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Seventh Circuit Rejects Use of Miller "Safe Harbor" Language When a Debt Cannot Increase

Safe harbor language is not always safe, as illustrated by a recent decision of the U.S. Court of Appeals for the Seventh Circuit Court of Appeals in Boucher v. Finance System of Green Bay.

The Fair Debt Collection Practices Act's (FDCPA) validation provision requires debt collectors to disclose the "amount of debt" a consumer owes (see 15 U.S.C. § 1692g). That sounds simple, but it becomes operationally difficult for pre-charge-off collections and other situations in which fees can be imposed or interest can continue to accrue after the validation notice is sent. Recognizing this dilemma, the Seventh Circuit set forth safe harbor language that allowed a debt collector to account for the fact that a debt may increase in Miller v. McCalla, Raymer, Padrick, Cobb, Nichols, & Clark, L.L.C.—commonly known as the "Miller safe harbor." In the 18 years since Miller was decided, however, courts have made this safe harbor less safe. The Seventh Circuit continued that trend in Boucher by holding that the Miller safe harbor language was misleading when a debt would not, in fact, increase after the validation notice was sent.

The defendant in Boucher sent a validation notice for collection of medical debt that included the following language: "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." The plaintiffs alleged that this language was misleading because the defendant could not legally collect late charges or other charges under state law. The district court dismissed the complaint because the language tracked the Miller safe harbor language.

But the Seventh Circuit reversed, holding that "although the Millerlanguage is not misleading or deceptive on its face, it may nevertheless be inaccurate under certain circumstances." The Seventh Circuit held that the Miller language was itself misleading and deceptive under the facts of Boucher because the defendant could not legally charge late fees or other charges. Accordingly, the court held that the statement was false on its face because it implied that the debt collector could, in fact, impose such charges if the consumer did not pay the debt.

Boucher is significant not only because it is from the Seventh Circuit (as was Miller), but also because it is in line with a troubling trend in which courts throughout the country are taking more nuanced views on when the Miller safe harbor language is appropriate. This trend makes a one-size-fits-all approach to validation notices dangerous. In light of this trend, debt collectors should give serious consideration to revising validation letters that contain safe harbor language. As was the case in Boucher, including the safe harbor language when a debt cannot legally increase due to fees or other charges can violate the FDCPA.

When a debt may increase, its best to provide detailed information from which a consumer could determine whether and under what circumstances debt will increase and, if so, the amount by which it will increase. This additional information is particularly important in the Second Circuit, in light of such cases as Avila v. Riexinger & Assocs., LLC, 817 F.3d 72, 76-77 (2d Cir. 2016) and Carlin v. Davidson Fink LLP, 852 F.3d 207, 216-217 (2d Cir. 2017), which hold that providing that a debt "may" increase without additional information does not satisfy 1692g in all circumstances.

Copyright © by Ballard Spahr LLP

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Kaplinksy, partner, New York, finance
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Alan S. Kaplinsky is Co-Practice Leader of the firm's Consumer Financial Services Group, which has more than 115 lawyers. Mr. Kaplinsky devotes his practice exclusively to counseling financial institutions on bank regulatory and transactional matters, particularly consumer financial services law, and defending financial institutions that have been sued by consumers in individual and class action lawsuits and by government enforcement agencies. Visit Mr. Kaplinsky's profile in Wikipedia.

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Christoper Willis, Partner, Ballard Spahr law firm, Consumer Financial Services Litigation attorney
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Christopher J. Willis is Practice Leader of the firm's Consumer Financial Services Litigation Group. He devotes his practice to assisting financial services institutions facing government investigations and examinations, counseling them on fair lending risk and compliance assessments, and defending them in individual and class action lawsuits brought by consumers and enforcement actions brought by government agencies.

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Stefanie H. Jackman devotes her practice to assisting financial services institutions facing government investigations and enforcement actions, as well as defending them in individual and class action lawsuits. Ms. Jackman regularly handles matters arising under an array of federal and state consumer financial laws, including UDAP/UDAAP statutes, FDCPA, FCRA, TCPA, EFTA, SCRA, and TILA. Ms. Jackman represents clients across the financial services industry, including banks and nonbanks, mortgage banking lenders and servicers, debt collectors and buyers, third-party...

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John L. Culhane, Jr., is known for his work advising on interstate direct and indirect consumer and residential mortgage loan and leasing programs, through both traditional brick-and-mortar facilities and e-commerce. Before joining Ballard Spahr, Mr. Culhane was associate counsel with Mellon Bank, N.A.; associate counsel with Bank of America NT&SA; and senior attorney (section chief) with the National Credit Union Administration, the federal agency regulating federal credit unions.

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Daniel L. Delnero represents a range of companies and individuals in consumer financial services litigation. He advises clients in large, complex matters involving banking and finance, constitutional due process challenges, corporate fraud, and state law tort actions.

Before entering private practice, Mr. Delnero was a law clerk for Hon. Lisa Godbey Wood, Chief Judge of the Southern District of Georgia.

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