January 18, 2018
from the United States District Court for the Eastern
District of Wisconsin. No. 17-CV-88 - William E. Duffin,
from the United States District Court for the Southern
District of Illinois. No. 3:16-CV-1333-NJR-SCW - Nancy J.
Sykes and Hamilton, Circuit Judges, and Lee, District Judge.
Dunbar and Tammy Smith received collection letters offering
to settle their debts at a significant discount. Both letters
included the warning: "This settlement may have tax
consequences." In separate suits Dunbar and Smith
claimed that this statement is misleading in violation of the
Fair Debt Collection Practices Act ("FDCPA"), 15
U.S.C. § 1692e, because they were insolvent when they
received the letters and therefore would not have incurred a
tax liability for any discharged debts.
courts below rejected that argument and dismissed the suits
on the pleadings. We consolidated the appeals and now affirm.
The challenged statement is not false or misleading because
"may" does not mean "will" and insolvent
debtors might become solvent before settling their debt,
triggering the possibility of tax consequences.
January 2016 the Kohn Law Firm, S.C., a collection law firm,
sent Amy Dunbar a letter seeking to collect a debt originally
owed to a bank. The letter stated that the full balance due
was $4, 049.08 and offered to settle the debt for $2, 631.90,
but warned: "NOTICE: This settlement may have tax
consequences." Dunbar was insolvent when she received
the letter and filed for bankruptcy six months later.
same month Weltman, Weinberg & Reis, also a collection
law firm, sent Tammy Smith a collection letter seeking to
collect a consumer credit-card debt. The letter stated that
the balance due was $4, 319.69 and invited Smith to contact
the law firm to discuss satisfying her debt obligation for a
reduced amount. Like Dunbar's letter, this letter warned:
"This settlement may have tax consequences." Smith
too was insolvent when she received the letter and filed for
bankruptcy two months later.
and Smith filed separate actions under § 1692e alleging
that the collection letters were misleading because they were
insolvent and therefore would not have had to pay taxes on
any discharged debt. A magistrate judge and district judge,
respectively, dismissed the cases for failure to state a
claim. See Fed. R. Civ. P. 12(b)(6). Both judges
concluded that alerting debtors that a settlement
"may" have tax consequences is neither false nor
FDCPA makes it unlawful for a debt collector to use "any
false, deceptive, or misleading representation or means in
connection with the collection of [a] debt." §
1692e. An objective "unsophisticated consumer"
standard applies to § 1692e claims: We ask "whether
a person of modest education and limited commercial savvy
would be likely to be deceived" by the debt
collector's representation. Evory v. RJM Acquisitions
Funding L.L.C., 505 F.3d 769, 774 (7th Cir. 2007). The
objective test disregards "bizarre" or
"idiosyncratic" interpretations of collection
letters. Gruber v. Creditors' Prot. Serv.,
Inc., 742 F.3d 271, 274 (7th Cir. 2014); Durkin v.
Equifax Check Servs., Inc., 406 F.3d 410, 414 (7th Cir.
2005). A collection letter can be "literally true"
and still be misleading, Gonzales v. Arrow Fin. Servs.,
LLC, 660 F.3d 1055, 1062 (9th Cir. 2011)-for example, if
it "leav[es] the door open" for a "false
impression," Fields v. Wilber Law Firm, P.C.,
383 F.3d 562, 566 (7th Cir. 2004).
this is a fact-laden inquiry, dismissal on the pleadings is
proper only in "cases involving statements that plainly,
on their face, are not misleading or deceptive."
Boucher v. Fin. Sys. of Green Bay, Inc., 880 F.3d
362, 366 (7th Cir. 2018) ...