Appeals from the United States District Court for the Northern District of Illinois, Eastern Division. Nos. 96 C 3233 & 96 C 2001 Charles R. Norgle, Sr., Judge.
Before CUDAHY, ROVNER, and EVANS, Circuit Judges.
The question presented by these appeals, one of first impression in the circuits, is whether an assessment owed to a homeowners or condominium association qualifies as a "debt" under the Fair Debt Collection Practices Act (the "FDCPA" or "Act"), 15 U.S.C. sec.sec. 1692 et seq. Guided by our recent decision in Bass v. Stolper, Koritzinsky, Brewster & Neider, S.C., 111 F.3d 1322 (7th Cir. 1997), which interprets the term "debt" under that Act, we hold that it does. We therefore reverse the district court's contrary judgment and remand for further proceedings.
In August 1995, Terrence and Michelle Newman received a collection letter from defendant Boehm, Pearlstein & Bright, Ltd., which the law firm sent on behalf of the Board of Directors of the Bridlewood Village Condominium Association. The letter informed the Newmans that they were in default on their obligation to pay a "proportionate share of the common expenses" due the association as required by the condominium ownership declaration and the association's by-laws. The amount due, according to the letter, was $421.31, which included past-due assessments, late fees, interest, and attorney's fees. The letter stated that if the amount demanded was not paid within thirty days, the association would commence proceedings to obtain possession of the Newmans' condominium unit.
Approximately one month later, David and Kathy Riter received a similar letter from Moss & Bloomberg, Ltd., a law firm representing the Greenbrook Tanglewood Homeowners Association. This letter indicated that the Riters owed $443.60 to the association and that a certified check in that amount should be sent within ten days. Barring that, the letter warned, Moss & Bloomberg would proceed with a "30-day Notice Demand for Possession" unless it was notified in writing that the Riters were disputing the amount owed.
After receiving these letters, the Newmans and Riters filed separate actions under the FDCPA, alleging that the defendant law firms had failed to comply with that statute's requirements. Both the Newmans and Riters specifically alleged that defendants had violated 15 U.S.C. sec. 1692g by failing to include in their collection letters the validation notice required by that section. See Avila v. Rubin, 84 F.3d 222, 226 (7th Cir. 1996) (discussing validation notice requirement). Both couples also alleged violations of section 1692e(11) in that the letters they received did not expressly disclose that defendants were attempting to collect a debt and that any information obtained would be used for that purpose. The Newmans further alleged that Boehm, Pearlstein had violated section 1692e in one additional way -- by falsely implying that legal proceedings on the alleged debt had already been initiated. The Newmans and Riters each sought statutory damages, costs, and attorney's fees in accordance with 15 U.S.C. sec. 1692k(a). Finally, both couples asked the district court to certify a class comprised of all individuals who had received similar letters from the defendant law firms and to appoint plaintiffs as class representatives. They also asked the court to appoint their attorneys (both couples were represented by the same counsel) as class counsel.
Moss & Bloomberg moved to dismiss the Riters' complaint for lack of subject matter jurisdiction, arguing that the past-due assessments referenced in its collection letter did not qualify as a "debt" under the Act. See 15 U.S.C. sec. 1692a(5) (defining a "debt" covered by the FDCPA). The district court granted the law firm's motion, holding that the assessments at issue were not encompassed by the statutory definition of a "debt." Riter v. Moss & Bloomberg, Ltd., 932 F. Supp. 210 (N.D. Ill. 1996). In reaching that conclusion, the court noted that a number of courts had construed the term "debt" in the Act as requiring an offer or extension of credit to a consumer. Id. at 211 (citing, inter alia, Zimmerman v. HBO Affiliate Group, 834 F.2d 1163, 1168-69 (3d Cir. 1987)). The district court observed that based upon that interpretation of the Act, the lower courts had uniformly held that an assessment owed to a homeowners or condominium association did not qualify as a "debt" because it did not satisfy the "credit" requirement. Id. at 211-12. Although it described the Riters' contrary argument as "not entirely unsound," the district court refused to buck the trend that was developing in the lower courts. Id. at 212. It therefore dismissed the Riters' complaint for lack of subject matter jurisdiction.
After issuing its decision in Riter, the district court granted Boehm, Pearlstein's motion to reassign the Newmans' case to it under the court's local rule. The district court then dismissed the Newmans' complaint sua sponte under Riter. The Newmans and Riters appealed separately to this court, and we consolidated their appeals for oral argument and disposition.
The FDCPA defines a "debt" in the following way:
The term "debt" means 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 ...