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Thursday, November 13, 2008

Ind. Decisions - 7th Circuit issues debt collection opinion

In McKinney v. Candleway Properties (ND Ill.), a 28-page, opinion split several ways, Judge Sykes writes:

This case requires us to determine whether the defendant, Cadleway Properties, Inc., is a “debt collector” under the Fair Debt Collection Practices Act, 15 U.S.C. §§ 1692 et seq. (“FDCPA”). If it is, then the FDCPA applies, and our second question is whether the “validation of debt” notice Cadleway sent to the plaintiff was clear or confusing on its face.

Reverend Versia McKinney’s Chicago home was damaged by a flood in 1996. To help with repair costs, she obtained a disaster assistance loan from the Small Business Administration (“SBA”). After McKinney ceased making payments in 2002, the SBA sold the debt to a third party, and Cadleway subsequently acquired it. In an attempt to collect on the debt, Cadleway sent McKinney a collection letter that included a notice of her right to dispute and obtain verification of the debt and of the original creditor as required by the FDCPA. McKinney responded with this lawsuit alleging the notice was confusing.

The district court entered summary judgment for McKinney, concluding that Cadleway is a debt collector and its collection letter was confusing to the unsophisticated consumer and therefore violated the FDCPA. We agree with the former conclusion but not the latter. The FDCPA covers debt collectors, not creditors, and these categories are “mutually exclusive.” Schlosser v. Fairbanks Capital Corp., 323 F.3d 534, 536 (7th Cir. 2003); see also 15 U.S.C. § 1692a(4), (6) & (6)(F). The undisputed evidence here establishes that Cadleway is a debt collector, not a creditor. Cadleway’s validation-of-debt notice, however, was objectively clear and not obscured by Cadleway’s request that McKinney confirm or dispute the amount she owed. Accordingly, we reverse the judgment of the district court and remand with instructions to enter judgment for Cadleway. * * *

Accordingly, although the district court properly con- cluded that Cadleway was a debt collector under the FDCPA, it improperly entered judgment for McKinney on the merits of the claim. The judgment of the district court is REVERSED and the case is REMANDED with instructions to enter judgment in favor of Cadleway.

MANION, Circuit Judge, concurring in part and con- curring in the judgment. I agree with the court’s well- reasoned analysis that the validation-of-debt notice Cadleway sent McKinney does not run afoul of the FDCPA. That McKinney herself does not claim to have been confused by the notice is telling. The notice is straightforward. It contains all the disclosures required by 15 U.S.C. § 1692g. It is in a normal, reasonably sized font. And it allows a consumer either to confirm the total amount owed or indicate that the total amount owed listed on the notice is incorrect and provide the correct amount, including $0. * * *

Even assuming that Cadleway met the statutory definition of a debt collector, Cadleway’s validation-of-debt notice was objectively clear, as explained in Part II.B.2 of the court’s cogent opinion, and McKinney therefore loses. But because the court has chosen to address the issue of whether Cadleway qualifies as a debt collector, I must respectfully disagree with the court’s resolution of the question.

ROVNER, Circuit Judge, concurring in part and dissenting in part. Although I agree with the majority opinion that Cadleway was a debt collector as defined in the Fair Debt Collection Practices Act, I disagree with its conclusion that the debt collection letter was not confusing. Judge Guzmán below determined that any reasonable jury would conclude that the unsophisticated consumer would be confused by the form. My colleague is worlds apart, finding that there is nothing confusing on the face of the letter at all. I find the latter position untenable. * * *

The confirmation portion of the letter raises all of these questions but leaves them unanswered. Not even I know the answer without resorting to legal research. This surely cannot be the standard we require of the unsophisticated con- sumer. The confirmation portion of the letter is clearly confusing on its face. I therefore respectfully dissent.

Posted by Marcia Oddi on November 13, 2008 12:55 PM
Posted to Ind. (7th Cir.) Decisions