For close to 18 years, debt collectors and loan servicers subject to the Fair Debt Collection Practices Act (“FDCPA”) relied on the U.S. Court of Appeals for the Seventh Circuit’s June 5, 2000 decision in Miller v. McCalla, Raymer, Padrick, Cobb, Nichols, and Clark L.L.C. The court in Miller offered debt collectors a “safe harbor” method of explaining the amount a consumer owes to satisfy her debt. The Seventh Circuit’s recent decision in Boucher v. Fin. Sys. Of Green Bay, Inc. potentially threatens that “safe harbor.”
Section 1692g of the FDCPA requires a debt collector to send the debtor a “validation of debt” notice within five days after the initial communication with the consumer.1 This notice must include the amount of the debt, among other information.2 Simple enough. But what is a collector to do when the debt is continuing to accrue interest, fees, or charges on a daily basis? The Seventh Circuit appeared to resolve this problem in its 2000 Miller decision. In Miller, the court addressed a debt collector who notified the consumer of only his unpaid principal balance, while disclosing that the unpaid principal balance did not include accrued interest, fees, or other charges, without setting forth the amounts of those items. Judge Richard Posner, writing for the court, noted that it is not sufficient under the FDCPA for a debt collector merely to state the unpaid principal balance, even when the amount of the debt changes daily due to fees, charges, and interest.3 (“The unpaid principal balance is not the debt; it is only part of the debt; the [FDCPA] requires statement of the debt.”) Judge Posner explained that the fact that the amount of the debt may change daily was “no excuse” for noncompliance with the FDCPA.4 Accordingly, the debt collector violated the FDCPA because it did not inform the consumer of the total amount of the debt.5 To minimize litigation over the “amount of the debt” provision, the Miller court set forth a “safe harbor” statement that debt collectors could use to satisfy the requirement that they accurately state the amount of the debt:
“As of the date of this letter, you owe $___ [the exact amount due]. Because of interest, late charges, and other charges that may vary from day to day, the amount due on the day you pay may be greater. Hence, if you pay the amount shown above, an adjustment may be necessary after we receive your check, in which event we will inform you before depositing the check for collection. For further information, write the undersigned or call 1–800– [phone number].”6
Judge Posner made clear that, so long as a debt collector furnished accurate information when using the “safe harbor” language, a debt collector using this form language did not violate the requirement to state the amount of the debt under Section 1692g of the FDCPA.7 After Miller, debt collectors adopted the “safe harbor” language in their communications with debtors. Most other federal courts followed suit and adopted the Miller safe harbor, in whole or in part, in their jurisdictions.8
Judge Posner’s caution that collectors must nonetheless furnish accurate information in their validation notices reappeared in January 2018 when the Seventh Circuit issued its decision in Boucher v. Fin. Sys. Of Green Bay, Inc.9 In Boucher, the Seventh Circuit addressed a collector of medical debt who included the prescribed Miller safe harbor notice in the collector’s validation of debt letters to debtors. That language included the Miller safe harbor language, notifying the debtors that the amount of the debt might increase due to “late charges and other charges.”10 However, the collector did not indicate in its notice that Wisconsin state law prohibited the collector from imposing “late charges or other charges.”11 The debtors sued the collector, alleging that the notice was false, misleading, or deceptive in violation of Section 1692e of the FDCPA.
The Seventh Circuit agreed. The court made clear that while merely reciting the Miller safe harbor verbatim might relieve a collector from Section 1692g liability, it does not necessarily insulate a debt collector from liability under Section 1692e of the FDCPA. In a matter of first impression for the Seventh Circuit, the court held that the inclusion of the Miller notice does not relieve the collector of liability under Section 1692e if the Miller notice itself is inaccurate under the circumstances. The court noted that “although the Miller language is not misleading or deceptive on its face, it may nevertheless be inaccurate under certain circumstances.”12 The court emphasized that Miller insulates a debt collector from liability under Section 1692e, but only to the extent the information in the notice is accurate.13
The court found the representation in the Miller language that a medical debt might incur late charges or other charges—when Wisconsin law prohibited the imposition of those charges—“falsely implie[d] a possible outcome … that cannot legally come to pass.”14 Analyzing the notice in light of the FDCPA’s “least sophisticated consumer” standard, the court stated that knowledge of a specific Wisconsin law prohibiting additional charges on medical debt “is not the type of legal knowledge we can presume the general public has at its disposal.”15 Therefore, the Miller notice implied to the least sophisticated consumer that he would be responsible for additional late charges and other charges that would accumulate if he did not pay the debt.16 Ultimately, as the court noted, “it is compliance with the statute, not our suggested language, that counts.”17 Because the notice was inaccurate under the debtors’ particular circumstances, the court held that the collector was not entitled to the “safe harbor” from FDCPA liability.
How district courts will apply the holding in Boucher, and whether other courts will follow the Seventh Circuit’s lead, is not yet clear.