In the United States Court of Appeals For the Seventh Circuit

No. 96-2113

TERRI L. BASS,

Plaintiff-Appellee,

v.

STOLPER, KORITZINSKY, BREWSTER & NEIDER, S.C. and KATHY LESCHENSKY,

Defendants-Appellants.

Appeal from the United States District Court for the Western District of Wisconsin. No. 95 C 470–Barbara B. Crabb, Judge.

ARGUED OCTOBER 22, 1996–DECIDED APRIL 18, 1997

Before BAUER, ESCHBACH, and COFFEY, Circuit Judges.

ESCHBACH, Circuit Judge. This case presents the novel question of whether the Fair Debt Collection Practices Act (“FDCPA” or “the Act”), 15 U.S.C. sec. 1692 et seq., applies to third-party efforts to collect payment from con- sumers who use a dishonored check for the purchase of goods or services. The answer turns on whether the pay- ment obligation that arises from a dishonored check con- stitutes a “debt” as defined in the Act. On cross-motions for partial summary judgment, the district court answered in the affirmative, holding that (1) the Act applies to third- party collectors of dishonored checks, and (2) the defen- dants’ collection practices violated the Act. On appeal, the defendants challenge only the former holding, arguing that the Act applies only to those debts arising from an offer

or extension of credit. We now affirm.

I.

To pay for groceries, Joe Arsenault wrote a check in the amount of $156.94 to “Copps,” a local supermarket. The check, which was subsequently dishonored by his bank due to insufficient funds, was drawn on an account that Arsenault held jointly with plaintiff-appellee, Terri Bass. To collect on the check, Copps employed defendant law firm, Stolper, Koritzinsky, Brewster & Neider, S.C. (“SKBN”), who instituted collection activities against Arsenault under Wisconsin’s civil recovery statute. ¹  

SKBN’s first three collection attempts were in the form of collection letters addressed solely to Arsenault. Arsen- ault did not respond. Its fourth collection letter, however, was addressed jointly to Arsenault and Bass. This letter, written and signed by defendant Kathy Leschensky, a non- attorney employee of SKBN, advised that she “draft[ed] and file[d] lawsuits” in collections matters, and that she would “hold off taking any action for 7 days” if Bass or Arsenault would make arrangements to pay. In response, Bass brought an action for statutory damages for defen- dants’ failure to comply with the FDCPA in its collec- tion letter. Among other complaints, Bass alleged that in the letter Leschensky misrepresented herself as an attor- ney in violation of 15 U.S.C. sec. 1692e(5), and that the letter did not include language specifically required by the Act stating that the purpose of the letter is to collect a debt and that any information received would be used solely in collection efforts. See 15 U.S.C. sec. 1692e(11). SKBN con- ceded before the district court that the letter lacked this required language.

Both parties moved for partial summary judgment, and on March 4, 1996, the district court granted Bass’s mo- tion, finding that 1) the Act applies to collectors of dis- honored checks, and 2) the letter sent to Bass violated sec. 1692e(11) of the Act. Before our court, defendants chal- lenge only the district court’s finding that the Act applies to their collection activities. ²   In finding that the Act ap- plied, the district court reasoned that a consumer who issues a subsequently dishonored check has an obligation to pay that meets the Act’s definition of the term “debt.”

We review a district court’s entry of partial summary judgment de novo, drawing all reasonable inferences in the light most favorable to the nonmovant. Daill v. Sheet Metal Workers’ Local 73 Pension Fund, 100 F.3d 62, 65 (7th Cir. 1996); Tolentino v. Friedman, 46 F.3d 645, 649 (7th Cir. 1995). Summary judgment is proper when there is no genuine issue of material fact left for the fact finder and the movant is entitled to judgment as a matter of law. FED. R. CIV. P. 56(c). In this case, the parties have no dispute over the material facts. The sole disagreement concerns whether the district court correctly interpreted a dispositive provision of the FDCPA. Our task on appeal is simply to review the district court’s finding that the payment obligation arising from a dishonored check cre- ates a “debt” under the FDCPA. We conduct this review pursuant to our jurisdiction under 28 U.S.C. sec. 1291.

II.

On September 20, 1977, premised on Congressional con- cern that state protections against questionable debt col- lection practices were insufficient, President Carter signed into law the Fair Debt Collection Practices Act as an amend- ment to the Consumer Credit Protection Act (“CCPA”). 15 U.S.C. sec. 1601 et seq. The primary goal of the FDCPA is to protect consumers from abusive, deceptive, and un- fair debt collection practices, including threats of violence, use of obscene language, certain contacts with acquaint- ances of the consumer, late night phone calls, and simu- lated legal process. See generally Jenkins v. Heintz, 25 F.3d 536, 538 (7th Cir. 1994), aff’d, 115 S.Ct. 1489 (1995) (reviewing the history and purpose of the FDCPA). A basic tenet of the Act is that all consumers, even those who have mismanaged their financial affairs resulting in default on their debt, deserve “the right to be treated in a reasonable and civil manner.” Baker v. G.C. Services Corp., 677 F.2d 775, 777 (9th Cir. 1982) (citing 123 Cong. Rec. 10241 (1977)).

In the most general terms, the FDCPA prohibits a debt collector from using certain enumerated collection methods in its effort to collect a “debt” from a consumer. Because not all obligations to pay are considered “debts” under the Act, the definition of “debt” thus serves to limit the scope of the FDCPA. ³   SKBN has conceded that the col- lection letter sent to Arsenault and Bass used one of the collection methods prohibited by the Act. Therefore, we face only the task of resolving the parties’ dispute over the scope of the FDCPA, specifically whether the pay- ment obligation that arises from a dishonored check con- stitutes a “debt” as defined in the FDCPA. Appellants’ argument, that the FDCPA does not control the collec- tion activities arising from worthless checks, rises and falls on its assertion that the only type of “debt” triggering application of the FDCPA is debt arising from an offer or extension of credit to the consumer. Appellee counters that neither the Act’s language, nor the Act’s legislative history, limits “debt” in this fashion. As support, each party relies on the appropriate side of a small, yet con- flicting body of case law on this issue which has grown up in the district courts. ⁴  

As with all issues of statutory interpretation, the appro- priate place to begin our analysis is with the text itself, see Hughey v. United States, 495 U.S. 411, 415 (1990), which is the most reliable indicator of congressional intent. Time Warner Cable v. Doyle, 66 F.3d 867, 876 (7th Cir. 1995). Appellants, however, skip the textual analysis in their opening brief and instead rely on the Act’s legisla- tive history to bolster their interpretation of the term “debt” as including only credit transactions. Given the complete lack of textual support in the Act for appellants’ argument, this course of action is understandable. Resort- ing to legislative history is unnecessary here, however, because the language in the statute’s definition of “debt” is plain.

A “debt,” the collection of which is governed by the FDCPA, ⁵   is defined in the Act as

any obligation or alleged obligation of a consumer to pay money arising out of a transaction in which the money, property, insurance, or services which are the subject of the transaction are primarily for personal, family, or household purposes, whether or not such obligation has been reduced to judgment.

15 U.S.C. sec. 1692a(5). Appellants would have us read into this definition the additional requirement that the debt flow from a specific type of consumer transaction–one in- volving the offer or extension of credit. However, we see no language in the Act’s definition of “debt” (or any other section of the Act) that mentions, let alone requires, that the debt arise from an extension of credit. Nor do we find patent ambiguity in the definition of “debt.” The definition is not “beset with internal inconsistencies [or] . . . burdened with vocabulary that escapes common un- derstanding.” EEOC v. The Chicago Club, 86 F.3d 1423, 1434 (7th Cir. 1996). In the absence of ambiguity, our in- quiry is at an end, and we must enforce the congressional intent embodied in the plain wording of the statute. In re Witkowski, 16 F.3d 739, 742 (7th Cir. 1994); Bethlehem Steel Corp. v. Bush, 918 F.2d 1323, 1326 (7th Cir. 1990).

On the contrary, the plain language of the Act defines “debt” quite broadly as “any obligation to pay arising out of a [consumer] transaction.” In examining this definition, we first focus on the clear and absolute language in the phrase, “any obligation to pay.” Such absolute language may not be alternatively read to reference only a limited set of obligations as appellants suggest. See, e.g., United States v. On Leong Chinese Merchants Assoc. Building, 918 F.2d 1289, 1296-97 (7th Cir. 1990) (holding that federal forfeiture statute at 18 U.S.C. sec. 1955(d) could not be read to exclude real property because the phrase “any prop- erty” unambiguously includes both personal and real prop- erty). As long as the transaction creates an obligation to pay, a debt is created. We harbor no doubt that a check evidences the drawer’s obligation to pay for the purchases made with the check, and should the check be dishonored, the payment obligation remains. See Williams v. United States, 458 U.S. 279, 285 (1982); see also Wis. Stat. sec. 403.413 (creating obligation of drawer to pay holder of check upon notice of the draft’s dishonor).

Nor can we accept appellants’ suggestion that “transac- tion,” a term undefined by the Act, should be read restric- tively in the definition of “debt” as “credit transaction.” A word is not ambiguous merely because it is not defined in the statute. A fundamental canon of statutory construc- tion instructs that in the absence of statutory definition, we give terms their ordinary meaning. See Perrin v. United States, 444 U.S. 37, 42 (1979); United States v. Wyatt, 102 F.3d 241, 247 (7th Cir. 1996). The ordinary meaning of the term “transaction” is a broad reference to many dif- ferent types of business dealings between parties, and does not connote any specific form of payment. See Web- ster’s New World Dictionary 1509 (2d ed. 1986) (defining “transaction” simply as “a business deal or agreement”). Although appellants would have us delve into legislative history to cast a different light on the term “transaction,” we must give meaning to the plain language actually used by Congress. Had Congress wanted to limit the meaning of the term “transaction,” such a change would have been easily made. Because they did not, we are simply power- less to rewrite the Act’s definition of “debt” by restrict- ing the ordinary meaning of the term “transaction” to “credit transaction.” See United States v. Thomas, 77 F.3d 989, 992 (7th Cir. 1996) (holding that the phrase “any other term of imprisonment” was unequivocal, and could not be restrictively read as “any other federal term of imprisonment”).

In sum, the fact that appellants would prefer a less broad definition of the term “debt” does not make the existing clear and unrestricted definition ambiguous. As the Supreme Court recently reminded us in Hubbard v. United States, 115 S. Ct. 1754 (1995), we are prohibited from reading into clear statutory language a restriction that Congress itself did not include. We must therefore hold that an offer or extension of credit is not required for a payment obligation to constitute a “debt” under the FDCPA. ⁶  

No circuit court has had occasion to pass on whether a dishonored check creates a “debt” under the FDCPA. However, appellants point us to Zimmerman v. HBO Af- filiate Group, 834 F.2d 1163 (3d Cir. 1987), which based its holding that the FDCPA did not apply to the conduct at issue in part on the proposition that an extension of credit was required under the Act. In Zimmerman, the issue was whether the defendant cable television com- panies, in demanding that plaintiff pay for allegedly pirated microwave television signals, were seeking to col- lect a “debt” within the meaning of the FDCPA. The court first concluded that the term “transaction” in the definition of debt is not broad enough to include asserted tort liability. It then added, without discussion, that the type of transaction resulting in “debt” under the FDCPA “is the same type of transaction as is dealt with in all other subchapters of the Consumer Credit Protection Act, i.e., one involving the offer or extension of credit to a consumer.” Id. at 1168.

We can agree that the conduct in Zimmerman falls out- side the reach of the FDCPA for the reason that pirating television signals did not amount to a “transaction” at all, arguably the true basis for decision in Zimmerman. Instead of being a consensual transaction for the purchase of consumer goods or services, the alleged conduct in Zim- merman was theft. And although a thief undoubtedly has an obligation to pay for the goods or services he steals, the FDCPA limits its reach to those obligations to pay arising from consensual transactions, where parties negoti- ate or contract for consumer-related goods or services. See, e.g., Shorts v. Palmer, 155 F.R.D. 172, 175-76 (S.D. Ohio 1994) (obligation to pay for shoplifted merchandise not a “debt” under the FDCPA because “plaintiff has never had a contractual arrangement of any kind with any of the defendants.”); Mabe v. G.C. Services Ltd. Partner- ship, 32 F.3d 86, 88 (4th Cir. 1994) (obligation to pay child support not a “debt” under the FDCPA because it was not incurred in exchange for consumer goods or services).

However, to the extent that the Zimmerman court cre- ates a requirement that only credit-based transactions con- stitute “debt” under the FDCPA, we must respectfully part ways. In reaching this conclusion, the court neither considered the plain language of the definition of “debt,” nor examined the legislative history, but rather relied solely on the Act’s codification as an amendment to the CCPA. ⁷   As we discuss infra, Congress’ choice of statutory structure as evidence of intent is unnecessary given the Act’s clear textual definition of the term “debt,” and is also outweighed by the more persuasive forms of intent evidenced in the Act’s legislative history.

III.

Even if the language in the Act’s definition of “debt” was so unclear as to require our resort to extrinsic sources, these sources only further support our holding today. Consideration of the full body of legislative history of the Act, as opposed to the snippets quoted by the ap- pellants, serves to reinforce a finding that non-credit transactions are included in the Act’s purview.

First, legislative history reveals that Congress contem- plated this very issue yet refused to require that “debt” covered by the Act arise only from a credit transaction. Early versions of the Act clearly included a credit exten- sion requirement in defining “debt” as “any obligation arising out of a transaction in which credit is offered or extended to an individual, and the money, property, or services which are the subject of the transaction are pri- marily for personal, family, or household purposes.” H.R. 13720, 94th Cong., 2d Sess. (1976) (emphasis added). We find persuasive the fact that this restrictive language was deleted from later drafts, and no reference to “credit” was ever re-inserted in the definition. See Securities and Exchange Comm’n v. Van Horn, 371 F.2d 181, 185 (7th Cir. 1966).

Second, although we do not deny that the inclusion or exclusion of certain statutory language is occasionally due to mere legislative oversight, legislative history belies that possibility here. A review of the debates during the House and Senate hearings on the FDCPA reveals acknowledge- ments by several debaters that the Act would include dis- honored checks as “debt.” See, e.g., Hearings Before the Subcommittee on Consumer Affairs of the House Comm. on Banking, Finance and Urban Affairs on H.R. 29, 95th Cong., 1st Sess. at 257-61 (1977) (statement of John W. Johnson, Executive Vice-president, American Collectors Association, Inc.) (warning that if passed, the Act would make it more difficult for financial collection services to collect dishonored checks). In light of the apparent con- gressional consideration of this issue during the drafting and revising stages, we are hard-pressed to believe that Congress’ ultimate decision to exclude references to “credit extensions” in the Act’s definition of “debt” was acciden- tal. In short, Congress was aware of discord on whether “debt” should be defined restrictively to include only credit transactions, but rejected this restriction in the text it adopted.

Finally, the legislative history provides an unequivocal statement of the drafters’ intent on this issue: “[T]he com- mittee intends that the term “debt” include consumer obli- gations paid by check or other non-credit consumer obliga- tions.” H.R. Rep. No. 95-131, 95th Cong., 1st Sess. 4 (March 29, 1977). ⁸  

In stark contrast to these indications of legislative in- tent, the portions of legislative history relied on by appel- lants do not prove their point, and in fact do little more than point out that Congress often discussed the Act using credit-based examples. As noted above, Congress also considered examples of non-credit transactions creating “debt.” We have no quarrel with an argument that con- sumer default on installment debt was a principal focus at congressional hearings on the Act. However, appellants cannot direct us to any portion of the legislative history indicating that installment debt was the only focus.

IV.

Appellants then claim that Congress “obviously” intend- ed that the FDCPA cover only debts arising from credit extensions merely by virtue of the fact that the FDCPA was passed as an amendment to the Consumer Credit Protection Act. We disagree. As a threshold matter, we reiterate that in light of the Act’s plain language, our reliance on this interpretive argument is unnecessary. While it may be appropriate to derive some meaning from a statute’s location in the United States Code when the statute itself is ambiguous, we are not faced with stat- utory ambiguity here.

Even were we to consider this extrinsic evidence, how- ever, the Act’s codification as an amendment to the CCPA is at best a weak tool in the search for Congressional intent. Although some courts have found the Act’s place- ment in the CCPA suggestive, see, e.g., Zimmerman, 834 F.2d at 1168, the inference appellants would like us to glean from this structural relationship is insufficient to outweigh the contrary intent evidenced in the Act’s legislative history, see supra. We also find the connection appellants suggest unpersuasive in light of the continu- ing expansion of the CCPA’s protective landscape. Al- though the CCPA as originally enacted may have focused on consumer protection in credit-based financial transac- tions, amendments to the Act suggest an enlargement of the CCPA to include consumer protections in other finan- cial arenas. ⁹   For example, the Electronic Funds Transfer Act (“EFTA”), 15 U.S.C. sec. 1693-1693r, which like the FDCPA was passed as an amendment to the CCPA, pro- tects consumers by providing a “basic framework estab- lishing the rights, liabilities, and responsibilities of partici- pants in electronic fund transfer systems.” ¹⁰   15 U.S.C. sec. 1693(b). Electronic Fund Transfers covered by the Act have three components: 1) a transfer of funds; 2) that is initiated by electronic means, and 3) debits or credits a consumer account. Noticeably absent is any requirement that, to be covered by the EFTA, the transfer must relate to a credit-based transaction. Codification of the EFTA, an Act governing electronic cash transactions and void of any credit reference or requirement, as an amendment to the CCPA thus refutes appellants’ argument that the various titles of the CCPA regulate only credit based transactions. In fact, location of both the FDCPA and EFTA as amendments to the CCPA evidence the nature of the CCPA as a set of functionally free-standing acts united not by their regulation of credit transactions, but by their goal of providing protection to consumers in a variety of potentially abusive financial situations.

In making their argument, appellants quote the stated Congressional purpose of the Truth in Lending Act (one of the six subchapters of the CCPA) which is to “assure a meaningful disclosure of credit terms . . . and to pro- tect the consumer against inaccurate and unfair credit bill- ing and credit card practices.” 15 U.S.C. sec. 1601a. Appel- lants incorrectly label this language as the stated purpose for the entire CCPA as amended, and then ask us to read sec. 1601′s reference to “credit” as evidence of Congressional intent that the FDCPA apply only to “debt” arising from credit transactions. We cannot ignore however, as appel- lants do, the fact that each subchapter of the CCPA has its own stated Congressional purpose. We need not look to sec. 1601a to glean Congress’ intended purpose in enact- ing the FDCPA, because Congress clearly codified the sepa- rate and specific purpose they intend the FDCPA to serve: “It is the purpose of this subchapter to eliminate abusive debt collection practices by debt collectors, to insure that those debt collectors who refrain from using abusive debt collection practices are not competitively disadvantaged, and to promote consistent State action to protect consumers against debt collection abuses.” 15 U.S.C. sec. 1692(e). The FDCPA is a self-contained, functionally complete act housing its own purpose, prohibitions, definitions, enforce- ment procedures, and remedies. The FDCPA requires no cross reference to other titles or subchapters of the CCPA, nor is such cross reference necessary to either understand or apply the Act’s provisions.

We find appellants’ suggestion that we graft a credit requirement, either from the location of the FDCPA in the United States Code or from the independent codified purpose of the Truth in Lending Act, untenable.

V.

In their final attempt to excuse their prohibited collec- tion practices, appellants argue that dishonored checks do not constitute “debts” under the FDCPA because “the tender of a worthless check is a criminal and tortious act, not a consumer credit transactions [sic].” Br. at 13. We take issue with this statement’s accuracy as well as its implication that any dishonored check should fall outside the act pursuant to a judicially created fraud exception.

Appellants misstate the law when they categorize all dishonored checks as criminal and tortious. Both under the common law of fraud, a specific intent crime, and under most state criminal statutes which specifically ad- dress dishonored checks, liability attaches only if the drawer either knew or intended that the check be dis- honored at the time the check was drawn. A bank may refuse payment on a check for a variety of reasons lack- ing in the necessary fraudulent intent: administrative holds on the account of which the drawer is unaware, bank error, and the drawer’s reliance on deposited checks that themselves are dishonored, to name a few. Even when the drawer is at fault for the dishonor, the requisite intent may be absent–for example, when the drawer makes a simple miscalculation or has a subsequent emergency need for funds.

We recognize that by the time a dishonored check has been turned over to a third party collector, the issuer has typically received notice of dishonor yet has still failed to pay. Nevertheless, an issuer whose intention not to pay the check arises only at some point after it is issued has still not, in most jurisdictions, committed a fraudulent or criminal act. The requisite knowledge or intent that the check be dishonored must arise at the time the check is written. ¹¹   We therefore must reject appellants’ argument that all dishonored checks are fraudulent and thus not covered by the Act.

Almost as a second thought, appellants state their (un- supported) belief that the specific check at issue was pass- ed with fraudulent intent, on the grounds that “Argen- ault’s [sic] tender of the worthless check violated . . . Wisconsin’s criminal statute.” However, they present no evidence that Bass specifically intended Arsenault to pass a check that she knew would be dishonored. Arsenault’s intent to pass a worthless check, even if proven, is not proof of Bass’s knowledge or intent. Appellants have thus failed to conclusively establish that Bass intended to pass a worthless check.

Because we reject appellants’ fraud-based arguments here, we are not faced with the need to determine wheth- er fraudulent intent, even if proven, should make a differ- ence–that is, whether a fraud exception to the Act is ap- propriate. Nevertheless, we note our discomfort with the proposition that the courts should create a fraud excep- tion where none exists in the Act’s text. ¹²   A review of the legislative history reveals that Congress considered the entire field of defaulting debtors, stating its belief that most debtors fully intend to repay their debts. See S. Rep. No. 382, 95th Cong., 1st Sess. 2 (reprinted in 1977 U.S. Code Cong. & Admin. News 1695, 1696). “Most” is not “all,” however, yet Congress still chose not to exempt debt collectors from following the Act if they could prove that the consumer intended his check to be dishonored or accepted credit from a merchant intending default. No section of the Act requires an inquiry into the worthiness of the debtor, or purports to protect only “deserving” debtors. To the contrary, Congress has clearly indicated its belief that no consumer deserves to be abused in the collection process. Moreover, we think that such a fraud exception would violate the spirit of the Act. The Act’s singular focus is on curbing abusive and deceptive collec- tion practices, not abusive and deceptive consumer pay- ment practices. We are not unaware that in some cases, the absence of a fraud exception will allow consumers who intend to pass worthless checks to invoke the protections of the FDCPA. And although we have no sympathy for a debtor who intends to default on his obligations, we believe that the sole wrong intended to be remedied by the FDCPA is debt collector abuse. Absent an explicit showing that Congress intended a fraud exception to the Act, the wrong occasioned by debtor fraud is more appro- priately redressed under the statutory and common law remedies already in place, not by a judicially-created ex- ception that selectively gives a green light to the very abuses proscribed by the Act. ¹³  

VI.

The district court is AFFIRMED. ¹⁴  

 

FOOTNOTES

¹   The statute allows recovery of the face value of the check, actual and exemplary damages, and costs if the drafter knew, should have known, or recklessly disregard- ed that the check was drawn on a nonexistent account or an account with insufficient funds. WIS. STAT. sec. 943.245.

 

²   The parties subsequently stipulated to the award of costs, thus resolving the remaining issues in the case. The district court entered final judgment in favor of plaintiff on April 5, 1996.

³   The terms “debt collector” and “consumer” are defin- ed in the Act and also serve to limit the scope of the FDCPA. Both definitions are dependent on the definition of “debt.” In this case, however, neither party challenges their status either as debt collector or consumer.

⁴   In addition to a few unpublished decisions, Bass relies on the following cases which hold that a dishonored check constitutes a “debt” under the FDCPA. Narwick v. Wex- ler, 901 F. Supp. 1275 (N.D. Ill. 1995); Newman v. Checkrite California, Inc., 912 F. Supp. 1354 (E.D. Cal. 1995); In re Scrimpsher, 17 B.R. 999 (Bankr. N.D.N.Y. 1982). We note the existence of several other cases which assume the same. See, e.g., Edwards v. National Business Factors, Inc., 897 F. Supp. 455 (D. Nev. 1995); Holmes v. Telecredit Serv. Corp., 736 F. Supp. 1289 (D. Del. 1990); Taylor v. Checkrite, Ltd., 627 F. Supp. 415 (S.D. Ohio 1986); West v. Costen, 558 F. Supp. 564, 571 (W.D. Va. 1983). We know of only two published decisions specifically holding that a dishonored check does not create a “debt” under the FDCPA, and both opinions rely on Zimmer- man’s “holding” that a credit extension is required to create “debt” covered by the Act. See Sarver v. Capital Recovery Assoc., Inc., 951 F. Supp. 550, 552 (E.D. Penn. 1996); Cederstrand v. Landberg, 933 F. Supp. 804 (D. Minn. 1996). As discussed infra, we disagree with Zim- merman on this issue.

⁵   In limited circumstances, state debtor protection laws will govern. The Act provides that the FTC may exempt by regulation certain debt collection practices of any State if that State’s debtor protection laws provide restrictions on collection practices substantially similar to (or more stringent than) those in the Act, and if the State ade- quately enforces those laws. See 15 U.S.C. sec. 1692o.

⁶   Thus we need not address the parties’ disagreement about whether a merchant who accepts a check is in effect mak- ing an extension of credit.

⁷   Contrary to the court’s statement, not all other sub- chapters of the CCPA regulate solely credit transactions. See discussion at part IV infra.

⁸   A second form of extrinsic evidence on which Bass urges our reliance is the interpretation of the term “debt” proffered by the Federal Trade Commission in its Amicus brief. The Act specifically assigns public enforcement responsibility of the FDCPA to the FTC, which has the power to bring independent actions for violation of the Act as “unfair or deceptive act[s] or practice[s]” under Section 5 of the Federal Trade Commission Act. See 15 U.S.C. sec. 1692l(a). The FTC argues in its brief that the plain language and legislative history support a broad reading of the term “debt” to include dishonored checks. This interpretation is in accord with the FTC’s com- prehensive narrative interpreting the FDCPA, issued in 1988, which includes as an example of “debt” dishonored checks tendered in payment for goods or services used primarily for personal, family, or household purposes. See Statements of General Policy or Interpretation, Staff Com- mentary on the Fair Debt Collection Practices Act, 53 Fed. Reg. 50,097, 50,102 (1988). Although resort to the FTC’s opinion is unnecessary in light of the Act’s unam- biguous definition of “debt,” and although we recognize that the FTC’s interpretations of the Act are not binding on the courts, we acknowledge and give due weight to the FTC’s informed interpretation of the term “debt.” Moreover, had Congress disagreed with the way the FTC was reading the Act in carrying out its assigned power of enforcement, it could easily have made a clarifying amendment to the Act’s definition of “debt.”

⁹   The current set of protections housed in separate sub- chapters of the Consumer Credit Protection Act include the Truth in Lending Act, 15 U.S.C. secs. 1601-1667e (which houses the Consumer Leasing Act and the Fair Credit Billing Act); Restrictions on Garnishment, 15 U.S.C. secs. 1671-1677; the Fair Credit Reporting Act, 15 U.S.C. secs. 1681-1681t; the Equal Credit Opportunity Act, 15 U.S.C. secs. 1691-1691f; the Fair Debt Collection Practices Act, 15 U.S.C. secs. 1692-1692o; and the Electronic Funds Transfer Act, 15 U.S.C. secs. 1693-1693r.

¹⁰   The EFTA was added as title IX of the CCPA by the Financial Institutions Regulatory and Interest Rate Control Act of 1978, Pub. L. No. 95-630, 92 Stat. 3641, 3728 (1978), and was implemented by Regulation E, 12 C.F.R. 205 (1979).

¹¹   In addition to state criminal statutes requiring strict proof of knowledge or intent of check dishonor at the time the check was written, several statutes presume that the drawer intended dishonor at the time the check was writ- ten if the drawer receives notice of dishonor but fails to make good on the check within a certain statutory period of days. However, the presumption is often rebuttable. See, e.g., ARK. CODE. ANN. sec. 57307 (knowledge of in- sufficient funds is presumed if bank notifies issuer of dishonor within 30 days and issuer fails to pay within 10 days of notice); IND. CODE sec. 35C5-5 (fact that check was refused or that person had no account at the bank is prima facie evidence of knowing dishonor); KAN. STAT. ANN. sec. 21-3707 (failure to pay the amount due within seven days after notice of dishonor constitutes prima facie evidence of intent to defraud).

¹²   No court has yet created such an exception.

¹³   Finally, in light of the Act’s clear definition of “debt,” supported by the weight of the legislative history eviden- cing an intent that the Act be interpreted as plainly writ- ten, we note that appellant’s policy arguments to the con- trary are best directed to the legislature.

¹⁴   In compliance with Seventh Circuit Rule 40(e), this opi- nion has been circulated among all judges of this court in regular active service. No judge favored a rehearing en banc on the question of whether “debt” as defined in the Fair Debt Collection Practices Act can only arise from a transaction involving the offer or extension of credit to a consumer.

 

 

BAUER, Judge, dissenting. I respectfully dissent. Judge Eschbach has written a powerful opinion that I find my- self unable to join. The notion that Congress, in passing the FDCPA, had in mind the protection of those who give bad checks for goods and services is one I cannot in con- science join.

In this position I am comforted by several things, not the least is the knowledge that the act itself does not mandate such a result; indeed, if it did, the opinion could have consisted of a paragraph or two pointing out the mandate. A second and, it seems to me, significant point also appears in the majority opinion: “No Circuit Court has had occasion to pass on whether a dishonored check creates a ‘debt’ under the FDCPA.” Indeed they have not, and I believe for good reason–it doesn’t apply.

Checks are, in the majority of cases, used to pay for bills already outstanding; that is to say, in response to bills sent asking for payment for goods and services de- livered some time in the past; a transaction that did not contemplate simultaneous delivery and payment. In short, to pay a bill where credit has already, explicitly or im- plicitly, been extended. A case can be made for the posi- tion that, if the check so used is drawn on an account with insufficient funds–or no funds at all–the payee is in no worse position than before the dishonored instru- ment was delivered. ¹  

No case can be made that would demonstrate that checks given in immediate payment of goods and services are “debts” contemplated by the act or that acceptance of the instrument was either a voluntary assumption of a credit transaction or anything other than an accommoda- tion to the check writer. The seller is simply relying on the warrant implied in the delivery of the check that the writer has funds in the institution drawn upon and that the institution will immediately honor the check, when presented, by payment in legal tender. So basic is this concept that Black’s Law Dictionary gives both the classic definition of “check” as “[a] draft drawn upon a bank and payable on demand, signed by the maker or drawer, con- taining an unconditional promise to pay a sum certain in money to the order of the payee” and the equally true definition of “bad check”: “A check which is dishonored on presentation for payment because of no, or insufficient, funds or closed bank account. Writing or passing of bad checks is a misdemeanor in most states.”

In fact, a great number of retail establishments (and deliverers of services as opposed to goods) will not honor personal checks. And those that do are relying on the warrant of the maker that the money will be found forth- with on presentation. (Many, if not most, general retail transactions presently involve commercial credit cards; Visa, Mastercard or the like. And in those transactions, the credit relationship is between the issuer of the card– generally a bank–and the card holder. The purveyor of goods and services gets paid without question from the bank because the validity of the card can be verified before acceptance.)

When accepting a check, the payee is peculiarly at the mercy of the maker; only the maker and the bank know whether money is available to pay the amount of the note and the banker is forbidden to disclose the condition of the account unless called upon to honor the draft (or certify it, which amounts to the same thing). So the recipient must rely on the maker’s trustworthiness. If anyone needs protection, it is the provider of goods and services who accepts a check in exchange.

Moreover, unlike the extender of credit, the payee of a bad check incurs an absolute loss because his banker will charge a penalty for processing a dishonored check and the payee has lost the use of the money he was en- titled to receive. And, of course, if he was relying on the uncollected funds for his own cash-flow purposes, he may very well do serious harm to his own credit rating.

Apart from all of that, I believe that the majority opin- ion gives too little weight to the reasoning of Zimmer- man v. HBO Affiliate, 834 F.2d 1163 (3rd Cir. 1987). It is not sufficient to point out that Zimmerman involved a theft. The majority says “and although a thief undoubt- edly has an obligation to pay for the goods or services he steals, the FDCPA limits its reach to those obligations to pay arising from consensual transactions, where parties negotiate or contract for consumer related goods or ser- vices. See, e.g., Shorts v. Palmer, 155 F.R.D. 172, 175-76 (S.D. Ohio 1994) (obligation to pay for shoplifted merchan- dise not a ‘debt’ under the FDCPA because ‘plaintiff has never had a contractual arrangement of any kind with any of the defendants.’).” Where a contract of sale is goods- for-money, the acceptance of a check is not a consent to receive something less than money; it is a convenience to the maker not to require legal tender. The giving of a bad check for goods or services differs from shoplifting only in degree, not in kind; in either event, it is a theft.

Nor is it an answer to say that the fraud involving dishonored checks is not always “criminal or tortious” be- cause “fraud is a specific intent crime”. ²   What this says is that when the defense of lack of bad intent is raised, the government (not the payee of the check who, for crim- inal prosecution purposes, is only a witness to the crime) must prove intent to defraud. Most jurisdictions have over the years taken the position that issuing a check without having sufficient monies on deposit to support the draft is prima facie evidence of fraud. ³   It is up to the writer to produce some basis for the belief that no fraud was intended. (It is, of course, only a burden of production, not of persuasion, but it does not alter the basic rule that a bad check creates an inference of fraud.)

I do not think that one can observe a “to let” sign, move into an empty apartment and then demand a thirty- day notice before an eviction can proceed. One cannot create a landlord-tenant relationship unless both parties agree. Nor, it seems to me, can one create a debtor- creditor relationship without the agreement of both par- ties. If I choose not to be a creditor, you cannot force me into that position. ⁴  

Absent a creditor-debtor relationship voluntarily assumed there is no “debtor” protected by the FDCPA. The victim is not the deliverer of the bad check; it is the recipient and, if protection is to be provided, it should be to him. The FDCPA, I believe, does not cover bad checks given for goods and services. It is not necessary in this case to decide whether bad checks given for an existing debt come under the protection of the act. That is not the issue.

I would reverse the judgment.

FOOTNOTES

 

 

---

1  
In a better position, in some small respect: the maker of the check can sue on the instrument itself or it can be used as an acknowledgement of the debt and the amount, both items of which might have been disputed on a simple suit to collect the debt. And, at any rate, the deliverer intended to extend credit when he failed to demand cash or check on delivery (unless the goods were sent C.O.D., of course).

 

---

2  
Theft, like fraud, is a specific intent crime. To obtain a conviction, the government must prove beyond a reasonable doubt that the defendant intended to deprive the owner permanently of some property. Someone who appears to have shoplifted may then, of course, have a valid defense–that he did not act with the requisite intent. One who walks out of a country store with a can of tunafish in his pocket that he forgot to pay for has not committed theft. The facts, however, may have terrible consequences before the defense can be raised. See, e.g., My Cousin Vinny, at Local Blockbuster Video Rental Store.

 

---

3  
In Illinois, for instance, the government indicted and convicted one Kevin Sumner by showing that Sumner did not have adequate funds on deposit on either the day of issuance or the day of presenting the check. The court said “Sumner, while agreeing that the State presented enough evidence to establish a statutorily adequate prime facie case, argues that his own testimony was legally sufficient to establish a reasonable defense showing that he lacked the necessary intent to defraud. Therefore, Sumner claims, the presumption of guilt established by the State’s prima facie case was rebutted, and the prosecution was required to refute his defense by presenting convincing proof that Sumner had the requisite intent to defraud when he issued the check in question. We agree with Sumner.” (emphasis added) People of the State of Illinois v. Sumner, 107 Ill. App. 3d 368, 370 (1st Dist. 1982).

 

---

4  
I do not think that a purchaser of goods can force a seller to become a creditor by delivering a bad check in payment of goods any more than I believe a seller of goods can force anyone into a position of being a debtor simply by delivering goods he has not agreed to accept. The relationship of seller-buyer is much different from creditor-debtor. The former relation can blossom into the latter only when done so by voluntary acts of both parties. When a bad check is delivered for goods or services it creates a debt by tortious conduct, not a debt by contract.

S T A T E O F M I C H I G A N

C O U R T O F A P P E A L S

 

ASSET ACCEPTANCE CORPORATION,

Plaintiff-Appellee,

FOR PUBLICATION

March 2, 2001

9:05 a.m.

v No. 215158

Wayne Circuit Court

OTHELL ROBINSON, LC No. 97-731706-CK

Defendant-Appellant.

Before: Markey, P.J., and McDonald and K. F. Kelly, JJ.

PER CURIAM.

Defendant appeals as of right from an order granting plaintiff’s motion for summary

disposition in this debt collection action. We affirm in part and remand.

On appeal, a trial court’s grant of summary disposition is reviewed de novo. Spiek v456 Mich 331, 337; 572 NW2d 201 (1998). This Court must review

Dep’t of Transportation,

the record to determine whether the moving party was entitled to judgment as a matter of law.

Morales v Auto-Owners Ins,

458 Mich 288, 294; 582 NW2d 776 (1998); Phillips v Deihm, 213

Mich App 389, 398; 541 NW2d 566 (1995). A motion for summary disposition under MCR

2.116(C)(10) tests whether there is factual support for a claim. Spiek, supra, 456 Mich 337;

Radke v Everett,

442 Mich 368, 374; 501 NW2d 155 (1993). A court must rely on affidavits,

pleadings, depositions, or any other documentary evidence in deciding whether a genuine issue of

material fact exists. Rollert v Dep’t of Civil Service, 228 Mich App 534, 536; 579 NW2d 118

(1998). If the opposing party fails to present documentary evidence establishing the existence of

a material factual dispute, the motion is properly granted. Smith v Globe Life Ins Co, 460 Mich

446, 455-456 n 2; 597 NW2d 28 (1999).

Defendant first contends that plaintiff did not have standing to bring this suit under the

Michigan Collection Practices Act (MCPA) based on the following provisions:

(b) Furnishing legal advice, or otherwise engaging in the practice of law,

or representing that the person is competent to do so, or to institute a judicial

proceeding on behalf of another.

* * *

-2-

(d) Employing or retaining an attorney to collect a claim. A licensee may

exercise authority on behalf of a creditor to employ the service of an attorney if

the creditor has specifically authorized the collection agency in writing to do so

and the licensee’s course of conduct is at all times consistent with a true

relationship of attorney and client between the attorney and the creditor. After

referral to an attorney, the creditor shall be the client of the attorney, and the

licensee shall not represent the client in court. The licensee may act as an agent of

the creditor in dealing with the attorney only if the creditor has specifically

authorized the licensee to do so in writing.

* * *

(f) Soliciting, purchasing, or receiving an assignment of a claim for the

sole purpose of instituting an action on the claim in a court. [MCL 339.915a(b),

(d) & (f); MSA 18.425(915a)(b), (d) & (f).]

Defendant maintains that plaintiff is a collection agency under the Act and has thus violated the

above provisions. Plaintiff, on the other hand, contends that it is not a collection agency and

purchased the debt in question outright and is not acting on behalf of a creditor.

A collection agency is defined as:

[a] person directly or indirectly engaged in soliciting a claim for collection or

collecting or attempting to collect a claim owed or due or asserted to be owed or

due another, or repossessing or attempting to repossess a thing of value owed or

due or asserted to be owed or due another arising out of an expressed or implied

agreement. . . . [MCL 339.901(b); MSA 18.425(901)(b).]

In the instant case, defendant purchased the vehicle from Repo Depo West, Inc. Repo Depo

West, Inc. immediately sold defendant’s account to Guardian National Acceptance Corporation.

On June 27, 1997, plaintiff purchased defendant’s account from GNA. The purchase agreement

states that GNA conveyed all of its interests in the accounts to plaintiff for value.

This Court holds that plaintiff is not a collection agency as defined by the Act. The

purchase agreement states that GNA conveyed all of its interest in defendant’s account for

valuable consideration. Moreover, the provisions of the Act clearly attempt to protect the debtor

and the creditor from the potentially improper acts of a third-party collection agency.1 Here,

plaintiff is not acting for the benefit of GNA, or any other party, in its suit to collect on the debt.

Therefore, plaintiff has standing to sue defendant on the outstanding debt.

1 The article provides that a person shall not operate a collection agency without first obtaining a

license, MCL 339.904; MSA 18.425(904), and maintaining a separate trust account, MCL

339.909; MSA 18.425(909). The article also provides that the collection agency must maintain

records or books of accounts outlining each client and the debtors’ accounts for which the agency

is attempting to collect. MCL 339.910; MSA 18.425(910).

-3-

Defendant next contends that despite plaintiff’s stance that it is not a collection agency

under Michigan law, its actions are clearly prohibited by the MCPA, MCL 339.901 et seq.; MSA

18.425(901) et seq. Specifically, as stated above, MCL 339.915a(f); MSA 18.425(915a)(f)

provides that a licensee under the Act is prohibited from “soliciting, purchasing, or receiving an

assignment of a claim for the sole purpose of instituting an action on the claim in a court.”

Defendant argues that because plaintiff purchased a delinquent account from GNA, and filed suit

on the account, it must be subject to the Act. In support of this contention, defendant refers to

the definition of creditor under the Act. Creditor is defined as:

[a] person who offers or extends credit creating a debt or a person to whom a debt

is owed or due or asserted to be owed or due. Creditor or principal shall not. In

include a person who receives an assignment or transfer of a debt solely for the

purpose of facilitating collection of the debt for the assignor or transferor

those instances, the assignor or transferor of the debt shall continue to be

considered the creditor or the principal for purposes of this article. [MCL

339.901(e); MSA 18.425(901)(e) (emphasis supplied).]

Thus, defendant argues that “an entity that receives a debt in default for the purpose of collecting

the debt is not a creditor and is therefore a debt collector/collection agency subject to the act.”

However, this Court holds that, although plaintiff received an assignment or transfer of a debt,

there is no evidence that plaintiff was “facilitating collection of the debt for the assignor or

transferor” (GNA). MCL 339.901(e); MSA 18.425(901)(e). As noted, plaintiff purchased all

interest in the account from GNA and cannot be acting on GNA’s behalf in collecting the debt.

Defendant also argues that, under the Fair Debt Collection Practices Act, 15 USC 1692 et(FDCPA), plaintiff is a debt collector and is prohibited from suing on accounts it purchased

seq.

after the debt was in default. Plaintiff concedes that it is a debt collector under the FDCPA.

Defendant relies on the following provisions to support his argument:

The term “creditor” means any person who offers or extends credit creating a debt

or to whom a debt is owed, but such term does not include any person to the

extent that he receives an assignment or transfer of a debt in default solely for the

purpose of facilitating collection of such debt for another. [15 USC 1692a(4).]

* * *

The term “debt collector” means any person who uses any instrumentality of

interstate commerce or the mails in any business the principal purpose of which is

the collection of any debts, or who regularly collects or attempts to collect,

directly or indirectly, debts owed or due or asserted to be owed or due another.

[15 USC 1692a(6).]

As noted, GNA sold all of its rights and interests in defendant’s debt and thus plaintiff cannot

collect the debt on behalf of GNA. In Kimber v Federal Financial Corp, 668 F Supp 1480 (MD

Ala, 1987), the United States District Court addressed the issue of whether an entity that

purchases a debt in default is a debt collector or a creditor under the Act. The court held, under

analogous facts, that despite the defendant’s argument that it was not collecting the debt for

-4-

another, “Congress merely intended that the debts should have originally belonged to another

and that the creditor was therefore in effect a third-party or independent creditor.” Kimber,668 F Supp 1485 (emphasis in original). The court held that:

supra,

even though FCC collects debts for itself, it is still a debt collector within the

meaning of § § 1692a(4) and 1692a(6) of the Act, because the corporation

regularly collects debts and debt collection is the principal purpose, and because

the debts the corporation collects were already in default when they were assigned

to the corporation and thus the corporation falls within the assignee exception to

the definition of creditor. [Kimber, supra, 668 F Supp 1485.]

The Kimber court went on to hold that as the defendant was subject to the Act as a debt collector,

it had violated several of the protective provisions under the Act. Kimber, supra, 668 F Supp

1488-1489.

In the instant case, plaintiff concedes, and we agree, that it is a debt collector under the

Act. However, defendant does not allege how, if at all, plaintiff has violated any of the

protective provisions of the Act. 15 USC 1692i provides:

(a) Venue

Any debt collector who brings any legal action on a debt against any

consumer shall-

(1) in the case of an action to enforce an interest in real property securing

the consumer’s obligation, bring such action only in a judicial district or similar

legal entity in which such real property is located; or

(2) in the case of an action not described in paragraph (1), bring such

action only in the judicial district or similar legal entity-

(A) in which such consumer signed the contract sued upon; or

(B) in which such consumer resides at the commencement of the

action.

(b) Authorization of Actions

Nothing in this subchapter shall be construed to authorize the bringing of

legal actions by debt collectors.

Although not the model of legislative clarity, this Court holds that the statute allows the filing of

suit on an outstanding debt. In fact, the Kimber court never held that the defendant’s act of

bringing suit itself violated any provisions of the Act. Accordingly, we hold that the trial court

did not err in determining that plaintiff could sue on the debt.

Defendant argues that under the Michigan Supreme Court’s holding in Bay Co Bar Ass’n345 Mich 434; 76 NW2d 23 (1956), plaintiff’s filing of suit constituted

v Finance System, Inc,

-5-

the unauthorized practice of law. In Bay Co, the defendant was engaged in the collection of

debts as its business. The creditors would assign the defendant an interest in the debt for the

purposes of collection only. Accordingly, the original creditors retained substantial interest in

the debt. Id., 436-437. The Court held that:

[w]e cannot escape the conclusion that engaging in the business of representing

the interests of assignors and controlling the proceedings to be taken in suits on

assigned claims in which assignors retain an interest, as done by defendants, is

engaging in the practice of law. When this is done by one not licensed as an

attorney it constitutes the unauthorized practice of law whether done by him in

person or through his agent, regardless of whether the latter be a layman or a

licensed attorney. [Id., 447 (citations omitted).]

In Bay Co, the Court emphasized that the assignor retained an interest in the debt and was to

receive a share of the proceeds. Thus, the defendant was merely managing the lawsuit on behalf

of the original creditor. Here, defendant hired an attorney to represent its exclusive interest in

collecting on the debt. Defendant argues that plaintiff’s office staff controlled the litigation.

Defendant did not, however, offer any evidence that an employee of plaintiff did anything other

than the routine tasks of a legal support staff or that legal documents were not signed by an

attorney. This Court holds that plaintiff’s actions did not constitute the unauthorized practice of

law.

Defendant next contends that the trial court erred in making the factual determination that

defendant received notice of the impending sale and by noting that, even if there was a genuine

issue of material fact with respect to the notice issue, defendant failed to produce evidence that

the sale of the vehicle was commercially unreasonable. MCL 440.9504(3); MSA 19.9504(3)

outlines the notice required to be given to the debtor and states that the sale of the collateral must

be commercially reasonable. It provides:

Disposition of the collateral may be by public or private proceedings and may be

made by way of 1 or more contracts. Sale or other disposition may be as a unit or

in parcels and at any time and place and on any terms but every aspect of the

disposition including the method, manner, time, place, and terms must be

commercially reasonable. Unless collateral is perishable or threatens to decline

speedily in value or is of a type customarily sold on a recognized market,

reasonable notification of the time and place of any public sale or reasonable

notification of the time after which any private sale or other intended disposition

is to be made shall be sent by the secured party to the debtor, if he has not signed

after default a statement renouncing or modifying his right to notification of sale.

In the case of consumer goods no other notification need be sent. In other cases

notification shall be sent to any other secured party from whom the secured party

has received (before sending his notification to the debtor or before the debtor’s

renunciation of his rights) written notice of a claim of an interest in the collateral.

The secured party may buy at any public sale and if the collateral is of a type

customarily sold in a recognized market or is of a type which is the subject of

widely distributed standard price quotations he may buy at private sale.

-6-

In Honor State Bank v Timber Wolf Construction Co, 151 Mich App 681, 687; 391

NW2d 422 (1986), this Court concluded that failure to provide notice to the debtor of the sale of

collateral absolutely bars recovery of any deficiency. In the instant case, the trial court held that

it was unclear whether defendant had notice of the impending sale. Defendant stated in his

affidavit that he did not have knowledge of the sale, and plaintiff’s employee provided an

affidavit that the information contained in plaintiff’s first letter to defendant did not contain the

information referenced in defendant’s letter to plaintiff. According to plaintiff, defendant must

have received notice about the sale of the vehicle from the prior creditor. A letter from the prior

creditor indicating the date of the sale was produced below2. However, defendant expressly

contends that he did not receive any notice of the proposed sale.

The trial court, however, held that the issue of notice was irrelevant in that defendant

failed to present any evidence that the sale was commercially unreasonable. Specifically,

defendant failed to provide any foundation for his valuation of the vehicle, and failed to indicate

the manner in which he surrendered the car to the original creditor. The court noted that

documentary evidence had been presented by plaintiff which demonstrated that the vehicle had

been abandoned and not surrendered as alleged by defendant. This Court holds that the trial

court’s determination that defendant failed to demonstrate that the sale was commercially

unreasonable does not overcome the potential lack of notice. As noted by the Honor State Bank

 

court, the notice provisions are in place to protect the debtor. The creditor, on the other hand, is

in a position to exercise a high degree of control over the relationship. Honor State Bank, supra,

 

151 Mich App 687-688. Thus, we hold that the case should be remanded for trial on the issue of

whether defendant received the statutorily required notice of sale.

Affirmed in part and remanded. We do not retain jurisdiction.

/s/ Jane E. Markey

/s/ Gary R. McDonald

/s/ Kirsten Frank Kelly

2 The letter referred to listed April 22, 1996 as the sale date. The actual sale date was May 15,

1996. Asset produced no documents to show that Plaintiff received any notice of the May 15,

1996 sale date.

CIVIL ACTION NO. 1:02CV 874 UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF OHIO 2003 U.S. Dist. LEXIS 24992

The consumer suing under the FDCPA need not prove that a violation was intentional or negligent in most cases. Lee v. Thomas & Thomas, 109 F.3d 302 (6th Cir. 1997). The “FDCPA is a strict liability statute.” Id.

The letter sent by Defendant Montgomery, Lynch violated numerous aspects of the FDCPA, including but not limited to 15 USC 1692e(11), 15 USC 1692e [*4] preface and 15 USC 1692e(10). Unfortunately, even though Defendant Montgomery, Lynch has exhibited a nearly total disregard for the requirements of the FDCPA, this Court may only make one statutory damages award with the maximum amount being One Thousand Dollars ($ 1,000.00). Wright v. Finance Service of Norwalk, Inc., 22 F.3d 647 (1994).

The FDCPA also allows the Court to award actual damages, in addition to the statutory damages, pursuant to 15 USC 1692k(a)(1). State law requirements regarding the proof of intentional or negligent infliction of emotional distress are not applicable to actual damages under the FDCPA. In Smith v. Law Offices of Mitchell N. Kay, 124 B.R. 182, 185 (D.Del. 1991). the district court instructed the jury:” First, actual damages may be awarded the plaintiff as result of the failure of defendants to comply with the Act. Actual damages not only include any out-of-pocket expenses, but also damages for personal humiliation, embarrassment, mental anguish or emotional distress.” Actual damages are certainly appropriate where the conduct of the debt collector is egregious, as it is [*5] here. See, Boyce v. Attorney’s Dispatch Service, 1999 U.S. Dist. LEXIS 12970, 1999 WL 33496505 (S.D. Ohio, April 27, 1999).

The multiple violations of the FDCPA and the particularly offensive implication that the failure to pay the amount will cause hard feelings and implying that she should display the “proper attitude” when dealing with Montgomery, Lynch is sufficient to cause anyone embarrassment, humiliation and upset. It is important to note that even though Plaintiff works for a debt collector herself, the inclusion of the type of language placed in its collection letters by Montgomery, Lynch would be offensive and upsetting even to those in the business and certainly to the least sophisticated consumer. See, Smith v. Computer Credit, Inc., 167 F.3d 1052 (6th Cir. 1999). 

 Accordingly, this Court awards Plaintiff the sum of Two Hundred Dollars ($ 250.00) [*6] in actual damages for Montgomery, Lynch’s violation of the FDCPA.

The Honorable Michael J. Davis, United States District Judge for the District
of Minnesota, sitting by designation.
United States Court of Appeals
FOR THE EIGHTH CIRCUIT
___________
No. 00-2661
___________
Troy L. Freyermuth *
*
Appellant, *
*
v. * Appeal from the United States
* District Court for the District
Credit Bureau Services, Inc, * of Nebraska.
d/b/a Checkmate of Fremont *
*
Appellees. *
___________
Submitted: February 15, 2001
Filed: April 27, 2001
___________
Before RICHARD S. ARNOLD, and HANSEN, Circuit Judges, and DAVIS,1
District Judge.
___________
DAVIS, District Judge.
Troy L. Freyermuth (Freyermuth) appeals the district court’s entry of
summary judgment in favor of Credit Bureau Services, Inc., d/b/a/ Checkmate of Fremont (Checkmate). Freyermuth commenced this action pursuant to the Fair Debt Collection Practices Act (FDCPA), for abusive practices in seeking to collect

The Honorable William G. Cambridge, United States District Judge for the
District of Nebraska.

The language of the two notices differs slightly. One notice addresses the checks for which the principal balance and the service charges are outstanding.

The payment for dishonored checks. 15 U.S.C. §§1692 et seq. The District Court2 granted summary judgment for defendant. We affirm.
I.
Between May 11, 1990, and April 8, 1998, Freyermuth wrote fourteen checks which were returned for insufficient funds (NSF) to various merchants in Fremont, West Point, and Wisner, Nebraska. The merchants referred the NSF checks to Checkmate, a check authorization service, for collection. Six of the checks were
referred to Checkmate in 1990; two checks were then referred in 1994, five in 1995, and one in 1998. Checkmate sent individual notices (“Initial Notices”) to Freyermuth within two business days after receiving each of the referred checks. Each Initial Notice
was sent to Freyermuth at his last known address. The Initial Notices indicated that Freyermuth had an amount due on Checkmate’s permanent bad check data file, and listed the outstanding balance and applicable service charges. Freyermuth paid the
principal balance on seven of the fourteen checks; he did not pay service charges on
any of the fourteen checks. On May 6, 1998, Checkmate sent Freyermuth two followup
notices (“Subsequent Notices”) regarding the NSF checks identified in the fourteen
Initial Notices.
The language of the Subsequent Notices reads: “Our records show the amount
due indicated below remains in our CHECKMATE PERMANENT BAD CHECK
DATA FILE. TO PROTECT YOUR CHECK-WRITING PRIVILEGES, REMIT
THE BALANCE DUE IMMEDIATELY (CASH OR MONEY ORDER ONLY)… To
be sure of proper credit and to stop further procedure[sic], make your payment in full.”3
other notice addresses those checks on which only the service charge is outstanding.
-3-
On May 20, 1998, Freyermuth, through his counsel, wrote Checkmate requesting
the names and addresses of the original creditors and the amount in controversy
concerning each check. On June 2, 1998, Checkmate replied in writing with a list of
11 creditors, and a principal amount for each creditor. Freyermuth filed this lawsuit
against Checkmate on May 5, 1999, for abusive debt collection practices in violation
of the FDCPA. He alleged that Checkmate unlawfully attempted to collect a service
charge in violation of 15 U.S.C. §1692f(1).
Checkmate brought a motion for summary judgment. In his response to
Checkmate’s motion, Freyermuth raised the new claim that Checkmate had further
violated the FDCPA by attempting to collect on debts that were probably time-barred,
and moved for partial summary judgment in his favor. The district court granted
summary judgment to Checkmate, holding that the entire claim was barred by the
FDCPA’s one year statute of limitation. Furthermore, the court held, Nebraska law did
not prohibit the collection of a service fee for a bad check, and thus no violation of the
FDCPA had occurred.
II.
This court reviews a grant of summary judgment de novo. Thus, summary
judgment is appropriate when the evidence, viewed in the light most favorable to the
nonmoving party, demonstrates that there is no genuine issue of material fact, and the
moving party is entitled to judgment as a matter of law. See Hill v. St. Louis Univ.,
123 F.3d 1114, 1118-19 (8th Cir. 1997); Duffy v. Wolle, 123 F.3d 1026, 1033 (8th
Cir. 1997).
-4-
The Fair Debt Collection Practices Act (FDCPA) makes it unlawful for debt
collectors to use “any false, deceptive, or misleading representation or means in
connection with the collection of any debt.” 15 U.S.C. §1692e. The Act prohibits a
debt collector from collecting any service charge “unless such amount is expressly
authorized by the agreement creating the debt or permitted by law.” 15 U.S.C.
§1692f(1). In addition, it is a violation of the Act to threaten to take “any action that
cannot legally be taken.” 15 U.S.C. §1692e(5).
The FDCPA states that any action to enforce any liability created by the Act
must be brought “…within one year from the day on which the violation occurs.” 15
U.S.C. §1692k(d). This Court has previously held that in cases regarding abusive debt
collection letters, the date of the violation of the FDCPA occurs on the date the letter
that allegedly does not comply with the FDCPA’s requirements is sent to the debtor.
See Mattson v. U.S. West Communications, Inc., 967 F.2d 259, 261 (8th Cir. 1997).
This action was filed on May 5, 1999, more than one year after the last of the Initial
Notices was mailed, on or about April 10, 1998. To the extent the complaint rests on
an alleged violation of the Act committed when Checkmate sent the Initial Notices, this
action is time-barred.
Freyermuth argues that his Complaint concerns alleged violations of the Act by
the Subsequent Notices, not the Initial Notices. Even if we were to find that the
Subsequent Notices form the basis of the Complaint and therefore it is not time barred,
the claim would nonetheless fail on the merits. Checkmate did not violate the FDCPA
when it attempted to collect service fees, nor when it attempted to collect on a debt that
was potentially time-barred.
Under the FDCPA, a debt collector may not impose a service charge unless (i)
the agreement creating the debt expressly authorizes the charge, or (ii) the charge is
permitted by law. See 15 U.S.C.A.§1692f(1). Neither party has argued that the
-5-
charge was expressly authorized, and so we must look to applicable state law.
Nebraska law authorizes reimbursement to the seller for incidental damages incurred
as a result of the buyer’s breach. Such incidental damages may include any
commercially reasonable charges. Neb. Rev. Stat. U.C.C. §2-710 (1963). A person
“in the position of a seller” can also recover incidental damages. In Nebraska, a
“person in the position of a seller” is one who “who has … become responsible for the
price of goods on behalf of his principal….” Neb. Rev. Stat. U.C.C. §2-707(1)(1963).
In this case, various merchants referred the checks to Checkmate for collection.
The merchants retained ownership of the debt, but enlisted the services of Checkmate
to collect on the amount due. In this way, Checkmate “became responsible for” the
debts, and thus stands in the position of the merchants for purposes of collecting
incidental damages, in the form of a commercially reasonable charge. See Tuttle v.
Equifax Check, 190 F.3d 9, 14-15 (2d Cir. 1999). Checkmate therefore did not violate
Nebraska law when it imposed the service fees, and did not violate the FDCPA when
it attempted to collect them.
The question of whether a debt collector violates the FDCPA when it attempts
to collect on a potentially time-barred debt is one of first impression in this Circuit.
Congress enacted the Fair Debt Collection Practices Act in order to stop “the use of
abusive, deceptive and unfair debt collection practices by many debt collectors.” 15
U.S.C.A.§1692(a). Impermissible practices include harassing, oppressive or abusive
conduct; false, deceptive or misleading representations; and unfair or unconscionable
collection methods. 15 U.S.C.A. §1692d-f. A court evaluating debt collection letters
must view them “through the eyes of the unsophisticated consumer.” Duffy v.
Landberg, 215 F.3d 871, 873 (8th Cir. 2000).
The case law on this issue focuses on the debt collector’s actions, and whether
an unsophisticated consumer would be harassed, misled or deceived by them. In
-6-
Kimber v. Fed. Fin. Corp., 668 F.Supp. 1480 (M.D. Ala. 1987), the court held that the
debt collector’s filing of a lawsuit on an apparently time-barred debt, without having
first determined after a reasonable inquiry that the limitations period had been tolled,
was a violation of the FDCPA. Subsequent cases have similarly turned on the threat,
or actual filing, of litigation. See Beattie v. D.M. Collections, Inc., 754 F.Supp. 383,
393 (D.Del. 1991)(threat of lawsuit which debt collector knows or should know is
time-barred is violation of FDCPA); Aronson v. Commercial Fin. Serv., 1997 WL
103818, *3 (W.D. Pa)(no FDCPA violation where no lawsuit threatened, and language
of letters tracked language of statute); Shorty v. Capital One Bank, 90 F.Supp. 2d 1330,
1332 (D.N.M. 2000)(no FDCPA violation where no lawsuit or further collection action
threatened); Johnson v. Capital One, 2000 WL 1279661, *1 (W.D.Tex.)(no violation
of the FDCPA where creditor only expressed intent to pursue lawful collection
attempts).
Only one court has found a violation of the Act in the absence of an express
threat of litigation when a creditor attempts to collect on a time-barred debt. See
Stepney v. Outsourcing Solutions, Inc., 1997 WL 722972, 4 (N.D. Ill.)(FDCPA claim
stated where collection notice promised “no further collection action” if the time-barred
debt was paid). Here, no legal action was taken or even threatened. As several cases
have noted, a statute of limitations does not eliminate the debt; it merely limits the
judicial remedies available. We decline to extend the reasoning of Kimber, and hold
that, in the absence of a threat of litigation or actual litigation, no violation of the
FDCPA has occurred when a debt collector attempts to collect on a potentially timebarred
debt that is otherwise valid.
III.
For the aforementioned reasons, we affirm the district court’s grant of summary
judgment for Checkmate.
-7-
A true copy.
Attest:
CLERK, U.S. COURT OF APPEALS, EIGHTH CIRCUIT.

In the United States Court of Appeals For the Seventh Circuit
No. 96-3980

CARL CHAUNCEY,

Plaintiff-Appellee,

v.

JDR RECOVERY CORPORATION,

Defendant-Appellant.

Appeal from the United States District Court for the Western District of Wisconsin. No. 95 C 887–Barbara B. Crabb, Judge.

ARGUED MAY 20, 1997–DECIDED JUNE 23, 1997

Before CUMMINGS, FLAUM and EVANS, Circuit Judges.

CUMMINGS, Circuit Judge. Plaintiff Carl Chauncey sued defendant JDR Recovery Corporation alleging violations of the Fair Debt Collection Practices Act (15 U.S.C. sec.sec. 1692-1692o) (“FDCPA”). The defendant is a professional debt collection agency and wrote plaintiff on December 10, 1994, a letter seeking to collect a $1,541.28 debt allegedly owed to Bridgestone/Firestone. On December 8 of the following year, plaintiff sued defendant alleging two violations of 15 U.S.C. sec. 1629g(a). The suit sought statutory damages, costs and reasonable attorney’s fees under 15 U.S.C. sec. 1692k. On June 14, 1996, the district court handed down an opinion finding defendant liable on one claim of plaintiff and finding it unnecessary to rule on plaintiff’s second claim because a single violation of the FDCPA is sufficient to entitle plaintiff to an award of statutory damages. However, the order did not determine the amount of statutory damages and attorney’s fees but permitted the parties to put in evidence on those amounts. 1

Defendant’s notice of appeal stated that it appealed “from the order entered in this action on the 25th day of October, 1996.” That order was the first one fixing plaintiff’s attorney’s fees and costs (SA 9-12). However, defendant is actually attacking the court’s June 14, 1996, order which granted summary judgment for plaintiff but did not then determine statutory damages and attorney’s fees (A. App- 1-19). Although the notice of appeal specified the October 25, 1996, order rather than the June 14, 1996, order, the validity of the October 25, 1996, order depended on the validity of the June 14, 1996, order. This notice defect did not mislead plaintiff. Therefore we will consider the earlier order. Chaka v. Lane, 894 F.2d 923, 924 (7th Cir. 1990); Asset Allocation and Management Co. v. Western Employers Insurance Co., 892 F.2d 566, 569 (7th Cir. 1989); see also Wright, Miller & Cooper, Federal Practice and Procedure 16A, sec. 3949.6.

The question before us is whether the dunning letter sent by defendant demanding payment within the 30-day debt validation period violates the FDCPA. The pertinent provision is contained in Section 1692g(a):

(a) Within five days after the initial communication with a consumer in connection with the collection of any debt, a debt collector shall, unless the following information is contained in the initial communication or the consumer has paid the debt, send the consumer a written notice containing–

(1) the amount of the debt;

(2) the name of the creditor to whom the debt is owed;

(3) a statement that unless the consumer, within thirty days after receipt of the notice, disputes the validity of the debt, or any portion thereof, the debt will be assumed to be valid by the debt collector; (4) a statement that if the consumer notifies the debt collector in writing within the thirty-day period that the debt, or any portion thereof, is disputed, the debt collector will obtain verification of the debt or a copy of a judgment against the consumer and a copy of such verification or judgment will be mailed to the consumer by the debt collector; and

(5) a statement that, upon the consumer’s written request within the thirty-day period, the debt collector will provide the consumer with the name and address of the original creditor, if different from the current creditor.

Subsection (b) provides that if the consumer notifies the debt collector within the above 30-day period that the debt is disputed, the collector must cease collection of the debt (or the disputed portion) until the requested verification or identity of the original creditor is mailed to the consumer.

In the December 10, 1994, letter, defendant, a professional debt collection agency, mailed from its Ramsey, New Jersey, office to plaintiff at his address in Janesville, Wisconsin, a dunning letter seeking to collect the $1,541.28 debt allegedly owed to Bridgestone/Firestone. The letter provided as follows:

Dear Carl P. Chauncey,

Please be advised that we have been requested by [Bridgestone/Firestone] to assist them in the collection of the amounts due set forth above. Unless we receive a check or money order for the balance, in full, within thirty (30) days from receipt of this letter, a decision to pursue other avenues to collect the amount due will be made.

Unless you notify this office within thirty (30) days after receiving this notice that you dispute the validity of this debt, or any portion thereof, this office will assume this debt is valid. If you notify this office in writing within thirty (30) days from receiving this notice that you dispute the debt or any portion of it, this office will obtain verification of the debt or obtain a copy of the judgment and mail you a copy of such judgment or verification. If you request this office in writing within thirty (30) days after receiving this notice, this office will provide you with the name and address of the original creditor if different from the current creditor.

This is an attempt to collect on this debt. Any information obtained will be used for that purpose.

You may contact Ms. Mackenzie at (800) 793-3369 if you have any questions or if you would like to discuss this matter further.

Please include the above JDR number on the outside of your remittance envelope to insure proper credit. We trust your prompt response will make any further collection activities unnecessary. In the event we do not hear from you within the next thirty (30) days, further collection activities will be pursued to the extent permitted by law.

The district court granted summary judgment to plaintiff “because the thirty-day payment requirement set out in the [first paragraph of the] collection letter contradicts the mandatory validation notice disclosures allowing thirty days to dispute the debt” (A. App- 1-2). We agree.

All Courts of Appeals which have addressed the issue in this case, including this Circuit, have held that, even though the sec. 1692g(a) information properly is included in a communication from a debt collector to a debtor, the debt collector may not overshadow or contradict that information with other messages sent with the validation notice or within the validation period. See Avila v. Rubin, 84 F.3d 222, 226 (7th Cir. 1996); see also Russell v. Equifax A.R.S., 74 F.3d 30, 35 (2d Cir. 1996); Graziano v. Harrison, 950 F.2d 107, 111 (3d Cir. 1991); Miller v. Payco- General American Credits, Inc., 943 F.2d 482, 484 (4th Cir. 1991); Swanson v. Southern Oregon Credit Service, Inc., 869 F.2d 1222, 1225 (9th Cir. 1988). In Avila, the debtor received several letters, one of which contained an appropriate explanation of his verification right, but then followed up with the statement that “[i]f the above does not apply to you, we shall expect payment or arrangement for payment within ten (10) days from the date of this letter. If payment is not received, a civil suit may be initiated against you by your creditor for repayment of your loan . . . .” Id. at 225. This Court found that the two statements were inconsistent and violated the FDCPA, explaining that it believed:

[T]he unsophisticated consumer would be scratching his head upon receipt of such a letter. He wouldn’t have a clue as to what he was supposed to do before real trouble begins. A debt validation notice, to be valid, must be effective, and it cannot be cleverly couched in such a way as to eviscerate its message.

Id. at 226. We find such reasoning equally applicable in this case. The statement in the first paragraph of defendant’s letter–”Unless we receive a check or money order for the balance, in full, within thirty (30) days from receipt of this letter, a decision to pursue other avenues to collect the amount due will be made”–contradicts the language in the letter explaining the plaintiff’s validation rights under the FDCPA, which allows plaintiff 30 days in which to dispute the debt and request verification. We believe that the contradictions in the letter, as in Avila, would leave an unsophisticated consumer confused as to what his rights are and therefore violate the FDCPA.

Defendant argues that the letter contains no contradiction because plaintiff is given the same amount of time to pay as to contest the debt (i.e., “within thirty (30) days”). But the letter required that plaintiff’s payment be received within the 30- day period, thus requiring plaintiff to mail the payment prior to the thirtieth day to comply. In contrast, subparagraphs (3) and (4) of sec. 1692g(a) give the consumer thirty days after receipt of the notice to dispute the validity of a debt. It is clear that Mr. Chauncey had the full thirty days to send his notification to defendant. Nothing in Section 1692g requires, and we have found no other court decision which has required, that the debt collector must receive notice of the dispute within thirty days as defendant insists. The district court’s holding is consistent with Avila, 84 F.3d at 226, where we described Section 1692g as follows: “Essentially, the notice required by sec. 1692g must tell the target that she has 30 days to dispute the validity of all or a portion of the debt.” If we were to hold that the validation request must be received by the thirtieth day, we would be rewriting Section 1692g, which we are not entitled to do. Accordingly the district court was correct in concluding that there was a contradiction in defendant’s notice that could raise a dilemma for an unsophisticated consumer.

Judgment affirmed.

FOOTNOTE
Eventually statutory damages of $1,000 were awarded to plaintiff plus $1,475 in attorney’s fees and $120 in costs (SA 16, 17).

PUBLISHED

UNITED STATES COURT OF APPEALS

FOR THE FOURTH CIRCUIT

MOHAMMAD H. CHAUDHRY; DIANA M. CHAUDHRY, Plaintiffs-Appellants,

v. No. 98-1024

MICHAEL G. GALLERIZZO; GEBHARDT & SMITH, Defendants-Appellees.

JAMES E. KILEY, JR., Appellant,

MOHAMMAD H. CHAUDHRY; DIANA M. CHAUDHRY, Plaintiffs-Appellants,

No. 98-1595
v.

MICHAEL G. GALLERIZZO; GEBHARDT & SMITH, Defendants-Appellees.

Appeals from the United States District Court for the District of Maryland, at Baltimore. Marvin J. Garbis, District Judge. (CA-96-1072-MJG)

Argued: December 1, 1998

Decided: April 5, 1999

Before MURNAGHAN, LUTTIG, and KING, Circuit Judges.

_________________________________________________________________

Affirmed by published opinion. Judge Murnaghan wrote the opinion, in which Judge Luttig and Judge King joined.

_________________________________________________________________

COUNSEL

ARGUED: James Edward Kiley, Jr., LAW OFFICES OF JAMES E. KILEY, JR., P.C., Rockville, Maryland, for Appellants. Louis Jay Ebert, GEBHARDT & SMITH, L.L.P., Baltimore, Maryland, for Appellees. ON BRIEF: Mark M. Dumler, George R. Calhoun, GEB- HARDT & SMITH, L.L.P., Baltimore, Maryland, for Appellees.

_________________________________________________________________

OPINION

MURNAGHAN, Circuit Judge:

Plaintiffs, Mohammad and Diana Chaudhry, filed the present action against Defendants Michael Gallerizzo and his law firm, Geb- hardt & Smith, in the United States District Court for the District of Maryland, alleging various violations of the Fair Debt Collection Practices Act (“FDCPA”), 15 U.S.C.A. § 1692a, et seq. (West 1998). The district court granted a motion for judgment as a matter of law in favor of Defendants on all counts. In addition, the district court lev- ied sanctions against Plaintiffs and their attorney for filing frivolous claims. We affirm.

I.

NationsBank, N.A. is a national banking association which main- tains an office in Bethesda, Maryland. NationsBanc Mortgage Corpo- ration (“NMC”) is a national mortgage provider and is an affiliate of NationsBank, N.A. NMC’s principal office is located in Dallas, Texas. NationsBank, N.A. and NMC are collectively referred to as “NationsBank.”

In 1994, the Chaudhrys decided to move from their home on Barn- wood Lane (“Barnwood Home”) to a home they planned to build on Inglewood Drive in Potomac, Maryland (the “Inglewood Home”). After discussions with Richard Garrard, a NationsBank loan officer, the Chaudhrys took out a home equity line on their Barnwood Home to assist in the purchase of the lot for the Inglewood Home and obtained a construction loan from NMC for the actual construction of the Inglewood Home (the “Construction Loan”). 1

When the Chaudhrys defaulted on the Construction Loan by, among other things, failing to pay the required monthly payments of interest, NationsBank transferred all of the Chaudhrys’ personal and business loans to Special Assets, a division of NationsBank, N.A. that deals with problem loans. Special Assets retained Gallerizzo and Geb- hardt & Smith to represent the interests of NationsBank in connection with the Chaudhrys’ loan.

After Special Assets assumed responsibility, the Chaudhrys’ attor- ney, James Kiley, scheduled a meeting for December 21, 1995. The Chaudhrys, Kiley, Michael Fodel, a supervisor in Special Assets, and Gallerizzo met at the Virginia offices of NationsBank, N.A. Unknown to Gallerizzo or Fodel, Kiley tape-recorded the meeting. Throughout the course of the meeting, Gallerizzo emphasized that no oral agree- ments could be made at the meeting and that NationsBank would not agree to anything unless the parties signed a written agreement con- taining a release of any claims the Chaudhrys believed they had against the bank. The Chaudhrys refused to agree to such a release. Gallerizzo also indicated that NationsBank might require the Chaud- hrys to pay the full balance of the Construction Loan if no agreement were reached. 2

After the December 21st meeting, Fodel instructed Gallerizzo to demand payment from the Chaudhrys. On December 22, 1995, Gal- lerizzo drafted a demand letter requiring the Chaudhrys to pay the amounts owed under the Construction Loan Documents within thirty days (the “Demand Letter”). The letter set forth the amount owed by the Chaudhrys for principal, interest and inspection fees. In addition, Gallerizzo advised the Chaudhrys that they were also obligated to reimburse the bank for all costs, expenses and attorneys fees which the bank incurred in connection with the matter. Gallerizzo did not demand payment of the attorneys fees or set forth a particular amount of attorneys fees.

On January 4, 1996, Kiley wrote to Gallerizzo, disputing the amounts that NationsBank claimed were due. Pursuant to the FDCPA, he requested that Gallerizzo verify the amounts claimed in the Demand Letter. After receiving Kiley’s January 4th letter, Gallerizzo telephoned Jeffrey Richman, another bank representative in Special Assets, and requested that he confirm the sums that were owed for principal, interest and inspection fees. By letter dated January 18, 1996, Gallerizzo sent Kiley a verification of the indebtedness and assured Kiley that the Chaudhrys did, in fact, owe the verified sums. The next day, Gallerizzo again wrote to Kiley and set forth the amounts necessary to pay off the Construction Loan. Subsequently, in a telephone conversation, Gallerizzo asked Kiley whether he had the information he requested. Kiley responded that he had received everything he needed except for verification of the attorneys’ fees. Gallerizzo discussed with Richman the amount that NMC would accept from the Chaudhrys in payment of NMC’s attorneys’ fees. On or about January 19, 1996, Richman instructed Gallerizzo to accept from the Chaudhrys $8,600, an amount less than the actual attorneys’ fees incurred by NMC through that date.

In the course of investigating allegations set forth in Kiley’s Janu- ary 4th letter, Gallerizzo identified an issue which he believed could potentially result in liability for NMC. Because NationsBank, N.A. was acting as the servicing agent for NMC and because the Chaud- hrys had threatened to sue NMC as the agent of NationsBank, N.A., Gallerizzo believed that any potential claim against NationsBank, N.A. could result in a claim against NMC. In order to advise NMC, Gallerizzo instructed an associate of Gebhardt & Smith to research the issue and prepare a research memorandum regarding his findings (the “Research Memorandum”). A redacted portion of the Research Memorandum was admitted into evidence. Gallerizzo billed NMC for the fees incurred in researching the Chaudhrys’ potential defense, and sent the bills to Richman at the offices of NationsBank, N.A.

On January 22, 1996, Kiley wrote to Gallerizzo and indicated that he still needed verification of the attorneys’ fees. Relying on this let- ter and his earlier telephone conversation with Kiley, Gallerizzo for- warded copies of the legal bills of Gebhardt & Smith but did not forward any additional information regarding the inspection fees. Believing the legal bills contained privileged information, Gallerizzo used a black marker to redact portions of several time entries on the bills.

Also on January 22, 1996, the Chaudhrys’ settlement attorney, Diane Fox, forwarded a request to NationsBank for a payoff figure on the Construction Loan, claiming that a meeting to refinance the loan was scheduled on January 25, 1996. At the request of NationsBank, Gallerizzo forwarded to Fox a payoff letter dated January 24, 1996.

The Chaudhrys filed the present action on April 8, 1996, alleging violations of the FDCPA and common law fraud claims. 3 At the ini- tial pre-trial proceedings, the Chaudhrys demanded unredacted ver- sions of Gebhardt & Smith’s legal bills. The Chaudhrys also demanded the release of the Research Memorandum prepared by Gebhardt & Smith that discussed possible violations of federal stat- utes. When Gallerizzo objected to the disclosure of the information, the Chaudhrys filed motions to compel production.

District Judge Marvin J. Garbis reviewed in camera the unredacted legal bills and the Research Memorandum. 4 With respect to the legal bills, Judge Garbis confirmed that the items redacted revealed the fed- eral statutes researched by Gebhardt & Smith. The first statute researched was the FDCPA. Consequently, Judge Garbis upheld the claim of privilege but determined that, because the Chaudhrys had filed suit, there was no harm in disclosing the fact that Gallerizzo had researched the Act. However, Judge Garbis ruled that the other fed- eral statute, which was the subject of the Research Memorandum, was privileged and refused to disclose the research. Judge Garbis pro- duced a redacted version of the first page of the Research Memoran- dum which did not reveal the research conducted.

A split bench and jury trial commenced on October 27, 1997. At trial, the Chaudhrys, in part, argued that Gallerizzo had misled them at the December 21st meeting by indicating that he would provide them with the amount of interest due which, if paid, would cure the loan default. They also maintained that some of the legal fees demanded from them was for legal services unrelated to the loan default and, thus, not chargeable under the Construction Loan. With the agreement of counsel, the trial judge decided to submit to the jury limited special verdict questions on these two issues. The court first asked the jury if Plaintiffs had proven by a preponderance of the evi- dence that Gallerizzo had made false, deceptive, or misleading state- ments at the December 21st meeting. The court then asked if Plaintiffs had proven by a preponderance of the evidence that the legal fees demanded from them were in excess of the amount properly chargeable to them. The jury returned a verdict in favor of Gallerizzo on issue one, but ruled against him on issue two. With respect to issue two, the jury found that the fees were not properly chargeable to the Chaudhrys and that Gallerizzo had knowingly and intentionally attempted to collect the excessive amount. After a hearing on post- trial motions, the court denied the Chaudhrys’ motion for judgment as a matter of law as to issue one, granted Gallerizzo’s motion for judgment as a matter of law on issue two, and entered judgment in favor of Gallerizzo on all other counts. On motion by Gallerizzo, the trial court granted sanctions against the Chaudhrys and their attorney for filing claims in bad faith and for the purpose of harassing Defen- dants. The Chaudhrys now appeal the district court determination.

II.

A. Unredacted Legal Bills and Research Memorandum

The Chaudhrys first claim that the district court erred in refusing to grant their motions to compel Defendants to produce unredacted legal bills and the entire Research Memorandum. Appellants insist that Defendants improperly prevented the discovery of certain rele- vant information by asserting attorney-client and work product privi- leges, without establishing any factual basis proving the asserted privileges. We review the district court’s decision that certain docu- ments are subject to privilege de novo , since it involves a mixed ques- tion of law and fact. See In re Grand Jury Proceedings , 33 F.3d 342, 353 (4th Cir. 1994).

Under the attorney-client privilege, confidential communications made between a client and an attorney in an effort to obtain legal ser- vices are protected from disclosure. Typically, the attorney-client privilege does not extend to billing records and expense reports. See id. at 353-54. In Clarke v. American Commerce National Bank , 974 F.2d 127 (9th Cir. 1992), however, the Ninth Circuit distinguished between privileged and discoverable information contained in an attorney’s billing records:

[T]he identity of the client, the amount of the fee, the identi- fication of payment by case file name, and the general pur- pose of the work performed are usually not protected from disclosure by the attorney-client privilege. However, corre- spondence, bills, ledgers, statements, and time records which also reveal the motive of the client in seeking repre- sentation, litigation strategy, or the specific nature of the services provided, such as researching particular areas of law, fall within the privilege. Id. at 129 (citations omitted).

In Clarke , the court concluded that the billing records were discover- able because of the general nature of the information provided therein, e.g. , information on the identity of the client, the case name for which payment was made, and the amount of the fee. Id. at 130. The attorney’s bills in Clarke , unlike Gallerizzo’s bills, contained “nothing [that] … reveal[ed] specific research or litigation strategy which would be entitled to protection from disclosure.” Id. at 130; see also In re Grand Jury Proceedings , 33 F.3d at 354 (intimating that the determination as to whether attorney billing statements are privi- leged hinges on whether the statements reveal something about the advice sought or given). In the instant case, the legal bills revealed the identity of the federal statutes researched. Since the records would divulge confidential information regarding legal advice, they consti- tute privileged communications and, as such, should not be disclosed.

Furthermore, the work product doctrine prohibits the disclosure of the Research Memorandum. Under the work product rule, codified in Fed. R. Civ. P. 26(b)(3), “an attorney is not required to divulge, by discovery or otherwise, facts developed by his efforts in preparation of the case or opinions he has formed about any phase of the litiga- tion.” In re Doe , 662 F.2d 1073, 1077 (4th Cir. 1981), cert. denied , 455 U.S. 1000 (1982). Fact work product is discoverable only “upon a showing of both a substantial need and an inability to secure the substantial equivalent of the materials by alternate means without undue hardship.” In re Grand Jury Proceedings , 33 F.3d at 348. Opinion work product is even more carefully protected, since it repre- sents the thoughts and impressions of the attorney. See id. at 348. As we explained in In re Doe , “`[a]n attorney’s thoughts are inviolate, … and courts should proceed cautiously when requested to adopt a rule that would have an inhibitive effect on an attorney’s freedom to express and record his mental impressions and opinions without fear of having these impressions and opinions used against the client.’” 662 F.2d at 1080. As a result, “opinion work product enjoys a nearly absolute immunity and can be discovered only in very rare and extraordinary circumstances.” In re Grand Jury Proceedings , 33 F.3d at 348; see also In re Doe , 662 F.2d at 1079, 1080.

The materials sought by Appellants relate to legal research con- ducted in connection with collection of the Construction Loan and detail the mental impressions, conclusions, and legal theories of NMC’s attorneys. As opinion work product, the materials are entitled to substantially greater protection than fact work product. Yet, Appel- lants fail to establish even the minimal required showing of a substan- tial need for the materials and undue hardship in obtaining their equivalent. Indeed, they advance no compelling arguments toward that end. Under the circumstances, we cannot conclude that the facts of the instant case constitute the “very rare and extraordinary” situa- tion justifying disclosure of opinion work product. The materials, therefore, are not subject to discovery.

Appellants maintain that, even if the attorney-client privilege and work product doctrine apply, the exception for crimes, frauds, and torts also applies here. The exception provides that a confidential communication between attorney and client “will not be privileged if made for the purpose of committing or furthering a crime or fraud.” In re Grand Jury Proceedings , 33 F.3d at 348; see also In re Doe , 662 F.2d at 1079. Appellants allege that the redacted legal bills indicate that Defendants were attempting to collect amounts billed to Nations- Bank for the other disputes the Chaudhrys have with the bank, which are not collectible under the Construction Loan. Appellants maintain that they are entitled to copies of the unredacted legal bills and the Research Memorandum for use at trial because they evidence wrong- doing under the FDCPA.

Appellants, as the party asserting the crime/fraud exception, must make a prima facie showing that the privileged communications fall within the exception. Appellants must prove that”(1) the client was engaged in or planning a criminal or fraudulent scheme when he sought the advice of counsel to further the scheme and (2) the docu- ments containing [the privileged materials] … bear a close relationship to the client’s existing or future scheme to commit a crime or fraud.” In re Murphy , 560 F.2d 326, 338 (8th Cir. 1977); see also In re Grand Jury Proceedings , 33 F.3d at 349 n.13 (quoting In re Murphy favor- ably). Appellants produced no evidence addressing either element of the required showing, so their claim must fail.

Under the circumstances, the district court did not abuse its discre- tion by denying Appellants’ motion to compel production of the unre- dacted legal bills and the Research Memorandum. See In re Grand Jury Proceedings , 33 F.3d at 348 (noting that”[a] district court’s determination of whether the government satisfied[the] standard [for the crime-fraud exception] will not be reversed absent a clear showing of abuse of discretion”).

B. Amended Complaint

Appellants also claim that the district court erred in refusing to allow them to amend their complaint for a third time. Federal Rule of Civil Procedure 15(a) governs the circumstances under which parties who have already pleaded in a case will be permitted to amend their pleadings. Fed. R. Civ. P. 15(a). Rule 15(a) provides that “a party may amend the party’s pleading once as a matter of course at any time before a responsive pleading is served …. Otherwise a party may amend the party’s pleading only by leave of court or by written con- sent of the adverse party; and leave shall be freely given when justice so requires.” Fed. R. Civ. P. 15(a). We have determined that “a motion to amend may be denied when it has been unduly delayed and when allowing the motion would prejudice the non-movant.” Lone Star Steakhouse & Saloon, Inc. v. Alpha of Virginia, Inc. , 43 F.3d 922, 941 (4th Cir. 1995). The trial court is generally in a better posi- tion to make such a determination. See In re Jeffrey Bigelow Design Group, Inc. , 956 F.2d 479, 483 (4th Cir. 1992). We, therefore, review the court’s decision for abuse of discretion. See Loan Star Steakhouse , 43 F.3d at 940.

Appellants argue that justice required the lower court to allow the amendments, especially where Defendants would have suffered no prejudice. As support for their contention, Appellants cite Foman v. Davis , 371 U.S. 178 (1962). In Foman , the Supreme Court observed that “[i]f the underlying facts or circumstances relied upon by a plain- tiff may be a proper subject of relief, he ought to be afforded an opportunity to test his claim on the merits.” Id. at 182. The Court also suggested, however, that leave to amend should be freely given only “[i]n the absence of any apparent or declared reason — such as undue delay, … repeated failure to cure deficiencies by amendments previ- ously allowed, [and] undue prejudice to the opposing party.” Id.

An amendment of the pleadings only two weeks before trial would have improperly allowed Plaintiffs to alter their case to the unfair prejudice of Gallerizzo. The district court previously permitted the Chaudhrys to file a second amended complaint. At that time, Plain- tiffs could have included the claims they later tried to add. Given the broad discretion afforded the district court in determining the appro- priateness of allowing amendments to pleadings, the fact that Plain- tiffs had been allowed to amend their complaint previously and the close proximity of the third request to the commencement of trial, we find no error in the court’s decision to deny the request. C. Judgment as a Matter of Law

The Chaudhrys also maintain that the district court erred in denying their motion for judgment as a matter of law and in granting Defen- dants’ motion for the same. Federal Rule of Civil Procedure 50(a) provides that, in actions tried by a jury, the district court may grant a motion for judgment as a matter of law if “a party has been fully heard … and there is no legally sufficient evidentiary basis for a rea- sonable jury to find for that party.” Fed. R. Civ. P. 50(a)(1). We review the grant or denial of a Rule 50(a) motion de novo , see Malone v. Microdyne Corp. , 26 F.3d 471, 475 (4th Cir. 1994), viewing the evidence in the light most favorable to the non-movants. See id. at 472 n.1. “Judgment as a matter of law is proper`when, without weighing the credibility of the evidence, there can be but one reason- able conclusion as to the proper judgment.’” Price v. City of Charlotte , 93 F.3d 1241, 1249 (4th Cir. 1996), cert. denied , 117 S.Ct. 1246 (1997). With this standard in mind, we evaluate the merits of Appellants’ claim.

1. Gallerizzo’s Alleged Failure to Disclose Amount of Debt in Fair Debt Letter

Appellants allege that Gallerizzo failed to disclose in the December 22nd Demand Letter the precise amount owed by them for legal fees, in violation of § 1692g(a) of the FDCPA. 5 The district court entered judgment in favor of Gallerizzo, finding that “the Chaudhrys were given fair notice that there was an obligation for legal fees.” The court further determined that “legal fees were not due and payable at the time the notices were sent.” Appellants argue that the court’s legal conclusion regarding when legal fees are “due and payable” is errone- ous and its factual findings in support of its conclusions are contrary to the evidence.

Relying on Black’s Law Dictionary (6th ed. 1990), Appellants urge that while “[p]ayable may … signify an obligation to pay at a future time, … when used without qualification, [the] term means that the debt is payable at once.” Appellants thus conclude that attorneys’ fees become a legally enforceable debt as soon as the legal services are rendered, making the district court’s legal conclusion that they “were not due and payable at the time the notices were sent” erroneous.

We believe, however, that the law of Maryland dictates otherwise. Under state law, loan documents may require that a debtor pay to a creditor the costs incurred by the creditor in collecting a debt, includ- ing reasonable attorneys’ fees. See Mortgage Investors of Washington v. Citizens Bank and Trust Co. of Maryland , 349 A.2d 647, 650 (Md. Ct. Spec. App.), aff’d , 366 A.2d 47 (Md. 1976). As Appellants sug- gest, attorneys’ fees due under a promissory note”are payable upon performance of the services contemplated.” Id. at 653. At the time the Demand Letter was sent, however, the legal services had not yet been fully rendered. The fees continued to mount. Furthermore, it was not clear that any legal fees would be owed, since NMC had discretion as to whether to impose legal fees at all and, if so, in what amount. Indeed, when contacted by Gallerizzo to obtain the amount of attor- neys’ fees to charge the Chaudhrys, NMC only required the Chaud- hrys to pay $8,600, an amount less than the fees actually billed to NMC. Therefore, Gallerizzo, through the Demand Letter, was merely advising the Chaudhrys that they may also be liable to NMC for attor- neys’ fees, as was provided in the Construction Loan. Under the cir- cumstances, we find no error in the district court’s grant of judgment as a matter of law in favor of Appellees.

2. Gallerizzo’s Failure to Cease Collection Efforts on Allegedly Unverified Inspection Fees and Legal Fees

Appellants allege that Defendants violated § 1692g(b) 6 by (1) fail- ing to verify the inspection fees portion of the debt asserted in the Demand Letter (Count II); (2) failing to verify the legal fees portion of the debt (Count III); and (3) failing to cease his collection efforts with respect to the foregoing disputed portions of the debt (Count IV).

With respect to Count II, the district court determined that Appel- lants’ counsel, in a telephone conversation with Gallerizzo where he stated that the verification that was needed related to legal fees, “waived whatever claim that the Chaudhrys might make in regard to the alleged failure to verify the inspection fees.” Assuming that there had been no waiver, however, the court determined that “Gallerizzo adequately verified the amount of inspection fees” and “then sent the Chaudhrys’ counsel a letter … including written verification of these fees.” The court found no duty for Gallerizzo to have assembled sup- porting documentation.

Contrary to Appellants’ contention, verification of a debt involves nothing more than the debt collector confirming in writing that the amount being demanded is what the creditor is claiming is owed; the debt collector is not required to keep detailed files of the alleged debt. See Azar v. Hayter , 874 F.Supp. 1314, 1317 (N.D. Fla.), aff’d , 66 F.3d 342 (11th Cir. 1995), cert. denied , 516 U.S. 1048 (1996). Con- sistent with the legislative history, verification is only intended to “eliminate the … problem of debt collectors dunning the wrong person or attempting to collect debts which the consumer has already paid.” S. Rep. No. 95-382, at 4 (1977), reprinted in 1977 U.S.C.C.A.N. 1695, 1699. There is no concomitant obligation to forward copies of bills or other detailed evidence of the debt.

In the present case, Gallerizzo, after receiving assurances from NationsBank that the sums were owed, verified the debt amounts in his January 18th letter to Plaintiffs’ counsel and forwarded a copy of the bank’s computerized summary of the Chaudhrys’ loan transac- tions. The summary included a running account of the debt amount, a description of every transaction, and the date on which the transac- tion occurred. See Graziano v. Harrison , 950 F.2d 107, 113 (3d Cir. 1991) (holding that computer printouts which confirmed amounts of debts, the services provided, and the dates on which the debts were incurred constituted sufficient verification). Thereafter, in a January 19th letter to counsel, Gallerizzo restated the amount of the inspection fees and indicated that the amounts were correct. Nothing more is required.

On Count III, the district court held that Gallerizzo was not “re- quired to provide the degree of detail that was contained in the time sheets” and that Defendants’ actions in redacting the legal fees was proper. The court ruled that “[v]erification only requires a debt collec- tor to confirm with his client that a particular amount is actually being claimed, not to vouch for the validity of the underlying debt.” For the same reasons stated above in support of the court’s ruling on Count II, we agree with the court’s determination on Count III.

Moreover, Gallerizzo cannot be liable for having redacted privi- leged information contained in the bills. Otherwise, a consumer would be able to prevent the legitimate collection of a debt by simply demanding the release of time entries from an attorney, serving as a collector, who has an ethical obligation to protect privileged informa- tion. Surely, the FDCPA does not require an attorney to violate that obligation.

In Count IV, Appellants allege that Gallerizzo’s January 24, 1996 letter responding to a request from Diane Fox, the Chaudhrys’ settle- ment attorney, was an attempt to collect the debt prior to the verifica- tion of the inspection fees or the attorneys’ fees. Because the district court properly held that Gallerizzo verified the inspection fees and legal fees, Count IV must also fail. Even assuming that Gallerizzo failed to verify the fees, however, the court was correct in finding that Gallerizzo’s letter was not an act to collect debt, but rather was sent to Fox, at her request, so that she could have an accurate payoff figure at a separate meeting to refinance the Chaudhrys’ loan. In sum, we find no error with respect to the district court’s conclu- sion that Defendants did not violate § 1692g(b).

3. Gallerizzo’s Alleged Failure to Mail Verification of Debt Directly to Chaudhrys

The FDCPA mandates that when a consumer disputes a debt in writing, “the debt collector obtains verification of the debt and a copy of such verification is mailed to the consumer by the debt collector.” 15 U.S.C.A. § 1692g(b) (emphasis added). Appellants argue that Gal- lerizzo never mailed any verification of the debt to them directly. Rather, he mailed the relevant correspondence and documentation to their attorney, allegedly in violation of § 1692g(b).

Appellants, however, disregard § 1692c(a)(2), which prohibits communications between the debt collector and a debtor who is repre- sented by an attorney. 7 15 U.S.C.A. § 1692c(a)(2). Given the unmis- takable language of § 1692c(a)(2) and in the absence of any statutory exceptions, 8 basic rules of statutory construction compel us to con- clude that when a debtor is represented by an attorney, verification must be sent to the attorney. See Freytag v. Commissioner of Internal Revenue , 501 U.S. 868, 877 (1991) (“Our cases consistently have expressed `a deep reluctance to interpret a statutory provision so as to render superfluous other provisions in the same enactment.’”). Therefore, the district court was correct in determining that Gallerizzo did not violate § 1692g(b) by addressing communications to Appel- lants’ attorney, rather than directly to the consumers. 4. Jury Verdict that Gallerizzo Knowingly Attempted to Collect Legal Fees in Excess of Amount Properly Chargeable to Plaintiffs

Appellants maintain that the jury verdict that Gallerizzo knowingly and intentionally attempted to collect legal fees in excess of the amount properly chargeable to them, in violation of§ 1692e of the FDCPA, 9 was supported by the evidence in the case. Appellants argue that the district court, in granting Defendants’ motion for judgment as a matter of law, inappropriately substituted its judgment for that of the jury. See Murdaugh Volkswagen, Inc. v. First National Bank of South Carolina , 801 F.2d 719, 725 (4th Cir. 1986) (noting that, in reviewing the trial court’s decision regarding judgment notwithstanding the ver- dict, court of appeals “may not substitute [its] judgment of the facts for that of the jury or pass on the credibility of witnesses”). To sup- port their contention, Appellants point to the court’s own language: “The Court, having observed the witnesses, finds this contention not worthy of belief. First, the Court disbelieves the Plaintiffs based upon an evaluation of their credibility at trial.” Appellants conveniently omit, however, that this quotation is in reference to a wholly different matter, the court’s consideration of Defendants’ motion for sanctions against Plaintiffs and their attorney, not the motion for judgment as a matter of law. Indeed, when considering the motion for judgment as a matter of law, the court explicitly noted that it “may not substi- tute its judgment for that of the jury, nor may it make credibility determinations.”

Appellants further insist that the jury’s verdict is supported by ref- erences in the redacted Research Memorandum to an increase in a “consumer credit line” from NationsBank. The references, Appellants argue, demonstrate that Defendants were researching issues pertaining to Appellants’ Private Home Equity Line of Credit, a consumer credit line with NationsBank unrelated to the Chaudhrys’ debt under the Construction Loan that Gallerizzo was attempting to collect. To the contrary, Gallerizzo testified that the Chaudhrys’ request for addi- tional funding to finish construction of the Inglewood Home was reviewed under both the Home Equity Line and the Construction Loan. The use of the term “consumer credit line” related to the request for funds for the construction of the home and not solely to the Home Equity Line. Thus, the research was chargeable under the Construc- tion Loan. As the trial court noted, Plaintiffs offered no evidence to rebut Gallerizzo’s testimony. There was, therefore, no basis for the jury to find that the request to increase the consumer credit line was not related to the construction of the home. We find no error with the district court’s grant of judgment as a matter of law in favor of Defen- dants.

5. Jury Verdict that Gallerizzo’s Representations at the Decem- ber 21, 1995 Meeting Were Not False, Deceptive, or Misleading

The Chaudhrys allege that Gallerizzo violated 15 U.S.C.A. § 1692e by promising, at the December 21st meeting, to provide them with the past due interest owed on the loan and that NMC would be willing to accept that amount in order to cure the defaults existing under the loan. The jury found that Gallerizzo did not deceive the Chaudhrys during the December 21st meeting, and the district court entered judg- ment in favor of Gallerizzo.

Appellants first charge that the district court improperly instructed the jury. In determining whether a debt collectors’ act or communica- tion constitutes a false, deceptive, or misleading practice under the FDCPA, Appellants urge that a court must assess the impact that the act or communication would have on the least sophisticated debtor. See United States v. National Financial Services, Inc. , 98 F.3d 131, 135-36 (4th Cir. 1996) (applying “least sophisticated debtor” standard to alleged violation of § 1692e). The court instructed the jury as fol- lows:

When I refer to a person unsophisticated in matters of law or finance, I am referring to a person of reasonable intelli- gence who has a basic understanding and has a willingness to listen to what is being said with care. I am not referring to a person who places an unrealistic or irrational interpreta- tion upon what was said. Appellants insist that the language does not comport with the “least sophisticated debtor” standard.

We review challenges to jury instructions for abuse of discretion. See Nelson v. Green Ford, Inc. , 788 F.2d 205, 208-09 (4th Cir. 1986). The test of the adequacy of jury instructions is whether the jury charge, construed as a whole, adequately states the controlling legal principle without misleading or confusing the jury. See Spell v. McDaniel , 824 F.2d 1380, 1395 (4th Cir. 1987). With this in mind, we believe that the court’s instruction is consistent with the “least sophisticated debtor” doctrine which seeks to protect naive consum- ers, while “preserving a quotient of reasonableness and presuming a basic level of understanding.” National Financial Services , 98 F.3d at 136. We are satisfied that the district court’s instruction adequately informed the jury of the essential principles of the doctrine. We find no abuse of discretion.

Appellants also allege that, at the December 21st meeting, Gal- lerizzo refused to provide them with information about the interest arrearage, which if paid arguably would have prevented their default on the loan. Appellants maintain that Gallerizzo instructed them to put their request for the information in writing and that the bank would take no action until after responding to their proposal. Appel- lants insist that Gallerizzo never intended to provide the requested amount of interest arrearage. Rather, they argue, he acted solely to deceive them into delaying making the required interest payment so that he could accelerate the Construction Loan the following day.

Appellants’ attorney tape-recorded the December 21st meeting, and, contrary to Appellants’ assertions, the transcript of the recording contains no evidence of false or misleading representations by Gal- lerizzo. Throughout the meeting, Gallerizzo advised Appellants that he had no authority to bind the bank. He also stated that there could be no agreement unless the Chaudhrys provided a release of the alleged claims that they were making against the bank, which they refused to do. Given the content of the recording and the fact that the Chaudhrys had no right under the Construction Loan to cure the default simply by paying the interest arrearage, there is clearly suffi- cient evidence for the jury to conclude that Defendants did not violate § 1692e. Therefore, it would be inappropriate to reverse the jury’s decision.

Appellants finally argue that the district court improperly refused to permit the Chaudhrys to use the unredacted version of the January 4, 1997 letter written by Appellants’ counsel. Appellants contend the court’s refusal contributed substantially to the jury’s verdict. The Jan- uary 4th letter contains numerous allegations against NationsBank not at issue in the instant case, but the subject of a separate state action. The state allegations are not only of questionable relevance but also may have unfairly prejudiced Defendants. The district court’s deci- sion to disallow an unredacted version of the letter is well within the discretion afforded the district court with respect to evidentiary matters. 10 See Martin v. Deiriggi , 985 F.2d 129, 137 (4th Cir. 1993) (noting that decisions regarding the admission and exclusion of evi- dence are within the discretion of the trial court and should not be reversed on appeal absent an abuse of discretion).

6. Gallerizzo’s Alleged Failure to Include Mandatory Language Required by § 1692e(11) in Letter to Plaintiffs’ Settlement Attorney

Appellants allege a violation of § 1692e(11), which requires disclo- sure, in all communications to the consumer, “that the debt collector is attempting to collect a debt and that any information obtained will be used for that purpose.” 15 U.S.C.A. § 1692e(11); see Carroll v. Wolpoff & Abramson , 961 F.2d 459, 461, (4th Cir.) (determining that the debt collection notification must be included in all correspon- dence), cert. denied , 506 U.S. 905 (1992). Gallerizzo sent a letter dated January 24, 1996 to the Chaudhrys’ settlement attorney Diane Fox, instructing that “[p]ayment of the aforementioned amounts should be tendered to NMC prior to 2:00 p.m. on January 25, 1996 ….” Because Gallerizzo suggested that the Chaudhrys tender payment to NMC, Appellants argue that the letter was a continuation of Gal- lerizzo’s efforts to collect the debt. As such, it required the inclusion of the § 1692e(11) debt collection notification. As explained above, however, Gallerizzo’s letter was not an act to collect a debt, but rather was sent at Fox’s request so that she could have an accurate payoff figure at the refinancing meeting. If the letter does not constitute an attempt to collect a debt, § 1692e(11) notification is not required.

D. Sanctions

The district court, citing Count VII, 11 granted sanctions against Plaintiffs pursuant to 15 U.S.C.A. § 1692k(a)(3) and against their attorney pursuant to Fed. R. Civ. P. 11 12 and 28 U.S.C.A. § 1927. 13 The court, concluding that “the case was brought in bad faith and for the purposes of harassment of the Defendants,” ordered Plaintiffs to pay Defendants $5000 and Plaintiffs’ counsel to pay $10,000. We review the district court’s decision to grant sanctions for abuse of dis- cretion. See Cooter & Gell v. Hartmarx Corp. , 496 U.S. 384, 405 (1990) (noting that “an appellate court should apply an abuse-of- discretion standard in reviewing … a district court’s Rule 11 determi- nation”); Carroll v. Wolpoff & Abramson , 53 F.3d 626, 628-29 (4th Cir. 1995) (determining that abuse of discretion standard governs review of awards under § 1692k(a)(3)); Mittier v. Burton , 896 F.2d 848, 855 (4th Cir. 1990) (reviewing sanctions award under § 1927 for abuse of discretion.)

In Cooter & Gell v. Hartmarx Corp. , the Supreme Court noted that “Rule 11 imposes a duty on attorneys to certify that they have con- ducted a reasonable inquiry and have determined that any papers filed with the court are well grounded in fact, legally tenable, and `not interposed for any improper purpose.’” Id. at 393. “A complaint con- taining allegations unsupported by any information obtained prior to filing, or allegations based on information which minimal factual inquiry would disprove, will subject the author to sanctions.” 14 In re Kunstler , 914 F.2d 505, 516 (4th Cir. 1990), cert. denied , 499 U.S. 969 (1991). Similarly, section 1692k(a)(3) allows the court, upon a finding that an action “was brought in bad faith and for the purpose of harassment,” to award to the defendant reasonable attorney’s fees. 15 U.S.C.A. § 1692k(a)(3). The district court, the Supreme Court has noted, “is better situated than the court of appeals to marshall the per- tinent facts and apply the fact-dependent legal standard mandated by [a sanctions award].” Cooter & Gell , 496 U.S. at 402 ; see also Brubaker , 943 F.2d at 1374 (“The district court is in the best position to determine whether sanctions should be imposed and, if so, how much.”).

The Chaudhrys claim that, at the December 21, 1995 meeting, Gal- lerizzo promised that they could simply pay the interest arrearage to prevent default on the loan. The trial court, relying on the tape- recorded transcript of the December 21st meeting, determined that no “… rational person could have interpreted what was said at the meet- ing to be the promise that Plaintiffs and their counsel contend was made by Mr. Gallerizzo.” We agree. We see nothing in the record that evidences such a promise. In fact, Gallerizzo’s repeated admonitions that he was not authorized to commit the bank to any agreement and that the bank would not negotiate further without a signed release suggest just the opposite. Furthermore, Gallerizzo indicated at the meeting that the bank could require payment of the loan in full. Appellants’ claim that Gallerizzo made a representation that was false, misleading, and deceptive is utterly without factual foundation. Given the substantial justification for its finding, the district court did not abuse its discretion by imposing what we believe to be appropri- ate and reasonable sanctions against Appellants and their attorney. By so ruling, we in no way intend to discourage the legitimate pursuit of FDCPA litigation but, rather, hope to deter groundless claims like the one advanced here.

For the foregoing reasons, we affirm the district court’s ruling in totum.

AFFIRMED

22

FOOTNOTES

1. The Construction Loan contained various loan documents, including a Residential Construction Loan Agreement, a Construction Loan Rider, an Adjustable Rate Note and an Adjustable Rate Rider.

2. Under the Construction Loan, the Chaudhrys had no right to cure the default by simply paying past due interest. Moreover, the Construction Loan required that if the Inglewood Home was not completed by Decem- ber 31, 1995, the Chaudhrys would have to pay all sums due by such date.

3. On the same date, the Chaudhrys initiated a lawsuit against NMC, NationsBank, N.A., various NationsBank loan officers, Gallerizzo and Gebhardt & Smith in the Circuit Court of Maryland for Montgomery County, Case No. 150185 (the “State Action”), in which the Chaudhrys alleged numerous lender liability claims. Gallerizzo and Gebhardt & Smith were dismissed with prejudice by the state trial court prior to the commencement of trial in the instant case.

4. The materials previously had been reviewed by another district court judge who subsequently recused himself.

5. Section 1692g(a), in pertinent part, states:

(a) Notice of debt; contents

Within five days after the initial communication with a con- sumer in connection with the collection of any debt, a debt col- lector shall, unless the following information is contained in the initial communication or the consumer has paid the debt, send the consumer a written notice containing —

(1) the amount of the debt; ***

15 U.S.C.A. § 1692g(a).
6. Section 1692g(b) provides as follows: [I]f the consumer notifies the debt collector in writing within [30 days of the initial notice] that the debt, or any portion thereof, is disputed, … the debt collector shall cease collection of the debt, or any disputed portion thereof, until verification is mailed to the consumer.

15 U.S.C.A. § 1692g(b).
7. Moreover, at the end of the December 21st meeting, Appellants’ counsel specifically requested that all communications be directed to him.

8. Section 1692c(a)(2) permits communications between the debt collec- tor and a consumer represented by counsel where”the attorney fails to respond within a reasonable period of time to a communication from the debt collector or … consents to direct communication with the con- sumer.” 15 U.S.C.A. § 1692c(a)(2).

9. Under § 1692e, “[a] debt collector may not use any false, deceptive, or misleading representation or means in connection with collection of any debt.” 15 U.S.C.A. § 1692e.

10. Appellants also allege that the district court committed other suppos- edly prejudicial errors. The allegations are utterly without merit, how- ever, so we decline to discuss them at length here. For example, Appellants object to the wording of certain questions to the jury, yet Appellants expressly accepted the language at trial. It seems inappropri- ate now to allow Appellants to argue that the questions should have been phrased differently.

11. In Count VII, the Chaudhrys claim that, at the meeting of December 21, 1995, Gallerizzo made false, deceptive, and misleading statements to them in violation of § 1692e of the FDCPA.

12. Rule 11 provides as follows:

(b) Representations to Court. By presenting to the court (whether by signing, filing, submitting, or later advocating) a pleading, written motion, or other paper, an attorney or unrepre- sented party is certifying that to the best of the person’s knowl- edge, information, and belief, formed after an inquiry reasonable under the circumstances,–

(1) it is not being presented for any improper purpose, such as to harass or to cause unnecessary delay or needless increase in the cost of litigation;

(2) the claims, defenses, and other legal contentions therein are warranted by existing law or by a nonfrivolous argument for the extension, modification, or reversal of existing law or the establishment of new law;

(3) the allegations and other factual contentions have evi- dentiary support or, if specifically so identified, are likely to have evidentiary support after a reasonable opportunity for further investigation or discovery; and

(4) the denials of factual contentions are warranted on the evidence or, if specifically so identified, are reasonable based on a lack of information or belief. (c) Sanctions. If, after notice and a reasonable opportunity to

respond, the court determines that subdivision (b) has been vio- lated, the court may, subject to the conditions stated below, impose an appropriate sanction upon the attorneys, law firms, or parties that have violated subdivision (b) or are responsible for the violation.

Fed. R. Civ. P. 11(b), (c).
13. Section 1927 provides that an attorney “who so multiplies the pro- ceedings in any case unreasonably and vexatiously may be required by the court to satisfy personally the excess costs, expenses, and attorneys’ fees reasonably incurred because of such conduct.” 28 U.S.C.A. 1927 (West 1998).

14. While distinct from Rule 11, section 1927 also requires “a finding of counsel’s bad faith as a precondition to the imposition of fees.” Brubaker v. City of Richmond , 943 F.2d 1363, 1382 n.25 (4th Cir. 1991).

United States Court of Appeals For the First Circuit ____________________

No. 98-1497

WILLIAM H. BRADY,

Plaintiff, Appellant,

v.

THE CREDIT RECOVERY COMPANY, INC. AND LESLIE A. CLARK,

Defendants, Appellees.

____________________

APPEAL FROM THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF MASSACHUSETTS

[Hon. Joseph L. Tauro,
U.S. District Judge
]

____________________

Before

Torruella,
Chief Judge
,

Bownes,
Senior Circuit Judge
,

and Lynch,
Circuit Judge
.

_____________________

Richard J. Rubin , with whom Yvonne W. Rosmarin was on brief, for appellant.

Alan I. Margolies for appellees.

____________________

November 18, 1998

____________________
TORRUELLA, Chief Judge . Plaintiff William H. Brady (“Brady”) filed this action against defendant The Credit Recovery Company (“CRC” or “defendant”) and its president and clerk Leslie A. Clark (“Clark” or “defendant”) to redress alleged violations of the Fair Debt Collection Practices Act (the “FDCPA”), 15 U.S.C. §§ 1692-1692o, and of related state law obligations.

The district court dismissed Brady’s FDCPA claim for failure to state a claim pursuant to Fed. R. Civ. P. 12(b)(6) and dismissed the remaining state law claims without prejudice for lack of jurisdiction. In its memorandum and order, the district court recited the standard governing 12(b)(6) motions to dismiss but relied in part on materials outside of the pleadings. We therefore treat the motion as one for summary judgment. See Dominique v. Weld , 73 F.3d 1156, 1158 (1st Cir. 1996).

We review a grant of summary judgment de novo , viewing the facts in the light most favorable to the nonmovant, plaintiff, see id. , and conclude that the order of dismissal/grant of summary judgment must be reversed. Accordingly, we remand this case for action consistent with this opinion.

I. BACKGROUND

Prior to 1990, Brady’s then wife leased an apartment and failed to pay $470 in rent. Brady never signed the lease in question but was named in the lease as a tenant. In August 1990, the landlord referred the Brady account to defendants for collection of the unpaid rent.

On September 4, 1990, defendants initiated the collection process by sending Brady a letter requesting payment of the debt. On September 13, Brady phoned Clark and explained that he had never signed the lease in question, that his ex-wife alone had signed the lease, and that therefore he had no obligation to pay the unpaid rent. Clark told Brady to submit a written letter to dispute the debt. Brady never put the dispute in writing.

Over the next few months, defendants sent Brady two more dunning letters and made two phone calls to him, none of which drew a response. In August 1991, CRC reported Brady’s alleged debt to various credit reporting agencies without also reporting Brady’s dispute.

Five years later, in February 1996, Brady applied for a mortgage to purchase a home. The mortgage company hired a credit agency, First American Credit Services (“First American”), to check Brady’s credit history. Upon learning of Brady’s bad credit report, the credit agency called defendants to inquire about the unpaid debt. As it had done in 1991, CRC again reported the unpaid rent as Brady’s debt without reporting its disputed status. The mortgage company subsequently advised Brady that his financing was in jeopardy because of the listing of the rent as an outstanding debt on his credit report.

Brady immediately contacted defendants and informed them, once again, that he was not liable for the unpaid rent. Defendants again refused to remove the debt from Brady’s credit report. One month later, Brady’s attorney contacted CRC’s attorney who, in turn, advised CRC to withdraw the bad credit report. CRC promptly removed the unpaid rent from Brady’s credit report.

Thereafter, Brady brought this suit alleging that defendants violated the FDCPA by failing to inform First American that Brady disputed the debt. Brady also brings pendent state law claims under Mass. Gen. Laws ch. 93, §§ 24, 50 and ch. 93A.

II. DISCUSSION

We review de novo a district court’s grant of summary judgment. See Bethlehem Steel Export Corp. v. Redondo Constr. Corp. , 140 F.3d 319, 320 (1st Cir. 1998).

Brady claims that defendants violated a provision of the FDCPA, which proscribes debt collectors from making any “false, deceptive or misleading representation[s] . . . in connection with the collection of any debt.” 15 U.S.C. § 1692e. More specifically, Brady argues that defendants violated § 1692e by failing to inform First American of the disputed status of the unpaid rent listed on his credit report. Section 1692e(8) explicitly states that the failure of a debt collector to disclose the disputed status of a debt constitutes a “false, deceptive, or misleading representation.” Id. 1692e(8). 1

Defendants do not contest the facts. Rather, defendants argue that the facts do not, as a matter of law, rise to the level of “false, deceptive, or misleading representation[s]” in violation of § 1692e(8) because Brady never disputed the debt in writing. This case thus turns on a narrow question of statutory construction: Should § 1692e(8) of the FDCPA — which on its face does not impose a writing requirement — be read to impose a writing requirement on a consumer who wishes to dispute a debt?

“In a statutory construction case, the beginning point must be the language of the statute, and when a statute speaks with clarity to an issue judicial inquiry into the statute’s meaning in all but the most extraordinary circumstance is finished.” Riva v. Commonwealth of Massachusetts , 61 F.3d 1003, 1007 (1st Cir. 1995) (quoting Estate of Cowart v. Nicklos Drilling Co. , 505 U.S. 469, 475 (1992)) (internal quotation marks omitted). In other words, the court need not consult legislative history and other aids to statutory construction when the words of the statute neither create an ambiguity nor lead to an unreasonable interpretation. Riva , 61 F.3d at 1007 (quotations omitted). In searching a statute’s text to determine congressional intent, we attribute to words that are not defined in the statute itself their ordinary usage, while keeping in mind that meaning can only be ascribed to statutory language if that language is taken in context. Id. (quotations omitted). Applying these tenets, we conclude that § 1692e(8) does not impose a writing requirement on a consumer who wishes to dispute a debt.

Because the FDCPA does not include the terms “dispute” or “disputed debt” in the section devoted to definitions, see 15 U.S.C. § 1692a, we look first to ordinary usage. In ordinary English “dispute” is defined as a “verbal controversy” and “controversial discussion.” Webster’s Third New International Dictionary (3d ed. 1971). Clearly, the ordinary usage of “dispute” does not contemplate a writing. See id. Defendants argue that a writing requirement should be implied from other sections of the statute and from context. We address these arguments.

First, defendants argue that we need not resort to ordinary usage because the FDCPA does in fact define the term “disputed debts.” In support of this contention, defendants point to § 1692g(b) which is captioned “disputed debts.” See 15 U.S.C. § 1692g(b). 2 Although we cannot assume that § 1692g(b) defines this term simply because of its caption, see Pub. L. 90-321, § 502 (May 29, 1968), 82 Stat. 146, 147, reported as a note following 15 U.S.C. § 1601 (forbidding reliance on captions), defendants contend that the text of § 1692g(b) provides a definition of “disputed debts” that carries over to § 1692e(8). We disagree.

As stated above, we must keep in mind that meaning can only be ascribed to statutory language if that language is taken in context. See Riva , 61 F.3d at 1007. Viewing the language of § 1692e(8) in the context of other provisions of the FDCPA, it makes logical sense to conclude that the meaning of “disputed debt” in § 1692g(b) does not carry over to § 1692e(8).

First, the fact that other sections of the FDCPA — like § 1692g(b) — explicitly impose a writing requirement suggests that Congress’s omission of such a requirement in § 1692e(8) was not inadvertent. Moreover, a closer examination of the purposes and effects of the two provisions further supports our conclusion that Congress intended to require a writing under § 1692g(b) but not under § 1692e(g).

Under section 1692g(b) a consumer must dispute a debt in writing , within an initial thirty-day period, in order to trigger a debt validation process. See 15 U.S.C. §1692g(b). Once a consumer exercises this right, a debt collector must cease all further debt collection activity until it complies with various verification obligations. See id. Section 1692g(b) thus confers on consumers the ultimate power vis-a-vis debt collectors: the power to demand the cessation of all collection activities. See id. Recognizing the broad consumer power granted by this provision, Congress expressly conditioned its exercise on the submission of written notification within a limited thirty-day window. See id.

In contrast, § 1692e(8) does not affect debt collection practices at all. See 15 U.S.C. § 1692e(8). Instead, § 1692e(8) merely requires a debt collector who knows or should know that a given debt is disputed to disclose its disputed status to persons inquiring about a consumer’s credit history. See id. Given the much more limited effect of this provision, Congress’s decision not to condition its exercise on the submission of written notification makes logical sense.

Our conclusion that § 1692g(b) does not define “disputed debt” for the entire FDCPA is further supported by the language of § 1692e(8) itself. If the meaning of “disputed debt” as used in § 1692g(b) carried over to § 1692e(8), then, in order to trigger the limited protection of § 1692e(8), a consumer would be required to submit written notice to a debt collector within the initial thirty-day period. See 15 U.S.C. § 1692g(b). But the plain language of § 1692e(8) requires debt collectors to communicate the disputed status of a debt if the debt collector “knows or should know” that the debt is disputed. See 15 U.S.C. § 1692e(8). This “knows or should know” standard requires no notification by the consumer, written or oral, and instead, depends solely on the debt collector’s knowledge that a debt is disputed, regardless of how or when that knowledge is acquired. See id. Applying the meaning of “disputed debt” as used in § 1692g(b) to § 1692e(8) would thus render the provision’s “knows or should know” language impermissibly superfluous. See United States v. Bailey , 516 U.S. 137, 145 (1995) (quoting Ratzlaf v. United States , 510 U.S. 135, 140-41 (1994) (“Judges should hesitate . . . to treat [as surplusage] statutory terms in any setting . . . .”).

III. CONCLUSION

We therefore conclude that § 1692e(8) does not impose a writing requirement on consumers who wish to dispute a debt. For the foregoing reasons, we reverse the district court’s order of dismissal/grant of summary judgment and remand this case for action consistent with this opinion.

FOOTNOTES

————–
[ 1 ]

Section 1692e(8) states, in pertinent part:

A debt collector may not use any false, deceptive, or misleading representation or means in connection with the collection of any debt. Without limiting the general application of the foregoing, the following conduct is a violation of this section:

. . .

(8) Communicating or threatening to communicate to any person credit information which is known or which should be known to be false, including the failure to communicate that a disputed debt is disputed.

15 U.S.C. § 1692e(8).

————–
[ 2 ]

Section 1692g(b) establishes a validation process which affords consumers, only in an initial thirty-day period, the right to dispute a debt. See 15 U.S.C. § 1692g(b). Section 1692g(b) requires such disputes to be submitted in writing. See id.

 

Supreme Court of the United States

George W. HEINTZ, et al., Petitioners,

v.

Darlene JENKINS.

No. 94-367.

 

 

Argued Feb. 21, 1995.

Decided April 18, 1995.

Debtor brought Fair Debt Collection Practices Act suit against attorney representing creditor in litigation, alleging false representations in correspondence. The United States District Court for the Northern District of Illinois, George M. Marovich, J., dismissed for failure to state claim, but the Court of Appeals, 25 F.3d 536, Manion, reversed and remanded. On certiorari review, the Supreme Court, Justice Breyer, held that Fair Debt Collection Practices Act applied to lawyer regularly engaged in consumer debt- collection litigation on behalf of creditor client.

Affirmed.

West Headnotes

 

Consumer Protection 10

 

 

 

Fair Debt Collection Practices Act applied to lawyer regularly engaged in consumer debt-collection litigation on behalf of creditor client. Consumer Credit Protection Act, § 803(6), as amended, 15 U.S.C.A. § 1692a(6).

 **1489

Syllabus

[FN*]

FN*

The syllabus constitutes no part of the opinion of the Court but has been prepared by the Reporter of Decisions for the convenience of the reader. See

United States v. Detroit Lumber Co., 200 U.S. 321, 337, 26 S.Ct. 282, 287, 50 L.Ed. 499.

 

*291

Petitioner Heintz is a lawyer representing a bank that sued respondent Jenkins to recover the balance due on her defaulted car loan. After a letter from Heintz listed the amount Jenkins owed as including the cost of insurance bought by the bank when she reneged on her promise to insure the car, Jenkins brought this suit against Heintz and his law firm under the Fair Debt Collection Practices Act, which forbids “debt collector[s]” to make false or misleading representations and to engage in various abusive and unfair practices. The District Court dismissed the suit, holding that the Act does not apply to lawyers engaging in litigation. The Court of Appeals disagreed and reversed.

Held:

The Act must be read to apply to lawyers engaged in consumer debt- collection litigation for two rather strong reasons. First, a lawyer who regularly tries to obtain payment of consumer debts through legal proceedings meets the Act’s definition of “debt collector”: one who “regularly collects or attempts to collect, directly or indirectly, [consumer] debts owed … another,” 15 U.S.C. § 1692a(6). Second, although an earlier version of that definition expressly excluded “any attorney-at-law collecting a debt as an attorney on behalf of and in the name of a client,” Congress repealed this exemption in 1986 without creating a narrower, litigation-related, exemption to fill the void. Heintz’s arguments for nonetheless inferring the latter type of exemption–(1) that many of the Act’s requirements, if applied directly to litigation activities, will create harmfully anomalous results that Congress could not have intended; (2) that a postenactment statement by one of the 1986 repeal’s sponsors demonstrates that, despite the removal of the earlier blanket exemption, the Act still does not apply to lawyers’ litigating activities; and (3) that a nonbinding “Commentary” by the Federal Trade Commission’s staff establishes that attorneys engaged in sending dunning letters and other traditional debt-collection activities are covered by the Act, while those whose practice is limited to legal activities are not–are unconvincing. Pp. 1490-1493.

25 F.3d 536,

affirmed.

BREYER

, J., delivered the opinion for a unanimous Court.

*292

George W. Spellmire, Chicago, IL, for petitioners.

Daniel A. Edelman

, Chicago, IL, for respondent.

Justice BREYER delivered the opinion of the Court.

The issue before us is whether the term “debt collector” in the Fair Debt Collection Practices Act, 91 Stat. 874, 15 U.S.C. § § 1692-1692o (1988 ed. and Supp. V), applies to a lawyer who “regularly,” through litigation, tries to collect consumer debts. The Court of Appeals for the Seventh Circuit held that it does. We agree with the Seventh Circuit and we affirm its judgment.

The Fair Debt Collection Practices Act prohibits “debt collector[s]” from making false or misleading representations and from engaging in various abusive and unfair practices. The Act says, for example, that a “debt collector” may not use violence, obscenity, or repeated annoying phone calls, 15 U.S.C. § 1692d; may not falsely represent “the character, amount, or legal status of any debt,” § 1692e(2)(A); and may not use various “unfair or unconscionable means to collect or attempt to collect” a consumer debt, § 1692f. Among other things, the Act sets out rules that a debt collector must follow for “acquiring location information” about the debtor, § 1692b; communicating about the debtor (and the *293 debt) with third parties, § 1692c(b); and bringing “[l]egal actions,” § 1692i. The Act imposes upon “debt collector[s]” who violate its provisions (specifically described) “civil liability” to those whom they, e.g., harass, mislead, or treat unfairly. § 1692k. The Act also authorizes the Federal Trade Commission (FTC) to enforce its provisions. § 1692l (a). The Act’s definition of the term “debt collector” includes a person “who regularly collects or attempts to collect, directly or indirectly, debts owed [to] … another.” § 1692a(6). And, it limits “debt” to consumer debt, i.e., debts “arising out of … transaction[s]” that “are primarily for personal, family, or household purposes.” § 1692a(5).

The plaintiff in this case, Darlene Jenkins, borrowed money from the Gainer Bank in order to buy a car. She defaulted on her loan. The bank’s law firm then sued Jenkins in state court to recover the balance due. As part of an effort to settle the suit, a lawyer with that law firm, George Heintz, wrote to Jenkins’s lawyer. His letter, in listing the amount she owed under the loan agreement, included $4,173 owed for insurance, bought by the bank because she had not kept the car insured as she had promised to do.

Jenkins then brought this Fair Debt Collection Practices Act suit against Heintz and his firm. She claimed that Heintz’s letter violated the Act’s prohibitions against trying to collect an amount not “authorized by the agreement creating the debt,” § 1692f(1), and against making a “false representation of … the … amount … of any debt,” § 1692e(2)(A). The loan agreement, she conceded, required her to keep the car insured ” ‘against loss or damage’ ” and permitted the bank to buy such insurance to protect the car should she fail to do so. App. to Pet. for Cert. 17. But, she said, the $4,173 substitute policy was not the kind of policy the loan agreement had in mind, for it insured the bank not only against “loss or damage” but also against her failure to repay the bank’s car loan. Hence, Heintz’s “representation” *294 about the “amount” of her “debt” was “false”; amounted to an effort to collect an “amount” not “authorized” by the loan agreement; and thus violated the Act.

Pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure, the District Court dismissed Jenkins’ Fair Debt Collection lawsuit for failure to state a claim. The court held that the Act does not apply to lawyers engaging in litigation. However, the Court of Appeals for the Seventh Circuit reversed the District Court’s judgment, interpreting the Act to apply to litigating lawyers. 25 F.3d 536 (1994). The Seventh Circuit’s view in this respect conflicts with that of the Sixth Circuit. See Green v. Hocking, 9 F.3d 18 (1993) (per curiam). We granted certiorari to resolve this conflict. 513 U.S. 959, 115 S.Ct. 416, 130 L.Ed.2d 332 (1994). And, as we have said, we conclude that the Seventh Circuit is correct. The Act does apply to lawyers engaged in litigation.

There are two rather strong reasons for believing that the Act applies to the litigating activities of lawyers. First, the Act defines the “debt collector [s]” to whom it applies as **1491 including those who “regularly collect or attempt to collect, directly or indirectly, [consumer] debts owed or due or asserted to be owed or due another.” § 1692a(6). In ordinary English, a lawyer who regularly tries to obtain payment of consumer debts through legal proceedings is a lawyer who regularly “attempts” to “collect” those consumer debts. See, e.g., Black’s Law Dictionary 263 (6th ed. 1990) (“To collect a debt or claim is to obtain payment or liquidation of it, either by personal solicitation or legal proceedings”).

Second,

in 1977, Congress enacted an earlier version of this statute, which contained an express exemption for lawyers. That exemption said that the term “debt collector” did not include “any attorney-at-law collecting a debt as an attorney on behalf of and in the name of a client.” Pub.L. 95- 109, § 803(6)(F), 91 Stat. 874, 875. In 1986, however, Congress repealed this exemption in its entirety, Pub.L. 99-361, 100 Stat. 768, without creating a narrower, litigation-*295 related, exemption to fill the void. Without more, then, one would think that Congress intended that lawyers be subject to the Act whenever they meet the general “debt collector” definition.

Heintz argues that we should nonetheless read the statute as containing an implied exemption for those debt-collecting activities of lawyers that consist of litigating (including, he assumes, settlement efforts). He relies primarily on three arguments.

First,

Heintz argues that many of the Act’s requirements, if applied directly to litigating activities, will create harmfully anomalous results that Congress simply could not have intended. We address this argument in light of the fact that, when Congress first wrote the Act’s substantive provisions, it had for the most part exempted litigating attorneys from the Act’s coverage; that, when Congress later repealed the attorney exemption, it did not revisit the wording of these substantive provisions; and that, for these reasons, some awkwardness is understandable. Particularly when read in this light, we find Heintz’s argument unconvincing.

Many of Heintz’s “anomalies” are not particularly anomalous. For example, the Sixth Circuit pointed to § 1692e(5), which forbids a “debt collector” to make any “threat to take action that cannot legally be taken.” The court reasoned that, were the Act to apply to litigating activities, this provision automatically would make liable any litigating lawyer who brought, and then lost, a claim against a debtor. Green, supra, at 21. But, the Act says explicitly that a “debt collector” may not be held liable if he “shows by a preponderance of evidence that the violation was not intentional and resulted from a bona fide error notwithstanding the maintenance of procedures reasonably adapted to avoid any such error.” § 1692k(c). Thus, even if we were to assume that the suggested reading of § 1692e(5) is correct, we would not find the result so absurd as to warrant implying an exemption for litigating lawyers. In any event, the assumption *296 would seem unnecessary, for we do not see how the fact that a lawsuit turns out ultimately to be unsuccessful could, by itself, make the bringing of it an “action that cannot legally be taken.”

The remaining significant “anomalies” similarly depend for their persuasive force upon readings that courts seem unlikely to endorse. For example, Heintz’s strongest “anomaly” argument focuses upon the Act’s provisions governing “communication in connection with debt collection.” § 1692c. One of those provisions requires a “debt collector” not to “communicate further” with a consumer who “notifies” the “debt collector” that he or she “refuses to pay” or wishes the debt collector to “cease further communication.” § 1692c(c). In light of this provision, asks Heintz, how can an attorney file a lawsuit against (and thereby communicate with) a nonconsenting consumer or file a motion for summary judgment against that consumer?

We agree with Heintz that it would be odd if the Act empowered a debt- owing consumer to stop the “communications” inherent in an ordinary lawsuit and thereby cause an ordinary debt-collecting lawsuit to grind to a halt. But, it is not necessary to read § 1692c(c) in that way–if only because that provision has exceptions that permit communications “**1492 to notify the consumer that the debt collector or creditor may invoke” or “intends to invoke” a “specified remedy” (of a kind “ordinarily invoked by [the] debt collector or creditor”). § § 1692c(c)(2), (3). Courts can read these exceptions, plausibly, to imply that they authorize the actual invocation of the remedy that the collector “intends to invoke.” The language permits such a reading, for an ordinary court-related document does, in fact, “notify” its recipient that the creditor may “invoke” a judicial remedy. Moreover, the interpretation is consistent with the statute’s apparent objective of preserving creditors’ judicial remedies. We need not authoritatively interpret the Act’s conduct-regulating provisions now, however. Rather, we rest our *297 conclusions upon the fact that it is easier to read § 1692c(c) as containing some such additional, implicit, exception than to believe that Congress intended, silently and implicitly, to create a far broader exception, for all litigating attorneys, from the Act itself.

Second,

Heintz points to a statement of Congressman Frank Annunzio, one of the sponsors of the 1986 amendment that removed from the Act the language creating a blanket exemption for lawyers. Representative Annunzio stated that, despite the exemption’s removal, the Act still would not apply to lawyers’ litigating activities. Representative Annunzio said that the Act

“regulates debt collection, not the practice of law. Congress repealed the attorney exemption to the act, not because of attorney[s'] conduct in the courtroom, but because of their conduct in the backroom. Only collection activities, not legal activities, are covered by the act…. The act applies to attorneys when they are collecting debts, not when they are performing tasks of a legal nature…. The act only regulates the conduct of debt collectors, it does not prevent creditors, through their attorneys, from pursuing any legal remedies available to them.” 132 Cong.Rec. 30842 (1986).

This statement, however, does not persuade us.

For one thing, the plain language of the Act itself says nothing about retaining the exemption in respect to litigation. The line the statement seeks to draw between “legal” activities and “debt collection” activities was not necessarily apparent to those who debated the legislation, for litigating, at first blush, seems simply one way of collecting a debt. For another thing, when Congress considered the Act, other Congressmen expressed fear that repeal would limit lawyers’ “ability to contact third parties in order to facilitate settlements” and “could very easily interfere with a client’s right to pursue judicial remedies.” H.R.Rep. No. 99-405, p. 11 *298 1985) (dissenting views of Rep. Hiler). They proposed alternative language designed to keep litigation activities outside the Act’s scope, but that language was not enacted. Ibid. Further, Congressman Annunzio made his statement not during the legislative process, but after the statute became law. It therefore is not a statement upon which other legislators might have relied in voting for or against the Act, but it simply represents the views of one informed person on an issue about which others may (or may not) have thought differently.

Finally,

Heintz points to a “Commentary” on the Act by the FTC’s staff. It says:

“Attorneys or law firms that engage in traditional debt collection activities (sending dunning letters, making collection calls to consumers) are covered by the [Act], but those whose practice is limited to legal activities are not covered.” Federal Trade Commission–Statements of General Policy or Interpretation Staff Commentary on the Fair Debt Collection Practices Act, 53 Fed.Reg. 50097, 50100 (1988) (emphasis added; footnote omitted).

We cannot give conclusive weight to this statement. The Commentary of which this statement is a part says that it “is not binding on the Commission or the public.” Id., at 50101. More importantly, we find nothing either in the Act or elsewhere indicating that Congress intended to authorize the FTC to create this exception from the Act’s coverage–an exception that, for the reasons we have set forth above, falls outside the range of reasonable interpretations of the Act’s express **1493 language. See, e.g., Brown v. Gardner, 513 U.S. 115, 120-122, 115 S.Ct. 552, 556-557, 130 L.Ed.2d 462 (1994); see also Fox v. Citicorp Credit Servs., Inc., 15 F.3d 1507, 1513 (CA9 1994) (FTC staff’s statement conflicts with Act’s plain language and is therefore not entitled to deference); Scott v. Jones, 964 F.2d 314, 317 (CA4 1992) (same).

 

*299

For these reasons, we agree with the Seventh Circuit that the Act applies to attorneys who “regularly” engage in consumer-debt-collection activity, even when that activity consists of litigation. Its judgment is therefore

Affirmed.

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