N.D. Illinois Makes Reasonable Ruling on Interest Disclosure Requirements

The Northern District of Illinois struck down the idea that the safe harbor language provided in Miller v. McCalla somehow creates new disclosure requirements for debt collectors. In Jasmine Chatman v. Alltran Education, Inc., 2018 WL 741465 (N.D. Ill. Feb. 7, 2018), the court dismissed a claim arguing this notion. The court found that including a balance due at the time of the letter and a simple statement saying interest is accruing, directing the consumer to the original loan agreement for the accrual rate, is sufficient to put the consumer on notice of the amount owed. 

Read the decision here.

Factual & Procedural Background 

Alltran Education, Inc. (Alltran) sent a collection letter to plaintiff Jasmine Chatman containing a “Total Current Balance” of $3,051.55. The letter contained a disclosure stating: 

The total balance due reflected above is correct as of the date of this letter. Until paid in full, interest may continue to accrue on your account.  Please refer to the original loan documents for interest rate and accrual information. 

Plaintiff, represented by Celetha Chatman of Community Lawyers Group of Chicago, filed suit against Alltran claiming that this disclosure failed to state how to determine the balance of the debt, that an adjustment may be necessary after receipt of payment due to the accruing interest, and that Alltran will notify the plaintiff in writing before depositing the payment if such adjustment is necessary. In other words, plaintiff argued that Alltran’s disclosure failed to conform to Miller’s requirements. 

Alltran filed a motion to dismiss the matter, alleging that plaintiff failed to state a claim upon which relief can be granted. The court granted Alltran’s motion. 

The Decision 

Plaintiff’s primary argument is that the elements of the Miller safe harbor language were missing in Alltran’s letter, thus arguing the letter violated the FDCPA. The court disagreed, citing Miller itself, stating that the Miller safe harbor disclosure is not the sole sufficient disclosure to convey the intended message to the consumer. 

The court called out the fact that the Seventh Circuit “did not create additional disclosures beyond those required by the statute when it formulated the safe harbor language in Miller” and declined to read any such additional disclosure requirements into the statute. 

The decision also stated that “Chatman as the unsophisticated consumer is reasonably intelligent, and is capable of making basic logical deductions and inferences. She would understand that she should check her loan documents for more information, as directed.” (Internal citations omitted.) 

Ultimately, the court found that Alltran’s disclosure met the unsophisticated consumer standard to accurately notify the consumer of the amount of her debt and dismissed the lawsuit with leave to file an amended complaint. 

Analysis 

In a rare turn of events, the consumer-friendly jurisdiction of Northern District (N.D.) Illinois refuses to further complicate an issue, taking a more workable stance than Eastern District (E.D.) New York.  Here, N.D. Illinois acknowledges that some disclosure is required in a situation where interest is accruing. However, the court does not muddle things by requiring the disclosure to be inundated with detail when such detail is available in another document, specifically the agreement between the consumer and creditor. 

Current precedent in E.D. New York, unfortunately, takes a more complex stance. Per Avila v. Riexinger & Assoc., Inc., the Second Circuit, like the Seventh Circuit where N.D. Illinois is located, requires a disclosure if an account is currently accruing interest. In E.D. New York, according to the Balke decision, a simple reference is insufficient and instead the consumer must be overwhelmed with detail of what the exact interest rate is, how to calculate the balance, and so forth. 

Ultimately, a further complication of collection letters harms consumers. Collection letters are already long and filled with legally required language created by lawyers, judges, and regulators – who are highly sophisticated individuals. While each individual disclosure on its own may be understandable, a mass of disclosures on a single letter may confuse and frustrate the least sophisticated consumer -- or even just a less-sophisticated consumer. Such a consumer who simply wants to resolve their account and move forward financially may be reluctant to do so if they are intimidated by the collection letter. 

The courts, if anything, should look for ways to simplify letters, not complicate them. The Northern District of Illinois succeeded in this task with the Chatman decision.