Appeal from the United States District Court for the Northern District of Illinois, Eastern Division. Nos. 05 C 3462 & 05 C 5865-David H. Coar, Judge, Charles P. Kocoras, Judge.
The opinion of the court was delivered by: Posner, Circuit Judge
Before POSNER, FLAUM, and WILLIAMS, Circuit Judges.
In these two closely related class action suits under the Fair Debt Collection Practices Act, 15 U.S.C. §§ 1692-1692p, which we have consolidated for decision, the plaintiffs complain about dunning letters sent them by the well-known Plaza Associates debt-collection agency. In both cases the district court entered summary judgment in favor of Plaza after rejecting the survey evidence prepared by the plaintiffs' expert witness, Howard L. Gordon.
Two identical letters sent to plaintiff DeKoven state that "we have been authorized to offer you the opportunity to settle this account with a lump sum payment for 65% of the above balance due, which is equal to $2,459.22. This offer will be valid for a period of thirty-five (35) days from the date of this letter." The letter to Kubert is similar but includes a paragraph which states-after telling the recipient that if he notifies the agency within 30 days that he "dispute[s] the validity of this debt or any portion thereof" the agency will "obtain verification of the debt or obtain a copy of a judgment and mail you a copy of such judgment or verification"-that "you may already have satisfactory proof that this account is listed with us in error. If so, please send this notice back along with a copy of one of the following to support your claim: Bankruptcy Notice from the court stating case number and filing date, Satisfaction of Judgment, Proof of prior settlement, Letter from the original Creditor clearing your account." The suits complain about the statement in the letters that the offer of settlement is valid for only 35 days and the additional statement in the Kubert letter concerning "satisfactory proof" that the account is in error.
The plaintiffs say the first statement would be understood by many consumers to mean that this would be their last chance to settle the claim and that the terms in it would be the best they'd be offered-that in short it was a final offer-when in fact Plaza Associates had been authorized by DeKoven's and Kubert's creditors to settle for less; thus the offers were just the opening bid in a negotiation. Kubert complains in addition that the reference to "satisfactory proof" of error is misleading because it implies that to "dispute" a claim a debtor must furnish "proof" to support his position.
As an original matter one might wonder why a debtor who does not deny the validity of his debt would be heard to complain that he had failed to understand that if he turned down the debt collector's initial offer he might be able to settle the creditor's valid claim for even less later. But in many cases, including the ones before us, the debtor is not simply a wise guy who could afford to pay his debts in full but would prefer not to. He is someone who cannot pay them in full because he has been hit by unforeseen medical bills or lost his job unexpectedly or is otherwise under water, without wanting to cheat anyone. He might be unable to pay 65 percent of a given debt but able to pay 25 or 33 percent, and if he did pay that lesser percentage he might be able to preserve his credit standing and avoid bankruptcy. If through poor wording of the debt collector's letter the debtor gets the impression that the initial offer is the final one, he may pay it in full and default on other debts, or decide that his position is hopeless and declare bankruptcy.
And so while a debt collector can, if authorized by the creditor whom he is representing, make his initial offer a final one, he cannot pretend that it is final if it is not, in the hope that the debtor will think it final. See 15 U.S.C. § 1692e(10); Campuzano-Burgos v. Midland Credit Management, Inc., 550 F.3d 294, 299 (3d Cir. 2008); Goswami v. American Collections Enterprise, Inc., 377 F.3d 488, 495-96 (5th Cir. 2004).
The problem with implementing this rule, as we explained in Evory v. RJM Acquisitions Funding L.L.C., 505 F.3d 769, 775-76 (7th Cir. 2007), is that "the settlement process would disintegrate if the debt collector had to disclose the consequences of the consumer's rejecting his initial offer. If he says 'We'll give you 50 percent if you pay us by May 14, but if you don't, we'll probably offer you the same or even better deal later, and if you refuse that, we'll probably give up and you'll never have to pay a cent of the debt you owe,' there will be no point in making offers." We added that this "concern can be adequately addressed yet the unsophisticated consumer still be protected against receiving a false impression of his options by the debt collector's including with the offer the following language: 'We are not obli-gated to renew this offer.' The word 'obligated' is strong and even the unsophisticated consumer will realize that there is a renewal possibility but that it is not assured."
Plaza has not included this safe-harbor language in its dunning letters, but we had disclaimed in Evory any suggestion "that in the absence of safe-harbor language a debt collector is per se liable for violating [the Fair Debt Collection Practices Act] if he makes the kind of settlement offer that we quoted. We see a potential for deception of the unsophisticated in those offers but we have no way of determining whether a sufficiently large segment of the unsophisticated are likely to be deceived to enable us to conclude that the statute has been violated. For that, evidence is required, the most useful sort being the kind of consumer survey described in Johnson v. Revenue Management Corp., 169 F.3d 1057, 1060-61 (7th Cir. 1999)." 505 F.3d at 776; see also Hahn v. Triumph Partnerships LLC, 557 F.3d 755, 757 (7th Cir. 2009); Williams v. OSI Educational Services, Inc., 505 F.3d 675, 678 (7th Cir. 2007). (But see, for criticism of the use of survey evidence, Judge Jolly's dissenting opinion in Gonzalez v. Kay, 577 F.3d 600, 609-11 (5th Cir. 2009).)
In the present cases the plaintiffs' expert did conduct a survey. But both judges considered it inadmissible under the standards governing the admission of survey evidence (a form of expert evidence) in federal court. See, e.g., Muha v. Encore Receivable Management, Inc., 558 F.3d 623, 625-26 (7th Cir. 2009); Peaceable Planet, Inc. v. Ty, Inc., 362 F.3d 986, 992 (7th Cir. 2004); United States v. Curtin, 588 F.3d 993, 997-98 (9th Cir. 2009); Vail Associates, Inc. v. VendTel-Co., Ltd., 516 F.3d 853, 864 n. 8 (10th Cir. 2008); see generally Fed. R. Evid. 702.
The survey staff interviewed 160 shoppers at a mall in a Chicago suburb. Half were shown the letter to Kubert; the other half-the members of the control group-were shown the letter minus the "valid for a period" and "satisfactory proof" paragraphs. There was no need to show either group the letters to DeKoven, since they differed materially from the letter to Kubert only in lacking the reference to "satisfactory proof."
After the survey respondents read the letter (either the survey letter or the control letter, depending on which group a respondent had been placed in), they were first asked questions about the letter orally, then given orally two answers to choose between, and finally handed a card with the answers printed on it and asked to pick one of them. The cards also contained a third answer option, which had not been presented orally: "DON'T KNOW/NOT SURE." The critical question, asked of the respondents in both groups, was what the respondent thought would happen if he or she didn't accept the offer in the letter-would it be renewed or extended, or was this the last chance to get a discount off the balance owed?
Of the respondents in the survey group, 59 percent thought the offer was final, 26 percent thought that it would be renewed or extended, and 15 percent didn't know or weren't sure. The corresponding percentages in the control group were 24 percent, 10 percent, and 66 percent. These statistics may seem strongly to support the hypothesis that the letter to Kubert was misleading. And likewise if we treat the "don't know/not sure" respondents as having correctly interpreted the letter to leave uncertain whether the offer was final or would be renewed; for there was nothing misleading about the letter if interpreted so because, as we said, a debt collector is not required to reveal his negotiating strategy. Then 76 percent of the respondents in the control group (the 10 percent who thought the offer ...