7th Cir Says FDCPA Prohibits Misleading Representations Only to "Consumers and Those Who Stand in the Consumer's Shoes" (and Not Judges)

The U.S. Court of Appeals for the Seventh Circuit recently held that the provisions of the federal Fair Debt Collection Practices Act (“FDCPA”) regulating false or deceptive communications from a debt collector (15 U.S.C. 1692e) extend only to “consumers and those who stand in the consumer’s shoes,” which does not include judges.

Palisades Acquisition XVI (“Palisades”) filed an action to collect a credit card debt in state court. Palisades’s complaint attached an exhibit resembling a credit card statement. The exhibit included a statement closing date several months before the complaint was filed, and listed Palisades as the issuing party. Although the exhibit looked like an authentic credit card statement, Palisades admitted that it had never sent the document to the debtor before filing the complaint.

When the debtor appeared in court to challenge Palisades’s collection action, Palisades voluntarily dismissed its complaint. The debtor subsequently sued Palisades in federal court, alleging that Palisades violated that the FDCPA by attaching to its complaint a document resembling a credit card statement, which the debtor claimed was materially false, deceptive, and misleading to a state court judge viewing the document in the context of granting a default judgment.

The Seventh Circuit rejected this argument, holding that the FDCPA provisions apply only to consumers and those who stand in consumers’ shoes, and held that state court judges do not stand in a consumer’s shoes. Noting that the FDCPA’s purpose is to protect consumers, the Seventh Circuit found that the Act’s prohibitions “are clearly limited to communications directed to the consumer and do not apply to state judges.”

The Court specifically stated that “drawing the line at communications directed at consumers . . . gives consumers the full breadth of protection that the [FDCPA] permits and keeps us from reading into the Act whatever implausible ends [the debtor’s] lawyers can conjure up.”

The majority explained as follows:

"As a general matter, the Act and its protections do not extend to third parties. Although courts have extended the Act’s prohibitions to some statements made to a consumer’s attorney, Evory v. RJM Acquisitions Funding L.L.C., 505 F.3d 769, 773-75 (7th Cir. 2007), and to others who can be said to stand in the consumer’s shoes, Wright v. Fin. Serv. of Norwalk, Inc., 22 F.3d 647, 650 (6th Cir. 1997) (en banc) (holding that executrix could sue because the Act applies to anyone who “stand[s] in the shoes of the debtor [with] the same authority as the debtor to open and read the letters of the debtor”), none has extended the Act to persons who do not have a special relationship with the consumer. In fact, the Eighth Circuit rejected an argument that the Act applied to representations that were not directed to the consumer: “The weight of authority applying section 1692e does so in the context of a debt collector making a false, deceptive, or misleading representation to the plaintiff.” Volden v Innovative Financial Systems, Inc., 440 F.3d 947, 954 (8th Cir. 2006) (emphasis in the original) (the false statements at issue were not made to the consumer but between a check guarantee company and a returned-check processor).

Thus, the Act is limited to protecting consumers and those who have a special relationship with the consumer— such that the Act is still protecting the consumer— from statements that would mislead these consumers. The Act is not similarly interested in protecting third parties. Id.; see also Guerrero v. RJM Acquisitions, LLC, 499 F.3d 926, 934 (9th Cir. 2007) (noting “Congress did not view attorneys as susceptible to the abuses that spurred the need for the legislation”)."