N.D. Illinois: Debt Itemization Does Not Imply Interest May Accrue

As the interest disclosure saga unfolds, the Northern District of Illinois continues to set the path for reasonable decisions on the issue. The Miller safe harbor language came from the Seventh Circuit and was eventually adopted by the Second Circuit in Avila. These two cases were the roots of a wide-spread filing spree by plaintiffs’ counsel on claims that distorted these two decisions by alleging that a failure to include a disclosure that interest is not accruing on the account somehow violates the FDCPA. 

In certain jurisdictions, such as New York, debt collectors must itemize the balance of a debt to show the consumer what portion is attributed to interest, fees, and other charges. Clinging to what they hoped to be their next cash cow, plaintiffs’ attorneys began filing claims that alleged including such a disclosure would lead a least sophisticated consumer to believe that interest could accrue on the account even if the itemization line indicates the number is zero.  

On March 7, 2018, Judge Sara Ellis of the Northern District of Illinois, a notoriously unfriendly jurisdiction for debt collectors, shut down this argument by granting Client Services’ motion to dismiss the complaint in Delgado v. Client Services Inc., No. 17-CV-4364, 2018 WL 1193741 (N.D. Ill. Mar. 7, 2018). 

Read the decision here. 

Factual and Procedural Background 

Client Services sent a collection letter to Plaintiff that included the following itemization: 

Balance Due at Charge-Off: 2,619.26

Interest: 0.00

Other Charges: 0.00

Payments Made: 20.00

Current Balance: 2,599.26 

Plaintiff, represented by Celetha Chatman of Community Lawyers Group, Ltd., filed a lawsuit against Client Services alleging that the letter misleads the unsophiscated consumer into thinking that the inclusion of interest itemization line means that interest may accrue on the account, and thus needed an interest disclosure. 

Client Services filed a motion to dismiss the suit, which was granted by the court. 

Decision 

The court agreed with Client Services that the unsophisticated consumer would not be misled into thinking that interest may accrue on the account simply by the inclusion of the interest itemization line when that line says that the balance consists of $0.00 interest. According to the court, this makes “it explicit that no part of the amount due includes interest or other charges.” 

Plaintiff attempted to argue that the reasoning in Tylke v. Diversified Adjustment Services, Inc., 2014 WL 546513 (E.D. Wis. Oct. 28, 2014), should be followed. The court in Tylke found that including a statement that the balance “includes a Verizon Wireless Collection Fee of $0.00” could indicate to a consumer that the collection fee may indeed be later assessed. 

The court, however, distinguished Tylke from the current case. According to the court, stating that the balance “’includes' a collection fee could potentially imply to an unsophisticated consumer that one will be included, even if the collection fee at that time is zero. On the other hand, an itemization accounts for what is and is not included in a total balance. An itemization of zero shows that the balance due does not include interest or other charges, rather than showing what is included in the balance.” 

The court then cited Dick v. Enhanced Recovery Co., 2016 WL 5678556 (E.D.N.Y. Sept. 28, 2016), stating that “[t]he FDCPA does not require Client Services to note that an amount will not increase; ‘there is no requirement that every statement in a debt collection notice include an extra assurance that the fact stated will not change in the future.” 

Analysis 

Northern District of Illinois continues to make consumer-friendly decisions on the interest disclosure issue.  Hopefully the courts in New York, where this issue spread like wildfire, will take note and decide similarly on the large volume of identical cases clogging their dockets. 

Most satisfying in this decision is the court’s understanding of the plight of debt collectors on this issue.  After stating that the case is similar to Dick, where the itemization of the debt was found not to be misleading, the court stated: 

To find otherwise places debt collectors between a rock and a hard place, where they cannot simply list the amount owed, for fear of being misleading, but likewise cannot breakdown the amount into categories either, for fear of being misleading. Debt collectors would be damned if they do and damned if they don’t. This is clearly not what Congress intended the FDCPA to do – essentially turn debt collectors into a modern-day version of Goldie Locks, who cast about searching for the letter that is just right, not listing too little information or too much.  

While this decision speaks specifically to the itemization issue, this is the crux faced by debt collectors in all facets of their communication with consumers. Bringing light to this issue is the first step in fixing it.