In an opinion issued on April 13, 2017, the Seventh Circuit Court of Appeals ruled that collectors acting under a safe harbor provision in a Wisconsin statute did not violate the FDCPA when they sent dunning letters requesting payment of a principal balance plus 5% interest.

The case is Aker v. Americollect and Collection Associates, Ltd (Case No 16-3633, Seventh Circuit Court of Appeals). The concise opinion is only 5 pages. A copy of the opinion can be found here.


Per the opinion:

“Plaintiffs received medical services but did not pay their bills. Their providers referred the debts to defendants, and dunning letters ensued. The debt collectors demanded payment not only of the principal sums but also of 5% per annum interest. Plaintiffs contend that this violates 15 U.S.C. §1692g(a)(1), part of the Fair Debt Collection Practices Act, (FDCPA) which says that debt collectors must specify the amount of the debt, plus other provisions of state and federal law.”

The plaintiff argued that, in absence of a contractual provision, Wisconsin law only provides for interest if a debt has been reduced to judgment, and any pre-judgment request for interest is forbidden.

The defendants responded with two alternative arguments. First, they contended that interest under Wis. Stat. §138.04 runs automatically—unless debts are uncertain in amount, or a contract provides otherwise—and that a judgment just memorializes what state law requires. Thus, a demand for 5% interest does not seek more than the current amount of the debt and what the law allows.

Second, defendants argued that Wis. Stat. §426.104(4)(b), which creates a safe harbor for people who act in ways approved by the Administrator of Wisconsin’s Department of Financial Institutions.

The defendants had previously sent the Administrator a letter asking if they are entitled to add 5% interest to debts created by the provision of medical services. The Administrator requested further information, which the debt collectors provided.  The Department of Financial Institutions took no further action after the defendants provided their response.

Wis. Stat. §426.104(4)(b) treats the absence of a response within 60 days of a request as equivalent to approval. The defendants argued that this entitles them to the statutory safe harbor. The district court agreed with defendants’ arguments and granted summary judgment in their favor. Myers v. Americollect Inc., 2016 U.S. Dist. LEXIS

136941 (E.D. Wis. Sept. 30, 2016).

The Court’s Opinion

Per the opinion:

“One of the two arguments suffices on appeal. The safe-harbor statute provides:

Any act, practice or procedure which has been submitted to the administrator in writing and either approved in writing by the administrator or not disapproved by the administrator within 60 days after its submission to the administrator shall not be deemed to be a violation of chs. 421 to 427 and 429 or any other statute to which chs. 421 to 427 and 429 refer notwithstanding that the approval of the administrator or nondisapproval by the administrator may be subsequently amended or rescinded or be determined by judicial or other authority to be invalid for any reason.

Plaintiffs seek to enforce their understanding of the interest statute through Wis. Stat. §427.104(1)(j), which forbids attempts to collect more than the debt owed. Chapter 427 is expressly covered by §426.104(4)(b). Nonetheless, plaintiffs insist that because demanding interest before a debt has been reduced to judgment is (in their view) a violation of §138.04, we should not accord deference to the Administrator’s failure to disapprove the debt collectors’ request. But §426.104(4)(b) is not about deference. It is a safe harbor, providing that the practices presented to the Administrator for opinion “shall not be deemed to be a violation” of other state laws, unless the Administrator later announces a different view or a court holds the Administrator’s position to be invalid. Thus, when the defendants sent their dunning letters, they were entitled to demand payment of both the principal amounts and interest under §138.04. This means

that the letters also did not violate 15 U.S.C. §1692e(2)(A), which prohibits false representations about the character, amount, or legal status of a debt.

Until the Administrator says something more, or a state court lifts the safe harbor under §426.104(4)(b) (and in addition rules that §138.04 does not by itself allow the debt collectors’ practice), neither state nor federal law forbids dunning letters that demand 5% interest from debtors in Wisconsin.”

insideARM Perspective

This is an interesting decision. The opinion notes that the case was argued on April 11, 2017. The decision came 2 days later. As noted above, the opinion is only 5 pages long.  It would suggest that the court  felt strongly about the issue.

After the court determined that the safe harbor provision was applicable, the court never had to address the issue of whether pre-judgment interest would be permissible in absence of the safe harbor provision.

The defendants acted proactively in seeking an opinion on the issue from the Administrator of Wisconsin’s Department of Financial Institutions. They followed the procedure. The Administrator received the request for an opinion, asked for follow-up information, but failed to issue an opinion.  The statute is clear.  The absence of a response within 60 days of a request is deemed equivalent to approval.

The defendants were simply following the statute.  An opposite result from the Court of Appeals would render the statute meaningless.

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