“Maybe you just shouldn’t collect debts in Illinois”

Two weeks ago, we attended the ACA International Annual Convention in Nashville. One of the more interesting discussions focused on compliance lessons creditors and debt collectors can take away from recent court decisions.

Some of them were easy. For example, in Armata v. Target Corp., 2018 WL 3097094 (Mass. Sup. Ct. June 25, 2018), the Massachusetts Supreme Judicial Court held that, under Massachusetts law, a debt collector may only initiate two automated calls to a consumer in a seven-day period regardless of whether those calls are answered or whether a message is left. Compliance lesson: don’t make more than two calls per week in Massachusetts.

Others were more difficult.  For instance, what constitutes an autodialer after the D.C. Circuit’s decision in ACA International v. FCC, 855 F.3d 687 (D.C. Cir. 2018)? Or can you contract around revocations of consent for purposes of the TCPA? (For more on those topics, see our earlier posts on post-ACA FCC developments and the evolution of the definition of autodialer and revocation of consent)

And then there are all those decisions from courts within the Seventh Circuit, and, in particular, the Northern District of Illinois. That court held in Rhone v. Med. Bus. Bureau, LLC, 2017 WL 4875297 (N.D. Ill. Oct. 25, 2017), appeal filed, No. 17-3408 (7th Cir. Nov. 22, 2017), that multiple debts owed to the same creditor must be aggregated when reported to a credit reporting agency. The case arose from nine separate physical therapy treatments; after insurance payments, Ms. Rhone still owed $60 for each visit. The physical therapy institute assigned nine separate debts to the debt collector, who reported them as such to Equifax. The district court held that because the debt collector had “the invoices and information regarding the treatment charges for the same injury[,] .  .  . it should have been apparent that there was one debt that should have been reported in one tradeline.”

After hearing about this case, my colleague commented, “Maybe you just shouldn’t collect debts in Illinois.” His sarcasm was prompted by the sheer number of consumer claims and theories that are born in the Northern District of Illinois. Just the day before hearing about Rhone, my colleague and I had spoken on a panel at the convention about, among other things, so-called “Pantoja claims,” which also originated there. And to my colleague’s point, decisions like Rhone do raise legitimate concerns. While Ms. Rhone wanted all her debts aggregated, another consumer could claim just the opposite—that reporting their multiple small debts as one large amount is itself inaccurate. Although Rhone should be distinguishable from many other types of debts because the court went to great lengths to point out that there was a single injury and single course of treatment, enterprising plaintiffs’ attorneys will no doubt try to export it to other situations.  What if a consumer obtains a new credit card to pay off a portion of an old one, and then both are sold to a debt buyer or assigned to a debt collector?  Should the two accounts be aggregated since it was simply a “collection of cumulative debt” like in Rhone?

There are a lot of gray areas in compliance, and companies should be careful about too quickly adopting a one-size-fits all approach. Sometimes, you have to take your lumps and plan for the long game; it eventually pays off.  That’s what happened last year in Midland Funding, LLC v. Johnson and Henson v. Santander Consumer USA, Inc.  And it seems to be what might happen in several cases from the Northern District of Illinois.