Collector - May 2020 - 42

IAP

E Pluribus Unum?
Credit reporting, serial transactional debts and the FDCPA.
By Colin Winkler

W

hen a creditor places a series
of transactional debts with
a third-party collector for
several instances of services provided to
one consumer, should the collector, if it
reports the debts to a credit reporting
agency (CRA), identify them as a single
account or as multiple accounts? Does
the answer to this question give rise to
potential liability under the Fair Debt
Collection Practices Act?
To date, the consumer bar has
raised these questions to courts only
infrequently. But in the heavily regulated
world of debt collection, where consumer
attorneys regularly find creative ways to
bring sword-not-shield lawsuits, the issue
merits consideration.
In the past year, two lawsuits addressing
these questions have worked their way up
to the 7th Circuit. These cases have tested
the waters for potential liability under
the FDCPA. But with support from ACA
International's Industry Advancement
Fund, these claims have been beaten back.
Here, we take a deep dive into the
successful defense of a separate-reporting
claim in the 7th Circuit.

FRIERSON V. STATES
RECOVERY SYSTEMS
One of the oldest cases that addresses the
question of a creditor's liability under the
FDCPA for separate reporting of a single
consumer's related transactional debts
appears to be Frierson v. States Recovery
Systems, No. CV 2:17-0781 WBS EFB, 2017
WL 2546889 (E.D. Cal. June 13, 2017).
In that case, Heather Frierson alleged
that States Recovery Systems, an ACA
member company, had reported as two
separate debts her past-due charges owed
to the Sacramento Municipal Utility
District for the June-July and July-August

42

2015 billing cycles. Frierson argued that
separately reporting these serial debts as
two accounts instead of one constituted
a "false, deceptive, or misleading
representation" under Section 807 of the
FDCPA (15 USC Section 1692e) and the
corresponding provision of California law.
The court dispatched Frierson's claim
on SRS's 12(b)(6) motion to dismiss.
In so doing, the court looked for "an
absence of sufficient facts alleged under a
cognizable legal theory." The court noted
that Frierson had not cited and the court
did not know of any case holding that
"reporting multiple tradelines for debt
incurred from a single billing account
is, without more, 'false, deceptive,
or misleading.'"
In surveying the body of then-existing
case law, the court found only three
relevant decisions, none of which directly
decided the question. Rather, they all
addressed variations of claims arising
from multiple credit reporting for the
same debt, i.e., instances of the same
debt appearing multiple times on the
consumer's credit report. In all cases, the
courts had focused on the accuracy of
the credit reporting, not the mechanics.
Where the furnisher had accurately
reported the amount of the debt, the
courts found no FDCPA violation
despite an alleged diminution of the
consumer's credit score as a result of the
multiple reporting.
Additionally, the Frierson court noted
that, unlike the tradelines in the multiplereporting cases it had surveyed-in which
the same debt had been reported more
than once-the two tradelines SRS had
reported for Frierson's serial debts to the
Sacramento Municipal Utility District
"were based on separate bills incurred for
separate billing cycles." The court held

that this basis for separating tradelines
did not violate the "false, deceptive, or
misleading" standard set forth in 1692e.

RHONE V. MEDICAL BUSINESS
BUREAU, LLC
More recently, in Rhone v. Medical
Business Bureau, LLC, 915 F.3d 438 (7th
Cir. 2019), a panel of the 7th Circuit Court
of Appeals, led by the esteemed Judge
Frank Easterbrook, decided that ACA
member company Medical Business
Bureau, LLC (MBB) did not misrepresent
the "character" of the consumer's debt in
violation of Section 1692e(2)(A) when it
reported to Equifax that plaintiff Diane
Rhone owed her physical therapist nine
separate debts of $60 each rather than a
single debt of $540.
Rhone had attended nine therapy
sessions between October 2012 and
December 2013. After insurance, she
owed her provider a $60 co-pay for each
visit. These co-pays went unremitted,
so the provider turned to MBB for debt
collection. "After three years of dunning
letters did not work," MBB reported to
Equifax that Rhone owed nine debts of
$60 each. In Rhone's view, by reporting
the $60 component debts separately,
MBB had made a "false representation" in
violation of 1692e(2)(A).
On appeal from the Northern District
of Illinois' grant of summary judgment
in Rhone's favor, the 7th Circuit panel
began with the proposition that, under
the statutory terms of 1692e(2)(A), the
"false representation" must pertain to the
"character, amount, or legal status" of the
debt. In Rhone's case, the court focused on
the "character" element of this standard,
observing that the "amount" of the
debt, i.e., the math, would be have been
accurate whether MBB had reported one

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