Incorrect Breakdown of Principal and Interest Does Not Violate FDCPA Requirement for ‘Truthful Information,’ Seventh Circuit Rules


In a Fair Debt Collection Practices Act class action, the Seventh U.S. Circuit Court of Appeals has ruled that a bill collector’s failure to correctly break down a bill into principal and interest does not violate that Act. Wahl v. Midland Credit Management, No. 08-1517 (7th Cir. Feb. 23, 2009) was a class action lawsuit alleging that debt collectors violate the FDCPA when they send out bills that state the correct total amount but break down the charges incorrectly.

Plaintiff Barbara Wahl had just $66.98 on a credit card when she sustained a stroke and racked up much larger medical bills during a time when she couldn’t work. The credit card went unpaid and eventually, the balance was $1,149.09, mostly in interest and late fees. Midland purchased the debt in January of 2005 and started sending demand letters to Wahl. The letter at issue arrived April 15, 2005, listing both the “current balance” and “amount due” at $1,160.57. On the back side, it listed the “principal” as $1,149.09 and the “accrued interest” as $11.48. This was followed by a similar letter listing a higher interest. The letters construed the “principal” as the total value of the debt Midland had bought, including interest accrued with the original creditor.

Wahl filed a proposed class-action lawsuit in federal court for the Northern District of Illinois. One of her two claims was that Midland had violated the FDCPA by incorrectly stating that the principal on her account was $1,149.09 rather than breaking down the original principal, the original interest and the new interest. Debt collectors are not required by law to break down charges, it said — but when they do, the law requires that the breakdown not contain false or misleading information. On cross-motions for summary judgment, the trial court ruled in favor of Midland. Wahl appealed.

On appeal, the Seventh Circuit agreed. Wahl relied on language from the FDCPA prohibiting “[t]he false representation of… the character, amount, or legal status of any debt,” they said, and argued that this meant she need only show that the breakdown of charges was outright false. The court disagreed, saying it has consistently tested for violations of the act on whether the disputed action would mislead an unsophisticated consumer. If it would not, the court said, it cannot find a violation. Furthermore, the judges argued, Wahl’s argument that the statement was outright false is not correct because Midland’s breakdown of charges was perfectly correct in Midland’s eyes — it had paid for $1,149.09 in debt and the interest it added was its own interest, not the original creditor’s.

The Seventh Circuit also said Wahl could not overcome the precedent it set in Barnes v. Advanced Call Center Technologies, LLC, 493 F.3d 838 (7th Cir. 2007). In that case, the court rejected an argument that a bill collector had violated the FDCPA by failing to state the total balance due, listing only the amount in collections. There, the court ruled that the correct amount of debt to list was the amount that the debt collector was seeking — not that amount plus the amount owned by the original creditor. In both cases, the original creditor is irrelevant to the transaction at hand. “Wahl’s argument rests on empty semantics and conflicts with Barnes,” the Seventh wrote, and thus the summary judgment order was upheld.

Lubin Austermuehle has an active practice in Fair Debt Collection Practices Act litigation, focusing on protecting consumers from illegal, misleading and harassing behavior by debt collectors. Our debt collection abuse lawyers are based in Chicago and Oak Brook, Illinois, but we help clients throughout the United States, in both individual lawsuits and class actions. If you’re being harassed by bill collectors or they are using fraud and deception to charge fees you don’t owe, you don’t have to put up with it. For a free, confidential consultation, please contact us online or call us toll-free at 630-333-0333.

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