Richardson v. LVNV Funding, LLC et al
MEMORANDUM Opinion and Order Signed by the Honorable John J. Tharp, Jr on 10/31/2017: For the reasons set forth in the Memorandum Opinion, the defendants' motion to dismiss 13 is denied. A status hearing is scheduled for 11/15/17 at 9:00 a.m. Mailed notice(air, )
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
LVNV FUNDING, LLC, and
FIRST NATIONAL COLLECTION
No. 16 C 9600
Judge John J. Tharp, Jr.
MEMORANDUM OPINION AND ORDER
This case involves an attempt to collect on a time-barred debt. Plaintiff Randy
Richardson alleges that Defendants LVNV Funding, LLC (“LVNV”) and First National
Collection Bureau, Inc. (“First National”) violated the Fair Debt Collection Practices Act
(“FDCPA”), 15 U.S.C. § 1692 et seq., by sending him a dunning letter that was designed to
deceive him into paying off part of a debt, even though he was no longer legally required to pay
any of it. The defendants have filed a motion to dismiss under Federal Rule of Civil Procedure
12(b)(6), arguing that Richardson’s one-count complaint fails as a matter of law because he
cannot establish that the dunning letter is misleading, let alone materially so. The dispute here
centers on whether the letter conveys the impression that LVNV (the purchaser of the debt) had
merely chosen not to sue Richardson, instead of stating that LVNV was barred from doing so
under the applicable statute of limitations. Because the Court finds that this is a question of fact
that cannot be resolved at this stage of the litigation, the defendants’ motion to dismiss is denied.
The allegations in the complaint are straightforward. 1 Sometime ago, Richardson
incurred a debt on his HSBC Bank USA (“HSBC”) consumer credit account that he could not
repay. (Compl. ¶¶ 14-15, ECF No. 1.) After it went into default, LVNV purchased the debt and
assigned it to First National for collection. (Id. ¶¶ 15-17.) First National mailed Richardson a
dunning letter on or about July 23, 2016, offering terms for the repayment of his debt. (Id. ¶ 18,
Ex. E.) As of the date of the letter, however, Richardson’s debt was time-barred. (Id. ¶ 22.) The
dunning letter reads, in pertinent part, as follows:
Our client LVNV Funding LLC is offering you a discounted offer of $1,071.42 in
6 payments over 6 months starting on 08/20/2016. (28 days)
Once payments totaling $1,071.42 have been paid to our office on time, we will
consider this account satisfied in full.
Payments may not be made more than 30 days apart or this discounted offer may
The law limits how long you can be sued on a debt. Because of the age of your
debt, LVNV Funding LLC will not sue you for it, and LVNV Funding LLC will
not report it to any credit reporting agency.
In many circumstances, you can renew the debt and start the time period for filing
of a lawsuit against you if you take specific actions such as making certain
payment on the debt or making a written promise to pay. You should determine
the effect of any actions you make take with respect to this debt.
(Id. at Ex. E.) The letter is signed by First National. (Id.) At the bottom of the letter, there are
detachable coupons that specify the amount due and the deadline for making each of the six
discounted offer payments. (Id.)
For purposes of this Rule 12(b)(6) motion, the Court must treat the facts asserted in
Richardson’s complaint as true. Yeftich v. Navistar, Inc., 722 F.3d 911, 915 (7th Cir. 2013)
(citing Fed. R. Civ. P. 12(b)(6)).
Richardson filed a one-count complaint against the defendants on October 7, 2016,
alleging that the letter he received contains misleading information in violation of section 1692e
of the FDCPA. The defendants responded by filing a motion to dismiss under Rule 12(b)(6).
To overcome a motion to dismiss under Rule 12(b)(6), “a complaint must ‘state a claim
to relief that is plausible on its face.’” Adams v. City of Indianapolis, 742 F.3d 720, 728 (7th Cir.
2014) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). “A claim has facial
plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable
inference that the defendant is liable for the misconduct alleged.” W. Bend Mut. Ins. Co. v.
Schumacher, 844 F.3d 670, 675 (7th Cir. 2016) (quoting Ashcroft v. Iqbal, 556 U.S. 662, 678
(2009)). Thus, dismissal is proper only “if it appears beyond doubt that the plaintiff could prove
no set of facts in support of his claim that would entitle him to the relief requested.” Enger v.
Chi. Carriage Cab Corp., 812 F.3d 565, 568 (7th Cir. 2016) (quoting R.J.R. Servs., Inc. v. Aetna
Cas. & Sur. Co., 895 F.2d 279, 281 (7th Cir. 1989)). In assessing the motion, the Court “must
accept as true all factual allegations in the . . . complaint and draw all permissible inferences” in
Richardson’s favor. W. Bend Mut. Ins. Co., 844 F.3d at 675 (quoting Bible v. United Student Aid
Funds, Inc., 799 F.3d 633, 639 (7th Cir. 2015) (internal quotation marks omitted)).
Richardson alleges that the defendants’ letter violates section 1692e of the FDCPA
because it provides misleading information about the enforceability of his time-barred debt and
uses deceptive means to lure him into paying on that debt. The dispute focuses on the following
language in the letter:
The law limits how long you can be sued on a debt. Because of the age of your
debt, LVNV Funding LLC will not sue you for it, and LVNV Funding LLC will
not report it to any credit reporting agency.
According to Richardson, this language gives the false impression that LVNV has chosen not to
sue him, instead of stating that LVNV cannot sue him because of the age of his debt. (Compl.
¶¶ 21-24.) In other words, he claims that the letter obscures the fact that he has a statute of
limitations defense that bars LVNV from collecting on his debt if he elects not to pay. The
defendants respond that these allegations fail to state a valid FDCPA claim for two reasons. They
first argue that nothing in the letter contains false or misleading information about Richardson’s
debt. (Defs.’ Mem. in Supp. of Mot. to Dismiss 3-5, ECF No. 14.) And, even if it does, nothing
in the letter is materially misleading. (Id. at 6-7.) The Court rejects both of the defendants’
grounds for dismissal and instead finds that Richardson adequately alleges a claim.
False, Deceptive, or Misleading Representations or Means
As an initial matter, debt collectors do not violate the FDCPA simply by seeking
repayment of time-barred debts. McMahon v. LVNV Funding, LLC, 744 F.3d 1010, 1020 (7th
Cir. 2014). Such collection efforts are permissible because “some people might consider full debt
re-payment a moral obligation, even though the legal remedy for the debt has been
extinguished.” Id. Instead, debt collectors run afoul of the Act if they use any “false, deceptive,
or misleading representation or means” to collect on a time-barred debt. 15 U.S.C § 1692e. This
includes making false representations about the character or legal status of the debt, such as its
enforceability, 15 U.S.C. § 1692e(2); McMahon, 744 F.3d at 1020-22 (finding letters offering to
“settle” time-barred debts could violate section 1692e(2) by leading consumers to believe debts
were legally enforceable), or using false representations or deceptive means generally to collect
or attempt to collect the debt, 15 U.S.C. § 1692e(10).
Courts analyze whether collection letters are false, misleading, or deceptive from the
point of view of an “unsophisticated consumer.” McMahon, 744 F.3d at 1019 (citation omitted).
That is, they must ask “whether a person of modest education and limited commercial savvy
would be likely to be deceived.” Id. (citing Evory v. RJM Acquisitions Funding L.L.C., 505 F.3d
769, 774 (7th Cir. 2007)). In doing so, courts must keep in mind that unsophisticated consumers
“may tend to read collection letters literally, [but do] not interpret them in a bizarre or
idiosyncratic fashion.” Gruber v. Creditors’ Prot. Serv., Inc., 742 F.3d 271, 274 (7th Cir. 2014)
(quoting another source). Whether a letter is misleading is a question of fact that typically cannot
be resolved on a motion to dismiss. Collopy v. Dynamic Recovery Solutions, LLC, No. 16 C
6667, 2017 WL 1321118, at *2 (N.D. Ill. Apr. 4, 2017) (citing Walker v. Nat’l Recovery, Inc.,
200 F.3d 500, 501 (7th Cir. 1999)). Indeed, “[d]ismissal is appropriate only when it is apparent
from a reading of the letter that not even a significant fraction of the population would be misled
by it.” McMahon, 744 F.3d at 1020 (quotation marks and citation omitted). That is not a
conclusion the Court can reach here.
Recently, in Pantoja v. Portfolio Recovery Associates, LLC, the Seventh Circuit
determined that a portion of the challenged language here is deceptive to an unsophisticated
consumer. 852 F.3d 679, 686-87 (7th Cir. 2017). The collection letter in that case, which offered
to settle a time-barred debt under various discount payments plans, stated: “Because of the age of
your debt, we [the debt collectors] will not sue you for it and we will not report it to any credit
reporting agency.” Id. at 682. The court found the sentence was misleading because it gives the
impression that the collector merely had “chosen not to sue,” as opposed to being prohibited by
law from doing so. Id. at 686. Few consumers know about statutes of limitations or that in many
states, including Illinois, making a partial payment on the debt or a promise to do so could result
in a waiver of the defense. Id. at 684-85. As a result, the court held that without a clear warning
about the defense, some consumers will choose to pay their stale debts not out of a moral
obligation, but because “they fear the consequences of not doing so.” Id. at 684, 687.
The holding in Pantoja, though, does not resolve this motion to dismiss. The letter sent to
Richardson includes an additional, preceding sentence that discusses time-barred debts: “The law
limits how long you can be sued on a debt.” Thus, the question here is whether the preceding
sentence (or anything else in the letter) dispels the misleading impression created by the
following, “we will not sue you” sentence. The Court cannot conclude as a matter of law that it
does. Although the preceding sentence indicates to the reader that there is a statute of limitations
defense, an unsophisticated consumer may still be confused about whether the defense actually
barred the defendants from suing on the debt. Stated differently, in reading both sentences
together, a consumer could still “wonder whether [the collector] has chosen to go easy on this
old debt out of the goodness of its heart, or perhaps because it might be difficult to prove the
debt,” Pantoja, 852 F.3d at 686, or because the limitations period had in fact expired.
An unsophisticated consumer may be further confused because the letter provides a
“discounted offer” that would render Richardson’s debt “satisfied in full.” Consumers could find
that this language contradicts the defendants’ promise not to sue and implies that the defendants
have some recourse if the consumer rejects the discounted offer. See McMahon, 744 F.3d at
1021; Shields v. J.C. Christensen & Assocs., Inc., No. 16-CV-1548-SEB-DML, 2017 WL
1106085, at *3 (S.D. Ind. Mar. 24, 2017). While it is true that the letter does not use the term
“settle” and includes language about resetting the limitations clock, the Court is not convinced
that the letter clearly and plainly informs unsophisticated consumers that the debt collector is
time barred from bringing suit to enforce the debt. See Pantoja, 852 F.3d at 687.
None of the defendants’ arguments warrant a different conclusion either. The defendants
contend that their letter is plainly not misleading because it uses language that the Federal Trade
Commission (“FTC”) and Consumer Financial Protective Bureau (“CFPB”)—agencies that have
been charged with enforcing the Act—have “deemed to be sufficient to advise consumers about
the collection of time-barred debts . . . .” (Defs.’ Mem. 3-4; Defs.’ Reply in Support of Mot. to
Dismiss 2, ECF No. 26). But approval from those agencies does not deem the challenged
language sufficient as a matter of law. Because the language is taken from consent decrees that
the FTC and CFPB have entered into with other debt collectors and is not the product of the
formal rule making process, it does not warrant Chevron-style deference. Collopy, 2017 WL
1321118, at *3 (citing Christensen v. Harris County, 529 U.S. 576, 587 (2000)). Instead, agency
approval serves only as evidence that the fact finder may consider—at a later time—to determine
whether the defendants’ letter is misleading to the unsophisticated consumer. See Shields, 2017
WL 1106085, at *3.
The defendants also argue that district courts in this circuit have found that the challenged
language is clearly not misleading. In particular, they argue that Judge Gettleman in Pantoja
found that the preceding, “law limits how long you can be sued” sentence in their letter clearly
“informs the recipient that it cannot be sued on the debt.” Pantoja v. Portfolio Recovery Assocs.,
78 F. Supp. 3d 743, 747 (N.D. Ill. 2015), aff’d, 852 F.3d 679 (7th Cir. 2017). 2 The Court,
however, does not find this citation to be persuasive. Judge Gettleman’s decision did not rest on
a finding that the preceding sentence sufficiently informs consumers about the statute of
The Seventh Circuit had not yet ruled on Pantoja when the parties finished briefing this
motion. Nonetheless, both sides cited to and relied on Judge Gettleman’s opinion in that case to
support their positions. Because the appellate court affirmed Judge Gettleman’s opinion and
largely adopted his reasoning, Pantoja, 852 F.3d at 681-82, this Court did not ask the parties to
submit supplemental briefing following the Seventh Circuit’s ruling.
limitations defense. Instead, it merely held (as did the Seventh Circuit) that including only the
following “we will not sue” sentence is insufficient. The opinion also was written in the context
of summary judgment; that is, after the parties had an opportunity to develop extrinsic evidence
to prove that unsophisticated consumers did in fact find the letter there to be misleading. See Lox
v. CDA, Ltd., 689 F.3d 818, 822 (7th Cir. 2012). 3 Moreover, at least one other district court has
found that near identical language has the potential to mislead unsophisticated consumers about
whether a debt collector could still bring suit despite the age of the debt. See Collopy, 2017 WL
1321118, at *3 (denying motion to dismiss because unsophisticated consumers “could
reasonably construe [near identical language] as stating that [the debt collectors] are merely
electing not to sue on the debt, rather than that they are legally barred from doing so”).
Finally, the defendants argue that their letter is not misleading because holding otherwise
would require debt collectors to engage in the unauthorized practice of law. (Defs.’ Mem. 4-5.)
More precisely, they maintain that collectors would need to provide debtors with legal opinions
about their time-barred debt, which is both impracticable and illicit, if the Court required them to
provide more precise information. (Id.) This argument is meritless. Acknowledging that a debt
one is trying to collect is time-barred does not provide legal advice; it simply renders the request
for payment understandable as an appeal to conscious rather than as a veiled suggestion that the
debt collector’s forbearance may dissipate if the debtor fails to jump on the bargain being
offered. The fix here may require nothing more than to change “will not” to “cannot.”
The defendants also cite to Sorenson v. Rozlin Financial Group, 15 C 50088, 2015 WL
6955494 (N.D. Ill. Nov. 10, 2015) to support their position. That case is distinguishable as well.
The court dismissed the consumer’s complaint principally because he failed to respond to the
motion to dismiss, which resulted in an abandonment of his FDCPA claims. Id. at *2. Although
the court went on to find that language similar to that at issue here would not mislead
unsophisticated consumers, the court focused on the “we will not sue you” sentence, id., which
the Seventh Circuit has since found to be misleading, Pantoja, 852 F.3d at 687.
Therefore, the Court concludes that the defendants’ collection letter has the potential to
mislead the unsophisticated consumer. After discovery, though, Richardson must demonstrate
that the challenged language is objectively misleading to succeed on his claim. See Lox, 689 F.3d
at 822 (stating that where language is not misleading on its face, but has the potential to be
misleading, “plaintiffs may prevail only by producing extrinsic evidence, such as consumer
surveys, to prove that unsophisticated consumers do in fact find the challenged statements
misleading or deceptive”); see also Durkin v. Equifax Check Servs., Inc., 406 F.3d 410, 414 (7th
Cir. 2005) (stating that unsophisticated consumer standard is an objective test).
Having determined that Richardson plausibly alleges that the letter is misleading, the
Court also finds that the misrepresentation at issue is material. In the context of the FDCPA, a
letter is materially misleading when it “has the ability to influence the consumer’s decision” in
how to address the debt. Lox, 689 F.3d at 826 (quoting O’Rourke v. Palisades Acquisition XVI,
LLC, 635 F.3d 938, 942 (7th Cir. 2011) (emphasis omitted)). For example, in Lox, the Seventh
Circuit found statements in a collection letter to be material where they suggested that the debt
collector could recovery attorney’s fees against the consumer in a suit to collect on the debt. Id.
at 826-27. The court determined that if the statements were accurate, the consumer’s decision to
litigate the debt could have been much more costly than if he had paid his debt upon receiving
the letter. Id. at 827. As a result, the perceived risk of having to pay attorney’s fees could have
influenced the consumer to pay his debt, even though he preferred to contest it. Id.
The same is true here. An unsophisticated consumer who read the collection letter that
Richardson received could have been led to believe that his debt was legally enforceable. Fearing
the consequences of not paying the debt, the misconception could influence the consumer to pay
up, even though he preferred to ignore the letter. See Pantoja, 852 F.3d at 687-88. Moreover, and
more importantly, misconceptions about the enforceability of a time-barred debt could lure
consumers into a worse legal position than had they done nothing. See id. at 684-85; McMahon,
744 F.3d at 1021 (“[A] gullible consumer who made a partial payment would inadvertently have
reset the limitations period and made herself vulnerable to a suit on the full amount.”). The
defendants rejoin that unsophisticated consumers would not be influenced by the misconception
because the letter put Richardson on notice that “no legal proceedings would be filed against
him.” (Defs.’ Mem. at 6-7.) But if the consumer believed that the debt collector could change his
mind at any moment, then the collector’s promise not to sue rings hollow. Therefore, because the
collection letter could influence an unsophisticated consumer to pay on his debt, instead of doing
nothing (the better option), Richardson’s claim satisfies the materiality requirement.
Accordingly, for the foregoing reasons, the defendants’ motion to dismiss is denied.
John J. Tharp, Jr.
United States District Judge
Date: October 31, 2017
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