Section 1692g requires debt collectors to disclose, among other things, the “amount of the debt” a consumer owes. See 15 U.S.C. § 1692g(a)(1). While seemingly simple, this requirement can become thorny when the amount of the debt is subject to fees, interest, and other charges which can increase the amount of the debt owed daily.
The Miller Safe Harbor
In 2000, the Seventh Circuit adopted safe harbor language to address this issue. The language provided as follows:
As of the date of this letter, you owe $ [the exact amount due]. Because of interest, late charges, and other charges that may vary from day to day, the amount due on the day you pay may be greater. Hence, if you pay the amount shown above, an adjustment may be necessary after we receive your check, in which event we will inform you before depositing the check for collection. For further information, write the undersigned or call 1-800-[phone number].
Miller v. McCalla, Raymer, Padrick, Cobb, Nichols & Clark, L.L.C., 214 F.3d 872,876 (7th Cir. 2000). The court cautioned, however, that the language will only provide a safe harbor so long as the disclosure is accurate and there is nothing which obscures the language. Over time, other courts adopted the language and collection agencies began incorporating the language into their 1692g letters.
But when doesn’t the safe harbor language create a safe harbor?
A recent decision by the Seventh Circuit answers that questions and serves as a cautionary tale to those who choose to rely upon the Miller language. In Boucher v. Fin. Sys. Of Green Bay, 880 F.3d 362 (7th Cir. 2018), the debt collector sent a letter to a consumer seeking to collect a medical debt in Wisconsin. The letter included the Miller safe harbor language and provided:
As of the date of this letter, you owe $[a stated amount]. Because of interest, late charges, and other charges that may vary from day to day, the amount due on the day you pay may be greater. Hence, if you pay the amount shown above, an adjustment may be necessary after we receive your check. For further information, write to the above address or call [phone number].
Id. at 364 (emphasis supplied). The consumer sued, alleging that the language was “false, deceptive, or misleading” because state law prohibited debt collectors from imposing “late charges or other charges” (beyond interest) on medical debt. The consumer contended that the letter “falsely implies a possible outcome—the imposition of ‘late charges and other charges’—that cannot legally come to pass.” Id. at 367.
The collection agency moved to dismiss the complaint asserting that there was no violation of the FDCPA because the language of the letter complied with the Miller safe harbor. While the trial court agreed with the collection agency and dismissed the complaint, the appellate court did not agree and reversed. Here’s why: the disclosure was not accurate under the applicable state law. While the letter stated that late charges and other fees might cause the balance to increase, the applicable state law did not allow for the recovery of late charges on medical debt.
As put the by the court, “debt collectors cannot immunize themselves from FDCPA liability by blindly copying and pasting the Miller safe harbor language without regarding for whether that language is accurate under the circumstances.” Id. at 371.
Lessons to Be Learned
So what lessons can be learned from Boucher and the other cases litigating the “amount of debt”? Here are a few:
- The days of a one size fits all §1692g letter are gone. Demand letters need to be customized to the jurisdiction and to the underlying debt itself. Here’s why:
- The courts are split as to the proper language for §1692g letters. While most adhere to a literal interpretation of §1692g, there are outliers that do not.
- In certain states and depending upon the circumstances, certain fees may not be recoverable (as demonstrated in Boucher).
- Understand the debt you are collecting. Is the amount of the debt subject to change or is it static?
- If it is subject to change, then certain additional language is likely necessary to allow the consumer to ascertain what is owed (for example, the Miller safe harbor).
- If the debt is static, then a simpler letter may be in order and you certainly would not want to suggest the balance is subject to change.
- The Miller safe harbor language only works if:
- The language is accurate; and
- There is nothing else in the letter which overshadows or obscures the disclosure.
Boucher serves as a reminder that the Miller safe harbor is not a cure all but in fact, only works when the language is accurate considering the circumstances of the case. It also serves as a reminder of some other matters that should be considered when drafting initial 1692g letters or deciding which 1692g letter to use.
For more information, contact Cornerstone today!
Caren Enloe is a partner with Smith Debnam in Raleigh, NC and leads the firm’s consumer financial services litigation and compliance group. Enloe serves as a member of the Editorial Board for the Compliance Professionals Forum and as a vice chair for the American Bar Association’s Debt Collection and Bankruptcy Subcommittee. She is an active member of ACA International, National Creditors Bar Association, the American Bar Association’s Consumer Financial Services Committee, the North Carolina Bankers Association and the North Carolina Creditor’s Bar Association. Enloe blogs and speaks regularly on current trends and issues involving consumer financial services.