Bandas v. United Recovery Service, LLC

Filing 33

MEMORANDUM Opinion and Order signed by the Honorable Virginia M. Kendall on 11/8/2017. Defendant's Motion to Dismiss Plaintiff's Complaint 13 is granted in part and denied in part. Defendant's Motion to Dismiss the FDCPA claims is denied and the Motion to Dismiss the ICAA claim is granted. Status hearing set for 11/20/2017 at 9:00 AM stands. Mailed notice(lk, )

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
)
)
FRANK BANDAS,
)
)
Plaintiff,
17 C 1323
)
v.
)
Judge Virginia M. Kendall
)
UNITED RECOVERY SERVICE, L.L.C.,
)
)
Defendant.
)
)
)
MEMORANDUM OPINION AND ORDER
After receiving a collection letter pertaining to a debt he owed of $94.00 for medical
services, Plaintiff Frank Bandas’s filed his Complaint under the Fair Debt Collection Practices
Act, 15 U.S.C. § 1692, et seq. (FDCPA) and the Illinois Collection Agency Act, 225 ILCS 425,
et seq. (ICAA), against Defendant, United Recovery Service, LLC (URS). (Dkt. 1.) Defendant
filed a Motion to Dismiss Plaintiff’s Complaint for failure to state a claim. [13]. The Motion is
denied in part and granted in part. Because Plaintiff has sufficiently alleged that the collection
letter potentially misleads an unsophisticated consumer, the Motion is denied with respect to the
FDCPA claims. However, Plaintiff fails to allege actual damages, and therefore the Motion is
granted with respect to the ICAA claim and that claim is dismissed.
BACKGROUND
The Court takes the following allegations from Plaintiff’s Complaint and treats them as
true for the purposes of a motion to dismiss. See Bell Atlantic, Corp. v. Twombly, 550 U.S. 544,
545 (2007). Plaintiff filed his Complaint under the FDCPA and ICAA. Plaintiff incurred a debt
for $94 in medical services but due to his financial circumstances, he was unable to pay and the
debt went into default. (Id. ¶¶ 11, 12; Dkt. 1–1, Exhibit C.) Advocate Medical subsequently

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assigned the debt to URS. (Id. ¶ 13; Dkt. 1–1, Exhibit C.) According to the Complaint, “URS is
engaged in the business of a collection agency, using the mails and telephone to collect consumer
debts originally owed to others.” (Id. ¶ 8.) On or about April 20, 2016, URS sent a letter
regarding the debt:
“Please receive and accept this letter in the spirit in which it is
intended. We do not seek to create a climate of argument and
threat but merely to state our position in as factual a manner as
possible. Our client claims a debt is due and owing from you; they
have attempted to resolve this between them and you with no
success. Our office has been brought into the picture and we have
done everything we can think of to convince you to pay this claim;
our file indicates that you have the means to pay but that you will
not pay.
We wish to make this appeal to you as one reasonable party to
another. Send us your full payment today or contact this office at
once to make suitable payment arrangements so that no further
procedures need to be taken in this matter.
This is our third attempt to have you voluntarily resolve this
claim. We seek your cooperation now!
Please contact our office if you have any questions about this claim
or to make suitable arrangement for payment(s). …
THIS LETTER IS AN ATTEMPT TO COLLECT A DEBT
AND ANY INFORMATION OBTAINED WILL BE USED
FOR THAT PURPOSE!”
(Dkt. 1, Ex. C). Plaintiff alleges that the “only legal alternative to having Plaintiff
voluntarily pay the debt is to sue Plaintiff for payment.” (Dkt. 1 ¶ 20.) Therefore, he believed
that URS was threatening a lawsuit against him. (Id. ¶ 21.) Plaintiff also alleges that “URS and
its client, Advocate Medical, do not sue consumers in Cook County for past due debts.” (Id. ¶
22.) Nevertheless, Bandas alleges, URS made this “false threat in an attempt to coerce Plaintiff
into paying[.]” (Id. ¶ 24.) Plaintiff “became afraid and felt anxiety at the prospect of being
sued.” (Id. ¶ 26.)

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LEGAL STANDARD
To survive a 12(b)(6) challenge, a complaint must contain sufficient factual matter to
state a claim for relief that is plausible on its face. Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009).
A complaint contains a claim that is plausible on its face if it supports a reasonable inference that
the defendant is liable for the harm. Id. This Court dismisses claims only if the plaintiff would
not be entitled to relief under any set of facts that could be proved consistent with the allegations.
See Visiting Nurses Ass’n of Southwestern Ind., Inc. v. Shalala, 213 F.3d 352, 354 (7th Cir.
2000). The Court relies on its “judicial experience and common sense” in making an assessment
of the plausibility of the claims. McCauley v. City of Chi., 671 F.3d 611, 616 (7th Cir. 2011)
(quoting Iqbal, 556 U.S. at 679). For purposes of this motion, this Court draws all reasonable
inferences in Plaintiffs’ favor. See Yeftich v. Navistar, Inc., 722 F.3d 911, 915 (7th Cir. 2013).

DISCUSSION
A. FDCPA
The FDCPA was enacted “to eliminate abusive debt collection practices by debt
collectors.” 15 U.S.C. § 1692(e). Plaintiff further alleges that Defendant violated two separate
provisions of the FDCPA: Section 1692e(5) and Section 1692e(10). Section 1692e(5) prohibits a
debt collector from making a “threat to take any action that cannot legally be taken or that is not
intended to be taken.” 15 U.S.C. § 1692e(5); see also McMahon v. LVNV Funding, LLC, 744
F.3d 1010, 1020 (7th Cir. 2014). Section 1692e(10) prohibits debt collectors from using any
“false representation or deceptive means to collect or attempt to collect any debt or to obtain
information concerning a consumer.” 15 U.S.C. § 1692e(10).
In evaluating claims under either section of the FDCPA, a court must apply the objective,
“unsophisticated consumer” standard. Gruber v. Creditors’ Protection Service, Inc., 742 F.3d

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271, 273 (7th Cir. 2014). This hypothetical individual is “uninformed, naïve, or trusting” but
also possesses “rudimentary knowledge about the financial world, [and is] wise enough to read
collection notices with added care, [possesses] ‘reasonable intelligence’ and is capable of making
basic logical deductions and inferences.” Id. at 273–274.
Generally, whether a collection notice is misleading is an issue of fact for a jury, but “a
plaintiff fails to state a claim and dismissal is appropriate as a matter of law when it is ‘apparent
from a reading of the letter that not even a significant fraction of the population would be misled
by it.’” Zemeckis v. Global Credit & Collection Corp., 679 F.3d 632, 636 (7th Cir. 2012) (citing
Taylor v. Cavalry Inv., L.L.C., 365 F.3d 572, 574 (7th Cir. 2004)). Because there has been no
opportunity for the presentment of extrinsic evidence of confusion here, such as consumer
surveys, Defendant’s motion can be granted only if “the allegedly offensive language is plainly
and clearly not misleading.” Cf. Lox v. CDA, Ltd., 689 F.3d 818, 822 (7th Cir. 2012).
Plaintiff alleges that the following language in the collection letter violated the FDCPA:
We wish to make this appeal to you as one reasonable party to
another. Send us your full payment today or contact this office at
once to make suitable payment arrangements so that no further
procedures need to be taken in this matter.
(Dkt. 1, Ex. C).

Plaintiff concludes that “[t]he only legal alternative to having Plaintiff

voluntarily pay the debt is to sue Plaintiff for payment,” and that therefore Plaintiff believed
litigation was imminent. (Dkt. 1 ¶ 20.) Plaintiff further alleges that “URS and its client,
Advocate Medical, do not sue consumers in Cook County for past due debts.” (Id. ¶ 22.)
Therefore, “URS’ threat was false, as it and its client did not intend to take legal action against
Plaintiff.” (Id. ¶ 23.)
Defendant argues that an unsophisticated consumer would not find this language to
constitute a threat of litigation because the letter made clear that no decision regarding legal
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action had been made nor was imminent. (Dkt. 14.) Defendant primarily relies on three cases
for the argument that the instant letter was not threatening litigation in violation of 1692e(5) nor
1692e(10). See Jenkins v. Union Corp., 999 F. Supp. 1120, 1136 (N.D. Ill. 1998)1; see also Aker
v. Bureaus Inv. Grp. Portfolio, LLC, et al., No. 12 C 3633, 2014 WL 4815366 (N.D. Ill. Sept. 29,
2014); see also Ruiz v. Midland Credit Management, No. 11 C 32, 2012 WL 33016 (N.D. Ind.
Jan. 6, 2012). In these three cases, the dunning letters contained express promises to continue
collection efforts and a statement concerning possible litigation. For example, in Jenkins, the
dunning letter stated that “[t]he economic feasibility of some type of litigation by our client has
not been determined[.]” Id. at 1136; see also Aker, 2014 WL 4815366 at *6; see also Ruiz, 2012
WL 33016 at *3.

Determining that there was no threat in stating that there was a mere

possibility of litigation, the district courts in these three cases never moved on to the next portion
of the analysis: whether the threats were false. See McMahon, 744 F.3d at 1020.
An unsophisticated consumer may read the instant dunning letter as threatening litigation.
The letter states that collection efforts have been exhausted, “we have done everything we can
think of[.]” (Dkt. 1, Ex. C). And the letter directs Plaintiff to contact the office “today” in order
to avoid “further procedures” and that “[t]his is our third attempt to have you voluntarily resolve
this claim. We seek your cooperation now!” (Id.). Taken together, an unsophisticated consumer
may find this letter threatens litigation based on the urgent tone, (including the phrases “today”
and “now!”), and based on the implication that all other avenues of collection have already been
exhausted.

This distinguishes the letter from Jenkins where the collector stated that the

feasibility of litigation had not yet been determined. 999 F. Supp. at 1136. Not only does

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Defendants in their Reply scold Plaintiffs for “ignor[ing] Jenkins and its progeny[.]” (Dkt. 20 at 1.) But Jenkins is
not precedential and was further distinguishable in that the court was reviewing a motion for summary judgment.
Defendants fail to respond to the arguments made in the Seventh Circuit cases cited to, including McMahon and
Pantoja. See McMahon v. LVNV Funding, LLC, 744 at 1021; Pantoja, 2017 WL 1160902.

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Plaintiff allege that he was threatened with litigation but his allegations also satisfy the next
portion of the analysis: it is not actually in URS’s practices to sue for collection and therefore
this threat was false and misleading. See McMahon, 744 F.3d at 1020.
Even without an express threat of litigation, collection efforts offer opportunities for
mischief and deception. See Pantoja v. Portfolio Recovery Assocs., LLC, No. 15-1567, 2017 WL
1160902, at *6 (7th Cir. Mar. 29, 2017). For example, in Cuenca v. Harris & Harris, Ltd., the
collector sent a letter to plaintiff that stated, in part: “[i]f this debt is not paid, our client(s) may
exercise their various options to enforce collection. At this point, the choice is still yours ...
please respond accordingly.” No. 16 C 5385, 2017 WL 1196922, *1 (N.D. Ill. Mar. 31, 2017).
The court in Cuenca held that a statement that a creditor will consider exercising its enforcement
options regarding a debt could easily be understood by an unsophisticated consumer as a
statement that litigation would be considered. Id. at *2. Furthermore, if the collector has no
intention of actually pursuing litigation, the statement violates the FDCPA. Id. at *3. Pantoja
held that “carefully crafted language” which is “chosen to obscure” a debt collector’s rights is
“the sort of misleading tactic the FDCPA prohibits.” 2017 WL 1160902 at *6. The court relied
on Pantoja in finding a violation had occurred. In Pantoja, the dunning letter specifically stated
the debt collector would not sue the debtor, but used vague language that implied the collector
had chosen not to sue when in reality the collector was time-barred from doing so. Id. at *6. In
Cuenca, the case was even “more clear-cut than Pantoja, because the “threat of potential
litigation hangs in the air without any representation it will not be used.” 2017 WL 1196922 at
*3. Because the debt collector in Cuenca had no intention of actually litigating, the district court
held that the plaintiff had stated a plausible claim under 1692e. Id. Similarly here, the threat of
“further proceedings” hangs in the air with no representation that it will not be used.

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Defendant argues that Cuenca is not similar to the instant case because the dunning letter
stated that the debt collector “may exercise their various options to enforce collection,” and
URS’s letter does not contain such language of “enforcement.” (Dkt. 20 at 4.) However, the
threat of “further proceedings” is analogous to the threat of enforcement.

Black’s Law

Dictionary defines “enforcement” as “[t]he act or process of compelling compliance with a law,
mandate, command, decree, or agreement.” BLACK’S LAW DICTIONARY (9th ed. 2009). Black’s
defines “proceedings” as “1. A specific method or course of action. 2. The judicial rule or
manner for carrying on a civil lawsuit or criminal prosecution.” Id. Based on that definition, a
promise of further “proceedings” if the Plaintiff does not pay indicates carrying on a civil
lawsuit. And, a promise of enforcement indicates compelling compliance with the law which
may occur through a lawsuit. Defendant attempts to distinguish Cuenca because of the word
“enforcement,” therefore, is unpersuasive.
Taken as a whole, an unsophisticated consumer could reasonably believe that “further
proceedings” in URS’s letter constituted a threat of litigation and Plaintiff has alleged that
Defendant does not, as a practice, pursue litigation. (Dkt. 1 ¶ 22.) Thus, an unsophisticated
consumer may believe an action could be taken against them that the Defendant does not actually
intend to take, making the “further proceedings” implication false and misleading. Based on
these allegations, Plaintiff has stated a plausible claim under 1692e(5) and 1692e(10).
B. ICAA
Section 425/9(a)(24) of the ICAA prohibits debt collectors from “[a]ttempting or
threatening to enforce a right or remedy with knowledge or reason to know that the right or
remedy does not exist.” 225 ILCS 425/9(a)(24). Here, Plaintiff alleges that URS violated
Section 425/9(a)(24) “when it threatened a lawsuit on behalf of a client that does not file lawsuits

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against consumers in Cook County.” (Dkt. 1 ¶ 31.) Defendant argues that the URS letter never
threatened a lawsuit and that Plaintiff has failed to plead actual damages as required to proceed
with an ICAA claim. See, e.g., McCabe v. Crawford & Company, 272 F. Supp. 2d 736, 751–52
(N.D. Ill. 2003).
Plaintiff states his damages are adequate and cites to Thomas v. Arrow Financial
Services, LLC, in which a district court held that the plaintiff’s allegations of humiliation and
embarrassment constituted a compensable injury. No. 05 C 5699, 2006 WL 2438346, at *3
(N.D. Ill. Aug. 17, 2006) (citing Greisz v. Household Bank, 8 F.Supp.2d 1031, 1043
(N.D.Ill.1998) (stating actual damages under ICFA include compensation for mental suffering)).
But in Thomas, the letter at issue was sent to a debtor’s employer, a third party, and allegations
of “humiliation” and “embarrassment.” Id. Here, there are no such allegations of humiliation
vis-à-vis a third party. Similarly, in Kim v. Riscuity, Inc., also cited by Plaintiff, the plaintiff
“sufficiently allege[d] that he has suffered actual damage by having his credit score damaged by
[defendant’s] actions.” Kim v. Riscuity, Inc., No. 06 C 1585, 2006 WL 2192121, at *2 (N.D. Ill.
July 31, 2006). But Kim had nothing to do with emotional damages and Plaintiff here does not
allege any facts showing he has been damaged in a way similar to the damaged credit score
alleged in Kim.
Defendant argues that the allegation of anxiety is insufficient because “[e]motional
distress constitutes legally cognizable damage only where the distress is particularly severe.”
(Dkt. 14 at 9) (citing Doe v. Northwestern University, 289 Ill. App. 3d 39, 45 (1st Dist. 1997)).
The Court agrees. Plaintiff received a single collection letter for $94 and his resulting “anxiety”
from the letter is insufficient to plead damages under the ICAA and therefore the claim is
dismissed.

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C. Supplemental Briefing
After the parties completed briefing the Motion to Dismiss, the Supreme Court handed
down Henson v. Santander Consumer USA, Inc., 137 S. Ct. 1718 (2017). The issue squarely
before the Court was as follows: “[H]ow to classify individuals and entities who regularly
purchase debts originated by someone else and then seek to collect those debts for their own
account.” Id. at 1721. The Supreme Court held that “[a]ll that matters is whether the target of
the lawsuit regularly seeks to collect debts for its own account or does so for ‘another.’” Id.; see
also id. at 1724 (“After all and again, under the [FDCPA’s] definition at issue before us you have
to attempt to collect debts owed another before you can ever qualify as a debt collector.”).
Accordingly, “a company collecting purchased defaulted debt for its own account” is not a debt
collector. Id. The Court ordered the parties to submit supplemental briefing on whether Henson
applies to this matter. (Dkt. 23.) In determining whether one is a debt collector, the Henson
Court held that one must not only regularly collect debts, but must be acting in the capacity of a
debt collector with respect to that particular debt. Id.
URS argues that Henson provides an additional basis for the Court to dismiss the FDCPA
claims. Although the Complaint alleges URS is a “debt collector” and “regularly collects or
attempts to collect” and the defaulted consumer debt “owed to others” (Compl., ¶¶ 8-10), the
Complaint also alleges URS was assigned the debt. (See Compl at ¶14) (emphasis added).
Based solely on those allegations of an assignment, it seems possible that URS is collecting its
own debt for its own account rather than acting as a third-party debt collection agent seeking to
collect a debt owed to another. However, the assignment allegation on its own will not suffice.
There is not enough on the record to determine who owns the debt. In Plaintiff’s supplemental
briefing, he asserts that URS was not a debt buyer and that in a letter sent to Plaintiff regarding

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the debt, URR stated that “Plaintiff owes [the debt] to Advocate Medical Group.” (Dkt. 14 at 1.)
Therefore, whether URS is a debt collector is a question appropriately answered based on
discovery and not at the initial pleading stage.
CONCLUSION
For those reasons, Defendant’s Motion to Dismiss the FDCPA claims is denied and the
Motion to Dismiss the ICAA claim is granted.

____________________________________
Hon, Virginia M. Kendall
United States District Judge
Date: November 8, 2017

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