A recent decision from the North District of Illinois has expanded on the Seventh Circuit’s holding in Pantoja v. Portfolio Recovery Assocs., LLC, 852 F.3d 679 (7th Cir. 2017) regarding revival warnings in collections letters on time-barred debt. Pierre v. Midland Credit Management, Inc., 2018 U.S. Dist. LEXIS 18860 (N.D. Ill. Feb. 5, 2018). The ruling resulted in summary judgment as to liability for a certified class of plaintiffs due to a collection agency failing to include a warning that payment could revive the statute of limitations on time barred debt.
The facts of the case are simple;the plaintiff, Pierre, defaulted on a credit card she took out with Target National Bank (“TNB”), and TNB sold the debt to Midland Funding, LLC for which the defendant, Midland Credit Management, Inc. (“Midland”), was a debt collector. Midland sent a collection letter to Pierre which stated she had been “pre-approved for a discount program” and gave her three “options” to pay off the $7,578.57 balance. The letter also included the following:
Relying on an earlier Seventh Circuit case, Pantoja v. Portfolio Recovery Assocs., LLC, 852 F.3d 679 (7th Cir. 2017), the District Court brushed aside Midland’s argument that such an omission was not a violation of the FDCPA because no revival warning is required. In Pantoja, the Seventh Circuit affirmed summary judgment for a plaintiff where a collection letter “d[id] not even hint, let alone make clear to the recipient, that if he makes partial payment or even just a promise to make a partial payment, he risks loss of the otherwise ironclad protection of the statute of limitations.” Pierre, 2018 U.S. Dist. LEXIS 18860, at *4 (citing Pantoja, 852 F.3d at 684). The Court found this to be the law of the circuit and that any collection letter on time barred debt must contain a revival warning. Although Midland argued that neither the CFPB nor the FTC required revival warnings in the context of letters concerning time barred debt, the Court found that those determinations were not entitled to deference and the Seventh Circuit’s “explicit holding” in Pantoja controlled.
Midland made two other arguments as to why its letter did not violate the FDCPA: (1) Midland’s internal policy is to never restart the statute of limitations, even if a partial payment is made; and (2) state law in the relevant state – Illinois – dictates that a partial payment on otherwise time barred debt does not restart the statute of limitations. The Court was not persuaded. As to Midland’s internal policy, the Court noted that the consumer could face suit if Midland changed its policies, or if Midland sold the debt to another “less principled” collector. On the state law issue, the Court noted that Illinois law was unclear on the point, and that a partial payment “puts [the consumer] in a worse legal position that she would have been in had she done nothing.”
Although Pierre never made any payments as a result of the letter, the Court nevertheless found the lack of a revival warning to be material: “Materiality does not hinge upon whether the plaintiff actually acted in reliance on a confused understanding, but rather whether the misleading letter has the ability to influence a consumer’s decision.” Id. at * 17 (citation omitted). Since a consumer “may well choose” to pay or promise to do so as a result of the letter, the materiality element was met. Id.
Implications of Pierre for Debt Collectors