March 18, 2011
Yesterday, the Seventh Circuit dealt with whether a debt collector's "dubious" methods of debt collection that are allegedly designed to mislead a court are violations of the Fair Debt Collection Practices Act,
15 U.S.C. § 1692,
et seq. in
O'Rourke v. Palisades Acquisition XVI, LLC, Case No. 10-1376. The Court held that the statute only applies to statements designed to influence a customer's decision, so the debt collection practices at issue were not covered by the Act.
less..
In this case, O'Rourke owed several thousand dollars of credit card debt. The debt was sold to Palisades, which sent him a collections notice. Several months later, O'Rourke received a summons and complaint with some exhibits attached. One of the exhibits was a statement that looked like a credit card bill, complete with a statement closing date several months before the complaint was filed, and it listed Palisades as the issuing party. Despite looking authentic, it was not an actual copy of a credit card statement. And Palisades admits that it never sent the statement to O'Rourke before filing the suit. O'Rourke hired a lawyer, and on the day of trial, Palisades voluntarily dismissed the case. After Palisades dismissed its suit, O'Rourke sued it in federal court claiming that the exhibit violated the Act, claiming the exhibit was designed to deceive the trial court into granting default judgment (if O'Rourke hadn't actually appeared). The district court granted Palisades's motion for summary judgment.
On appeal, the Court described why the exhibit could be characterized as misleading. However, it refused to hold that the Act regulated Palisades's conduct in this regard because the Act does not cover filings that are meant to deceive a state court judge.
[W]hen read in light of the Act's purpose and numerous provisions, the prohibitions are clearly limited to communications directed to the consumer and do not apply to state judges. ... [T]o be actionable a misleading statement must have the ability to influence a consumer's decision.
...
By drawing the line at communications directed at consumers — "any natural person obligated or allegedly obligated to pay any debt" — and those who stand in their shoes, the Act fits its purpose: protecting consumers. This gives consumers the full breadth of protection that the Act permits and keeps us from reading into the Act whatever implausible ends O'Rourke’s lawyers can conjure up.
...
Judges do not have a special relationship with consumers. They stand as impartial decision-makers in the discharge of their office. They are neither a consumer's advocate nor his adversary; their role is to ensure that the process is followed. They have no special relationship with the consumer; thus, the Act's protections do not extend to communications that could mislead them.
Thus, in order to bring an action under the Fair Debt Collection Practices Act for a statement to a third person, the consumer must prove a special relationship with that person. A judge does not have a special relationship with a consumer appearing before him. Therefore, the Act does not extend to communications that would confuse or mislead a state court judge.
Lessons:
- Misleading statements made to a third party are only actionable under the Fair Debt Collection Practices Act if the third party has a special relationship with the debtor.
- Misleading statements made to a judge in the collection of a debt are not actionable under the Fair Debt Collection Practices Act.
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