Federal Judge Sides with Collection Agency and Debt Buyer in Letter Class Action

A federal judge in Illinois two weeks ago dismissed an FDCPA class action filed against a debt buyer and its contracted collection agency over the use of the word “transferred” in a collection letter explaining why a new company was attempting to recover the debt. The case had been granted class action status and will be appealed to the Seventh Circuit.

In Janetos v. Fulton Friedman & Gullace, LLP, debt buyer Asset Acceptance had filed debt collection lawsuits against four different consumers in 2008 and 2009: Bernave, Fujioka, Janetos, and King. The company won the suits against Fujioka and King, voluntarily dismissed the case against Bernave, and lost the case against Janetos.

At some point, Asset retained Fulton Friedman & Gullace (FF&G) to collect debts on its behalf. On or about December 12, 2011, FF&G sent form collection letters to Janetos’s and Bernave’s counsel and to King and Fujioka directly.

All four letters contained the following disclosure near the top, changed slightly for the letters that went to counsel:

Please be advised that your [the] above referenced account has been transferred from Asset Acceptance, LLC to Fulton, Friedman & Gullace, LLP. If you have [your client has] already entered into a payment plan or settlement arrangement with Asset Acceptance, LLC, please note that we are committed to honoring the same.

The plaintiffs filed an FDCPA suit claiming that the phrase “has been transferred” was confusing to the least sophisticated consumer regarding the current ownership of the debt. Furthermore, the attorney for the plaintiffs claimed that the wording was confusing even to him, and that it was a violation under the more onerous “competent attorney” standard.

The case was granted class action status last year.

In reviewing the defendants’ motion to dismiss, District Judge Thomas M. Durkin bought neither of the plaintiffs’ arguments.

For the two consumers that received the letters directly, the plaintiffs relied exclusively on the letters themselves and their own affidavits stating that they found the letters confusing. “This evidence is insufficient to support summary judgment in their favor, and also insufficient to create a material factual dispute for trial,” wrote Durkin.

But Durkin went further and noted that, “Even if the plaintiffs had established that FF&G’s letters would confuse a significant fraction of the population, their claims would still fail because the letters are not materially misleading.”

Addressing the letters sent to plaintiffs’ counsel, Judge Durkin had a hard time believing that professional consumer attorney Daniel Edelman’s claim that “I was unable to tell from reading the letters whether the Janetos and Bernave accounts were owned by (a) [Asset], (b) FF&G, or (c) some third party that had retained FF&G to collect on those accounts.” Edelman claimed that additional research – and Internet search — was required to conclude that Asset owned the accounts and FF&G were collecting on them.

Durkin noted that the standard used in the Seventh Circuit “presumes that the competent attorney will perform some investigation,” and that Edelman’s Internet search was just that. “The internet searches that Mr. Edelman describes would take a competent attorney a few minutes to complete and dispel any confusion created by the word “transferred,’” Durkin wrote.

Besides, Durkin noted, Edelman’s confusion is irrelevant since Durkin would have ruled that the letters were not materially misleading, as with the letters sent directly to the two other consumers.

Durkin granted the defendants’ motion to dismiss.

The case has already been appealed to the Seventh Circuit Court.