In June 2018, we wrote about a developing conflict in the Northern District of Illinois that could have serious ramifications for the debt collection community. In Delgado v. Client Services, Inc., 2018 WL 1193741 (N.D. Ill. Mar. 8, 2018), Judge Ellis dismissed a Fair Debt Collection Practices Act (FDCPA) lawsuit in which the plaintiff asserted that a debt collection letter that contained line items of $0.00 for interest and other charges was deceptive because it falsely implied that interest and other charges could accrue in the future. In Clarence Wood v. Allied Interstate, LLC, 2018 WL 2967061 (N.D. Ill. Jun. 13, 2018), Judge Feinerman disagreed with Judge Ellis and denied a motion to dismiss an analogous claim. And although he only denied the motion to dismiss rather than ruling on the merits, Judge Feinerman caused some consternation amongst debt collectors by stating—without qualification—that Allied Interstate’s “letter falsely suggests that fees and collection costs could be added to the amount Wood owed if he did not quickly pay the debt.”

While that language is still concerning, debt collectors can breathe a little easier after Judge Feinerman granted summary judgment to Allied Interstate in the Wood matter on December 28, 2018. 

In the Seventh Circuit, debt collection statements alleged to be false or misleading under § 1692e of the FDCPA fall into three categories. First, there are statements that are, on their face, not deceptive or misleading to the unsophisticated consumer. Courts have the prerogative to dismiss or grant summary judgment to debt collectors in such cases. Second, there are statements that are potentially misleading. For those statements, the consumer must present extrinsic evidence to prove that the statements do in fact mislead or deceive unsophisticated consumers. And third, there are statements that are, on their face, clearly misleading and deceptive. In those circumstances, the court may grant judgment to the consumer without the admission of extrinsic evidence.

Judge Ellis in Delgado had found a debt collection communication with the $0.00 line items to fall within category one. The concern within the debt collection community was that Judge Feinerman was inclined to classify such communications as category three. He did not do so. Analyzing the statements in their entirety, Judge Feinerman concluded they were susceptible to multiple interpretations. One interpretation was that $0.00 meant “$0.00 for now,” which would be misleading if in fact it was “$0.00 forever.” But the other was that $0.00 actually meant “$0.00 forever.” Given the two reasonable interpretations, Allied Interstate’s communication was only potentially misleading and thus fell within category two. And because Wood did not present any extrinsic evidence to establish actual deception, summary judgment was appropriate in favor of Allied Interstate.

Judge Feinerman’s decision does not resolve the conflict in the Northern District regarding whether communications with line items of $0.00 fall within category one or category two. But in practice, that conflict is much less significant than a conflict over whether such communications fall in category one or category three. While debt collectors would obviously prefer category one classification because it allows them to resolve these cases on a motion to dismiss, it is rare for consumers to be able to muster sufficient extrinsic evidence to meet their burden in a category two case. The result is that, like here, most category two cases resolve in favor of the debt collector or via settlement. 

In sum, this is a significant win for debt collectors (or perhaps more accurately, the avoidance of a significant loss). While the category one versus category two debate will likely be resolved by the Seventh Circuit and that resolution will remain of interest to debt collectors, they do not face the risk of automatic exposure for communications containing line items of $0.00. Nevertheless, we continue to recommend that debt collectors use “N/A” rather than $0.00 for line items where no obligations have accrued and none can occur in the future.