On April 1, the United States District Court for the Central District of Illinois dismissed a debt collector’s motion to dismiss a Fair Debt Collection Practices Act lawsuit arising from the visit of the consumer on the online payment portal of the debt collector. This ruling highlights the potential risks debtors face in indirect communication with debtors, including operating online payment portals, without adequate warnings.
Factual and procedural background
After checking her credit report, Julia Alexander learned that an alleged bond had been assigned, transferred and / or placed for collection with Consumer Adjustment Company, Inc. (âCACiâ). After learning that the debt was listed on his credit report, Alexander visited CACi’s website for more information and entered CACi’s online payment portal. When Alexander entered the portal, CACi reportedly attempted to collect the debt payment, despite not meeting the statute of limitations. The portal did not inform Alexander that CACi could not pursue the debt due to his statute of limitations, or that Alexander making a partial payment or even just acknowledging the debt could remove, waive or restart the statute of limitations. Because of this, Alexander filed a complaint claiming that CACi’s conduct violated Sections 1692d, e, and f of the FDCPA.
CACi requested the rejection for failure to report, arguing that when a debt collector does not make an offer to settle or contact the consumer directly, there is no obligation under the FDCPA to disclose the statute of limitations of a debt or the implications of making partial payment. In response, Alexander argued that the combination of CACi declaring the debt lapsed to credit bureaus with its payment portal requesting payment of the debt when Alexander accessed it constituted a communication under the FDCPA, and that the communication was misleading because it did not inform him that the debt had lapsed or that a partial payment could revive the debt limitation period.
In analyzing the arguments of the parties, the Court first clarified that the CACi payment portal was a communication relating to the recovery of a debt. While a communication under the FDCPA involves the transmission of information indirectly by any means, and CACi has stated in its portal that the portal is a communication from a debt collector for the purpose of collecting a debt, the Court quickly found that the portal was a communication under the FDCPA. Importantly, the Court also rejected CACi’s argument that the portal could not be a communication because it was unsolicited. As an interesting comparison, the court said that the CACi’s insistence that Alexander looked at the payment portal was unsolicited was similar to a beggar feigning bewilderment and surprise when a passer-by leaves money in his donation jar.
After determining that the portal was a communication relating to debt collection, the Court considered whether the communication was misleading or deceptive to the uninformed consumer. In doing so, the Court looked at earlier Seventh Circuit decisions that dealt with a debt collector’s obligations to disclose when a debt is time-barred and the risk of resetting a debt’s limitation period. In one of these cases, a debt collector sent a reminder letter to a consumer regarding an overdue debt, offering to “settle” the debt without any mention that the debt collector could not legally do so. execute the debt. . In finding that the offer to settle involves the ability to legally enforce the debt, the Seventh Circuit upheld the lower court’s decision which noted that a letter without warning as to the enforceability of a debt or the consequences of payment debt can mislead and deceive unsophisticated consumers. In a subsequent case, a debt collector sent a prescribed debt reminder letter offering to settle and stating that due to the age of the debt, the debt collector would not sue the consumer or report the debt. debt to no credit reporting agency. . The Seventh Circuit ruled that the letter was misleading and deceptive in law because it offered no warning about the risk of resetting the debt statute of limitations. Alternatively, the Seventh Circuit also found the letter to be misleading and deceptive as it implied that the debt collector was choosing not to sue instead of being legally prohibited from doing so.
Applying these judgments to the arguments of the parties, the Court held that, at a minimum, the question of whether an uninformed consumer would be misled or deceived by the silence of the CACi as to the enforceability of the debt or the consequences of a payment or a promise to pay was a question of fact sufficient to survive a motion to dismiss. The court further ruled that Alexander plausibly alleged that CACi attempted to circumvent these disclosure requirements by reporting past due debts to credit reporting agencies, knowing that debtors would eventually find their way to the website. of CACi and, ultimately, the payment portal. In summary, the Court had no problem determining that, even when not directly contacting a debtor, a debt collector must have adequate information regarding enforceability and the risk of paying or acknowledging debts. matured, and that a plausible claim that a debt collector circumvented such disclosures is sufficient to declare a claim under the FDCPA.