Because the debt was not his, plaintiff could not prove it was a consumer debt under the FDCPA, according to the Seventh Circuit

The Seventh Circuit in Burton v. Kohn Law Firm, S.C., 934 F.3d 572 (7th Cir. August 9, 2019) held that because the defendant in a debt collection suit denied any knowledge or association with the debt, he could not provide sufficient evidence that the debt in was a consumer debt under the FDCPA.

The defendant debt collection law firm, (“firm”) brought an action against the alleged debtor, Mr. Burton, on behalf of a debt collector for a debt allegedly incurred on a credit card account. Burton denied knowledge of, or any association with, the account. While that action was pending in state court, Burton filed suit against the firm in the federal district court alleging a violation of the FDCPA and the Wisconsin Consumer Act, (“WCA”) for filing the collection action without first providing him with notice of his right to cure the default.

The Wisconsin state court later dismissed the collection action on the basis of Burton’s denial that he was the individual who had incurred the debt. The district court in the federal case then granted summary judgment to the firm, and the debt collector, holding that Burton could not proceed on his FDCPA or WCA claims because he had failed to present sufficient evidence that the debt incurred on the credit card account was for personal, family, or household purposes and therefore a “consumer debt.”

The Seventh Circuit affirmed. It observed that both the FDCPA and the WCA were enacted to protect personal borrowers from abusive debt collection practices. Thus, to state a claim under either statute the plaintiff, who has the burden of proof, must demonstrate that the debt arises out of a transaction incurred for personal, family, or household purposes. Even where the plaintiff maintains that the underlying debt was not his, he can nonetheless claim FDCPA protection by showing that the debt collector treated him as a “consumer” allegedly owing a consumer debt. However, a plaintiff proceeding under this theory still must offer evidence to establish that the debt was a consumer debt.

Burton submitted five pieces of evidence to establish that the debt was consumer debt: (1) his statements that, to the extent he was liable for the debt, it was a consumer debt; (2) the defendants’ treatment of the debt as a consumer debt by including FDCPA disclaimers on the collection letters, suing Burton in his personal capacity, and sending communications to his personal address; (3) the defendants’ description of their consumer debt collection services on their websites; (4) a credit card employee’s email describing the underlying account as a “consumer account”; and (5) the billing statements listing purchases made on the credit card for personal, family, or household purposes.

The Court found none of this evidence compelling. First, his statements that he was liable for a consumer debt were undermined by his disavowals in the state court that he was not liable for the debt. Second, the law firm and the debt collector’s disclaimers in the collection letters were not indicative that the debt was consumer debt because, as courts have repeatedly held, merely including FDCPA disclaimers on debt collection letters is insufficient evidence that the debt was a consumer debt. Debt collectors may be simply exercising caution and including disclaimers on all communications with debtors simply to avoid any FDCPA liability.

Third, the advertisement on their websites that the defendants collect consumer debts did not establish that the debt they attempted to collect in this case was a consumer debt. Fourth, the email from the credit card employee that the debt was consumer debt was inadmissible hearsay and properly excluded. It is not a statement by an opposing party because the employee was employed by someone who was not a party to the lawsuit. Finally, billing statements showing purchases of low dollar amounts might indeed be evidence that the card was used for consumer purposes, but the statement submitted here shed no light on why those charges were incurred. Given that Burton could not explain whether the transactions were for a consumer as opposed to a business purpose, the billing statements did not provide enough information for a trier of fact to conclude these purchases were made for personal, family, or household purposes.

The district court did not err in granting summary judgment.


  • James Noonan

    Jim is a founding partner of Noonan & Lieberman. Jim has more than 25 years of experience in civil litigation on behalf of creditors, servicers, business and real estate owners.

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