Slick v. Portfolio Recovery Associates, LLC

Citations: 111 F. Supp. 3d 900; 2015 U.S. Dist. LEXIS 84448; 2015 WL 3982632Docket: No. 12 C 2562

Court: District Court, N.D. Illinois; June 30, 2015; Federal District Court

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Plaintiff Donna M. Slick alleges that Portfolio Recovery Associates, LLC (PRA) violated the Fair Debt Collection Practices Act (FDCPA) in its attempts to collect a delinquent debt. The Court previously granted Slick partial summary judgment and denied PRA's corresponding motion regarding Slick's claim of violations under 15 U.S.C. 1692e(5) and e(10), determining that Slick was entitled to statutory damages of up to $1,000. This decision rendered further arguments on other FDCPA provisions unnecessary. 

As the Court prepared for a limited trial on Slick's actual damages claim, Slick indicated her intention to pursue judgments on undecided claims. The Court invited both parties to submit supplementary motions, which have now been completed. The Court grants in part and denies in part both Slick's and PRA's motions.

PRA's supplemental motion effectively serves as a motion for reconsideration of the Court's earlier ruling, which found PRA's dunning letters misleading for implying that Slick's failure to pay could be reported to credit agencies. The FDCPA prohibits reporting accounts placed for collection that are older than seven years. The reporting period for Slick’s account began with the delinquency reported on December 2, 2003, and ended on June 3, 2011. The Court rejected PRA's argument that the reporting period should start from the date Capital One charged off the account on December 3, 2004, asserting instead that the period is measured from the original delinquency date. PRA contends that the relevant dates should be December 3, 2004, and July 28, 2011, arguing that the limitation period started at the charge-off date.

PRA argues that the Court misinterpreted a quote from Gillespie regarding the Fair Credit Reporting Act (FCRA) and the triggering of the reporting limitation period. According to PRA, the full context of the Gillespie ruling indicates that the seven-year reporting period under 15 U.S.C. 1681c(a)(4) commences 180 days after an account is charged off or placed in collection, effectively starting from the original delinquency date. The plaintiffs in Gillespie challenged the “Date of Last Activity” on their Equifax credit reports, claiming it failed to meet the clarity requirements of 15 U.S.C. 1681g(a)(1). The confusion arose from how Equifax displayed both positive and negative data in this field, particularly when an account had delinquent status followed by payments, which could misleadingly suggest that the reporting period could be reset by subsequent payments. The Seventh Circuit found this language ambiguous, implying that negative history from a prior delinquency could persist beyond the initial seven-year period. However, the Court clarified that the reporting period should be measured from the delinquency date, not from the creditor's charge-off date. In this specific case, the delinquency date was December 2, 2003, and the reporting period expired on June 3, 2011. PRA's communications to Slick in August and September 2011 suggested that it could legally report her delinquent account, which was found to be misleading. Consequently, the Court denied PRA’s motion to reconsider its earlier ruling granting summary judgment in favor of Slick on her claims under 15 U.S.C. 1692e(5) and e(10). Slick further contends that PRA's letters also violated 15 U.S.C. 1692e(2) by falsely representing the character and legal status of the debt.

In McMahon v. LVNV Funding, LLC, the Seventh Circuit determined that dunning letters regarding time-barred debts could mislead an unsophisticated consumer, particularly when they contain terms such as "settle" or "settlement." The case involved letters sent to plaintiffs that failed to disclose that the debts were time-barred, with one letter offering a settlement amount that implied the debt was enforceable. The district court initially dismissed McMahon's claim as moot due to a settlement offer, while in Delgado v. Capital Management Services, LP, the district court denied a motion to dismiss. The Seventh Circuit reversed the dismissal in McMahon and affirmed the decision in Delgado, asserting that misleading language in debt collection letters violates the Fair Debt Collection Practices Act (FDCPA). The court rejected the notion that a threat of litigation must be present for a letter to be actionable, arguing that misleading representations about a debt’s legal status are sufficient grounds for violation. The court highlighted that offers to settle made the situation more misleading, as a consumer could inadvertently reset the statute of limitations by making a partial payment. Judge Gettleman subsequently referenced McMahon in a ruling against Portfolio Recovery Associates in a similar case.

PRA's letter indicated it would not sue or report a consumer's old debt, which Judge Gettleman found misleading as it failed to inform the consumer that the debt was time-barred and that making a partial payment could revive the statute of limitations for collection. PRA's letters similarly do not disclose that the debt is time-barred under Maryland's three-year statute of limitations, nor do they clarify the implications of partial payments. Maryland law states that acknowledging a time-barred debt removes the statute of limitations. PRA challenges Slick's claim under § 1692e(2) on procedural grounds, asserting that Slick did not seek judgment on this claim and did not provide adequate notice. However, the court found that Slick's First Amended Complaint sufficiently alleged that any lawsuit regarding her Capital One debt would be time-barred and that PRA's letters lacked critical information. PRA argued it was entitled to summary judgment, claiming Slick did not provide evidence to show that its communications misled an unsophisticated consumer. The court identified three categories of FDCPA cases and noted that while some claims require extrinsic evidence to demonstrate misleading nature, others do not. It concluded that extrinsic evidence was unnecessary in this case, referencing Pantoja, which deemed PRA's letter plainly misleading on its face.

An unsophisticated consumer would reasonably conclude that the defendant was attempting to collect a legally enforceable debt, despite the defendant's indication that it would not pursue legal action. The court referenced the Seventh Circuit's stance from McMahon, emphasizing that silence regarding the debt's status can be misleading. Neither LVNV nor CMS indicated that the debts were subject to a strong limitations defense, and while it is not improper for a debt collector to seek repayment of time-barred debts, the initial letter from PRA did not clarify that the debt was not legally binding. The court noted that consumers typically do not understand their rights regarding time-barred debts, as highlighted by the Federal Trade Commission and the Consumer Financial Protection Bureau.

PRA's communications suggested settlement on the debt, with the September 7, 2011 letter outlining a payment plan contingent upon timely payments. The court expressed concerns that making any payments could revive the debt, making consumers vulnerable to lawsuits for the full amount. Consequently, the court found PRA's communications misleading, granting Slick summary judgment on her claim that PRA violated 15 U.S.C. § 1692e(2)(A) by misrepresenting the legal status of the debt.

Additionally, under 15 U.S.C. § 1692g(b), after a consumer disputes a debt, the collector must cease collection until verification is provided. Despite PRA sending a letter after receiving Slick's verification request, the court rejected PRA's claim for summary judgment, noting the violation of the statute was clear, regardless of any extenuating circumstances. The FDCPA allows for communication during the 30-day verification period, but once a verification request is received, collection activities must cease.

The statute does not allow for an exception in this situation. PRA contends it is not liable due to a good-faith mistake, relying on Section 1692k(c) of the FDCPA, which provides an affirmative defense for "bona fide errors." To succeed in this defense, PRA must prove: 1) the violation was unintentional; 2) it resulted from a bona fide error; and 3) it maintained adequate procedures to prevent such errors. The first element requires PRA to show the FDCPA violation was unintentional, rather than its actions. PRA focuses primarily on the third element, asserting it trains employees to comply with the FDCPA and to record verification requests under a specific result code, "DSP." However, the collector failed to update the account accordingly. PRA merges the three defense elements, arguing that training implies any deviations are unintentional and in good faith, yet lacks testimony from individuals knowledgeable about the handling of Slick’s account, thus making its argument speculative. Consequently, Slick's motion for summary judgment on her 1692g claim is granted, while PRA's motion on that claim is denied. Regarding Slick's other claims, she abandoned her 1692c(b) claim and failed to support her 1692f claim, leading to the Court granting PRA's motion for summary judgment on these issues. The Court partially grants Slick’s renewed motion for summary judgment, upholding her claims under 15 U.S.C. 1692e(2) and 1692g, while denying her claim under 15 U.S.C. 1692f.

The Court partially grants and partially denies PRA’s renewed cross-motion for summary judgment. Specifically, it grants the motion regarding Slick’s claims under 15 U.S.C. §§ 1692c(b) and 1692f, but denies it concerning Slick’s claims under §§ 1692e(2) and 1692g. Furthermore, the Court denies PRA’s request to reconsider its prior memorandum opinion and order from August 20, 2014. A trial date will be scheduled during the status hearing on July 1, 2015, to address Slick’s claims for damages under 15 U.S.C. §§ 1692e(2), e(5), e(10), and 1692g. The Court finds that PRA's communications are misleading and notes that PRA has not provided arguments to the contrary. PRA's assertion that it does not revive the statute of limitations is rejected, with the Court agreeing with Judge Gettleman's characterization of PRA’s argument as "pure sophistry." The Court emphasizes that the debt is revived by operation of law, not by the defendant's actions.