Justia U.S. 7th Circuit Court of Appeals Opinion Summaries

Bernal bought a monthly pass to Six Flags amusement parks. The contract said that if he fell behind on his payments, he would “be billed for any amounts that are due and owing plus any costs (including reasonable attorney’s fees) incurred by [Six Flags] in attempting to collect amounts due.” After Bernal missed several monthly payments, Six Flags hired AR, a debt collector. Under their contract, AR could charge Six Flags a 5% management fee plus an additional amount based on the number of days the debt was delinquent (in this case, an additional 20%), as is common in the market. AR hired NRA, a subcontractor, which sent Bernal a collection letter asking for the $267.31 he owed, plus $43.28 in costs. Reasoning that it could not have cost $43.28 to mail a single collection letter, Bernal filed a class-action lawsuit under the Fair Debt Collection Practices Act, alleging that NRA charged a fee not “expressly authorized by the agreement creating the debt,” 15 U.S.C. 1692f(1). The Seventh Circuit affirmed a judgment for NRA. A debt collector’s fee counts as a collection cost under that language. The contract unambiguously permits Six Flags to recover any cost it incurs in collecting past-due payments, and that includes a standard collection fee. View "Bernal v. NRA Group, LLC" on Justia Law

GL services repayment of Nelson's federally-insured student loans. On its website, GL tells borrowers struggling to make their loan payments: “Our trained experts work on your behalf,” and “You don’t have to pay for student loan services or advice,” because “Our expert representatives have access to your latest student loan information and understand all of your options.” Nelson alleged that when she and other members of the putative class struggled to make payments, GL steered borrowers into repayment plans that were to its advantage and to borrowers’ detriment. She alleged violations of the Illinois Consumer Fraud and Deceptive Business Practices Act, constructive fraud, and negligent misrepresentation. The district court dismissed the claims as preempted by a federal Higher Education Act provision: “Loans made, insured, or guaranteed pursuant to a program authorized by ... the Higher Education Act ... shall not be subject to any disclosure requirements of any State Law,” 20 U.S.C. 1098g. The Seventh Circuit vacated. When a loan servicer holds itself out as having experts who work for borrowers, tells borrowers that they need not look elsewhere for advice, and tells them that its experts know what options are in their best interest, those statements, when untrue, are not mere failures to disclose information but are affirmative misrepresentations. A borrower who reasonably relied on them to her detriment is not barred from bringing state‐law consumer protection and tort claims. View "Nelson v. Great Lakes Educational Loan Services, Inc." on Justia Law

Simm, a debt collection agency, sent plaintiffs collection letters, stating: CLIENT: PAYPAL CREDIT ORIGINAL CREDITOR: Comenity Capital Bank; giving the balance and origination date; and stating that, upon the debtor’s request, Simm will provide “the name and address of the original creditor, if different from the current creditor.” Plaintiffs filed purported class actions (consolidated on appeal) under the Fair Debt Collection Practices Act (FDCPA), alleging Simm violated 15 U.S.C. 1692g(a)(2) by failing to disclose the current creditor or owner of the debt and that the letter was false, deceptive, or misleading. The court granted Simm summary judgment. The Seventh Circuit affirmed. The letter identifies a single “creditor,” as well as the commercial name to which the debtors had been exposed, allowing the debtors to easily recognize the nature of the debt. It is true the letter identifies Comenity as the “original” instead of “current” creditor but the FDCPA does not require the use of any specific terminology to identify the creditor. The letter does not identify any creditor other than Comenity, which might have led to consumer confusion. By informing debtors they could request the name of the original creditor if different from the current creditor, the letter alerts debtors the original and current creditor may be the same. View "Nieto v. Simm Associates, Inc." on Justia Law

Casillas allegedly owed a debt to Harvester. Madison sent Casillas a letter demanding payment. The Fair Debt Collection Practices Act requires a debt collector to give consumers written notice, 15 U.S.C. 1692g(a), including a description of two mechanisms that the debtor can use to verify her debt. A consumer can notify the debt collector “in writing” that she disputes all or part of the debt, which obligates the debt collector to obtain verification and mail a copy to the debtor or a consumer can make a “written request” that the debt collector provide her with the name and address of the original creditor. Madison’s notice neglected to specify that Casillas’s notification or request under those provisions must be in writing. Casillas filed a class action. She did not allege that she planned to dispute the debt or verify that Harvester was actually her creditor. The Act renders a debt collector liable for “fail[ing] to comply with any provision.” She sought to recover a $1000 statutory penalty for herself and a $5000 statutory penalty for unnamed class members, plus attorneys’ fees and costs. The Seventh Circuit affirmed the dismissal of the suit. A plaintiff cannot satisfy the injury‐in‐fact element of Article III standing simply by alleging that the defendant violated a disclosure provision of a consumer‐protection statute. Absent an allegation that Madison’s violation had caused harm or put Casillas at an appreciable risk of harm, Casillas lacked standing to sue. View "Casillas v. Madison Avenue Associates, Inc" on Justia Law

Paz defaulted on a $695 credit card debt. PRA, a debt collector, purchased the debt and attempted to collect but violated the Fair Debt Collection Practices Act by failing to report that Paz disputed the debt. Paz filed suit in June 2014. PRA invoked FRCP 68, offering to eliminate the debt and pay Paz $1,001 plus reasonable attorneys’ fees and costs as “agreed ... and if no agreement can be made, to be determined by the Court.” The agreement stated that “[t]his … is not to be construed as an admission that ... Plaintiff has suffered any damage.” Paz accepted PRA’s offer. Counsel agreed to attorneys’ fees of $4,500. PRA nonetheless continued to report Paz’s debt to credit reporting agencies, even confirming its validity in response to inquiries. Paz filed another lawsuit and unsuccessfully attempted to add class claims. PRA again invoked Rule 68, offering $3,501 on the same terms as the first settlement. Paz never responded. The court limited the claims allowed to go to trial. Days before trial, PRA offered Paz $25,000 plus attorneys’ fees and costs. Paz rejected the offer. A jury found for Paz but determined that Paz had sustained no actual damages, so his recovery was limited to $1,000 in statutory damages for his FDCPA claim. Paz sought $187,410 in attorneys’ fees and $2,744 in costs, 15 U.S.C. 1692(k)(a)(3). The Seventh Circuit affirmed an award of $10,875, reasoning that Paz’s rejection of meaningful settlement offers precluded a fee award so disproportionate to his recovery. View "Paz v. Portfolio Recovery Associates, LLC" on Justia Law

The district court found that Spectrum violated the Consumer Product Safety Act, 15 U.S.C. 2064(b)(3), when its subsidiary failed to timely report to the government a potentially hazardous defect in its Black & Decker SpaceMaker coffeemaker. In 2009, there were multiple complaints that the plastic handle on the coffeemaker’s carafe had broken. In one instance, the handle's failure caused a consumer to suffer a burn from the hot coffee in the carafe. Spectrum ordered design changes, but continued to sell the product and did not file a section 15(b) report with the Commission until April 2012. The court entered a permanent injunction, requiring Spectrum to adhere to its newly-implemented CPSA compliance practices and to retain an independent consultant to recommend additional modifications to those practices. The Seventh Circuit affirmed, rejecting Spectrum’s argument that the late-reporting claim was barred by the statute of limitations and that the court abused its discretion in awarding permanent injunctive relief, including the requirement that it engage the expert. Spectrum’s failure to report constituted a continuing violation that did not end until Spectrum finally submitted a report; the statute of limitations did not begin to run until 2012. Given the gravity of its failures and the delay in compliance, the district court justifiably concluded that there was a reasonable likelihood that Spectrum might again commit similar violations in the future. View "United States v. Spectrum Brands, Inc." on Justia Law

Abdollahzadeh opened an MBNA credit-card account in 1998. He defaulted on the debt, making his last payment in August 2010. In June 2011 he attempted another payment that never cleared. In April 2013 MBNA sold his account to CACH, which referred Abdollahzadeh’s debt to Mandarich, a debt-collection law firm. CACH identified the later, unsuccessful payment attempt as the last payment on the account. Relying on this date, Mandarich sent Abdollahzadeh a collection letter in December 2015. Mandarich sued when it received no response. The state court dismissed the suit because the last payment to clear occurred outside of Illinois’s five-year statute of limitations. Abdollahzadeh sued Mandarich for attempting to collect a time-barred debt (Fair Debt Collection Practices Act, 15 U.S.C. 1692). The court granted Mandarich summary judgment, concluding that the violations were unintentional and occurred despite reasonable procedures aimed at avoiding untimely collection attempts. The Seventh Circuit affirmed, rejecting Abdollahzadeh’s arguments that Mandarich’s continuation of the collection action after it learned the true last-payment date created a factual dispute on the issue of intent; that the firm’s reliance on CACH’s representations about the last-payment date was an abdication of its duty to engage in meaningful review; and that the firm’s procedures for weeding out time-barred debts were insufficient to support the affirmative defense. The bona fide error defense doesn’t require independent verification and procedural perfection. Mandarich had procedures in place that were reasonably adapted to avoid late collection efforts. View "Abdollahzadeh v. Mandarich Law Group, LLP" on Justia Law

In 1996 Aldaco pleaded guilty to battery and received a sentence of six months’ supervision, a diversionary disposition under Illinois law. The court entered a finding of guilt and deferred proceedings. After Aldaco complied with the conditions of her supervision, the court dismissed the charge. Aldaco could have had the battery record expunged, but did not ask the court to do so. Nineteen years later Aldaco wished to rent an apartment. As part of one application process, she consented to a criminal background check, which the landlord outsourced to Yardi. Its report flagged her battery sentence and the landlord refused to rent to Aldaco. She protested to Yardi, falsely asserting that the battery record did not pertain to her. She did not inform Yardi that the reported length of her sentence was incorrect. Yardi reexamined its work and confirmed that the record pertained to Aldaco. Aldaco filed suit, contending that Yardi—as a consumer reporting agency—violated the Fair Credit Reporting Act when it disclosed her criminal history. The Act prohibits reporting agencies from disclosing any arrest record or other adverse items more than seven years old but permits them to report “records of convictions” no matter how old, 15 U.S.C. 1681c(a). The Act does not define the word “conviction.” The Seventh Circuit affirmed summary judgment for Yardi. Federal law controls; the word “convictions” encompasses pleas of guilt. View "Aldaco v. Rentgrow, Inc." on Justia Law

A Zestimate is an estimated value for real estate, generated on the Zillow website by applying a proprietary algorithm to public data, such as location, tax assessment, number of rooms, and recent selling prices. Zillow does not inspect the building nor adjust for whether a property is attractive or well-maintained. Zillow states that its median error (comparing a Zestimate with a later transaction price) is less than 6%. The Zestimate is off by more than 20% in about 15% of all sales. Zillow informs users that Zestimates may be inaccurate. Plaintiffs learned that the Zestimates for their parcels were below the amounts they hoped to realize. Zillow declined requests to either to increase the Zestimates or remove the properties from the database. Plaintiffs sued, citing the Illinois Real Estate Appraiser Licensing and Uniform Deceptive Trade Practices Acts. The Seventh Circuit affirmed dismissal. The plaintiffs lack a private right of action under the appraisal statute, which makes unlicensed appraisal a crime; an administrative agency may impose fines for unlicensed appraisal and issue cease-and-desist le\ers that can be enforced by injunctions. Illinois courts create a non-statutory private right of action “only in cases where the statute would be ineffective, as a practical ma\er, unless such action were implied.” Given the multiple means of enforcing the licensing act, and the penalties for noncompliance, a private action is not necessary. The Trade Practices Act deals with statements of fact, while Zestimates are opinions. View "Patel v. Zillow, Inc." on Justia Law

Rhone’s physical therapy provider (Institute), billed her $134 for each session. Insurance covered all but a $60 co-pay per session. Rhone did not remit her part of the bills. Institute turned to the Bureau for debt collection. After three years of collection efforts did not work, the Bureau reported to Equifax that Rhone owes nine debts of $60 each. Rhone contends that the Bureau had to report the aggregate debt of $540 rather than nine $60 debts. The district court found the at the Bureau made a “false representation” about “the character, amount, or legal status of any debt,” 15 U.S.C.1692e(2)(A) and imposed a $1,000 penalty. The Seventh Circuit reversed. The credit report was factually correct. The word “character” does not require aggregation of debts arising from multiple transactions with a single entity. The number of transactions between a debtor and a single merchant does not affect the genesis, nature, or priority of the debt and so does not concern its character. View "Rhone v. Medical Business Bureau, LLC" on Justia Law