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A decade-long series of 7th U.S. Circuit Court of Appeals rulings and advisory opinions in Fair Debt Collection Practices Act cases has created a unique body of law that some consumer lawyers say has made related litigation more complicated and expensive. Lawyers who represent consumers also assert that the 7th Circuit’s heavy hand on the FDCPA has created “gratuitous” circuit splits. They also charge that the court’s “advice” to debtors runs the risks of fostering other violations of both the law and professional ethical standards. But the debt collection industry’s lawyers welcome the active role that some of the 7th Circuit’s judges play in clarifying the statute and advising debt collectors on how to avoid violating it — much the same clarity that the Federal Trade Commission seeks from Congress in its 2005 annual FDCPA report. Manuel H. Newburger of Barron & Newburger, an Austin, Texas-based national consumer-protection law practice, said that, in addition to the court’s other FDCPA decisions, its advisory opinions “have left us scratching our heads.” “In each of these cases, it is as if the court took an approach based upon economic efficiency and decided to tell the collection lawyers how they could get it right rather than allow case after case to come before the court before someone finally fell into doing it right,” said Newburger, who also teaches consumer protection law at the University of Texas School of Law. “Courts don’t give advisory opinions,” he added. “They rule on the issues before them, not on how they will rule in the future on other facts.” REVOLUTION BEGINS The revolution began when the 7th Circuit Judge Frank H. Easterbrook replaced the FDCPA’s “least sophisticated consumer” standard with an “unsophisticated” consumer, which made it more difficult for plaintiffs to prove that debt collectors acted deceptively. Easterbrook also instructed courts in a concurring opinion to consider claims alleging deceptive or misleading conduct as questions of fact, rather than questions of law, as they are in the other circuits. Gammon v. GC Services, 27 F.3d 1254 (7th Cir. 1994). Analogous to the “reasonable man” of negligence law, the “least sophisticated consumer” is the standard most courts use to measure whether a defendant’s conduct is deceptive. But Easterbrook said this standard set the common denominator too low, and instead he created the “unsophisticated consumer” — one of less-than-average sophistication or intelligence, but not at “the very last rung on the sophistication ladder.” Richard J. Rubin, a solo practitioner in Santa Fe, N.M., who represents consumers in credit and debt-collection abuse litigation, is among lawyers who say that the improvisation is unnecessary. “The least-sophisticated consumer standard has been the standard for 75 years in federal court and at the Federal Trade Commission. It comes from the Unfair Trade Practices Act of 1934. Easterbrook created the unsophisticated consumer out of the whole cloth,” Rubin said. O. Randolph Bragg of Horwitz, Horwitz & Associates in Chicago, and David J. Philipps of Gomolinski & Philipps in Palos Hills, Ill., who represent consumers, both said that the 7th Circuit’s unsophisticated-consumer standard “may be a distinction without a real difference.” Bragg added that the different standard requires lawyers who practice widely in this area “to keep track of which circuit you’re practicing in.” But Bragg, Philipps and Rubin all take issue with the Gammoncourt holding that makes FDCPA claims — which allege deceptive or misleading conduct — questions of fact requiring proof, rather than questions of law that a judge can decide, as they are in all the other circuits. The standard Easterbrook applied is used in cases arising from the federal Lanham Act over whether a trademark or advertisement is likely to confuse consumers. The result is that, where before the court decided whether a communication about a debt owed was misleading, FDCPA plaintiffs in the 7th Circuit must provide extrinsic evidence — such as individual, expert and consumer-survey testimony — to prove that a communication from a debt collector is deceptive or misleading. Critics agree that the extra burden increases the cost and difficulty of pursuing such claims. For example, Bragg and Philipps said that they had not yet succeeded in court with linguistic experts they retained to testify about whether a communication from a debt collector is above the reading level of the circuit’s unsophisticated consumer. They added that the consumer surveys are “prohibitively expensive.” Philipps said that the cost of a survey — in general, hiring someone to go to a shopping mall, rent space and conduct a survey — starts at about $15,000. However, Bragg said, “there may be some easing of that standard,” such that in cases “when the facts are clear the judge can make that determination as a matter of law.” ETHICS PROBLEM? The 7th Circuit’s advisory opinions instruct debt collectors how to word dunning letters and other communications with consumers, providing so-called “safe harbor” formulas for complying with the FDCPA. These opinions also have set the court on a course apart from the other circuits. Some attorneys warn that these improvisations could violate other areas of the statute, as well as the American Bar Association’s Model Rule 4.3, which forbids lawyers from giving adverse parties legal advice other than the advice to obtain counsel. Judge Richard A. Posner, the 7th Circuit judge who wrote two of the key advisory opinions — Bartlett v. Heibl, 128 F.3d 497 (7th Cir. 1997), and Miller v. McCalla, Raymer, Padrick, Cobb, Nichols and Clark LLC, 214 F.3d 872 (7th Cir. 2000) — declined in an e-mail to comment on the cases, noting that the “opinions speak for themselves.” In Bartlett, Posner drafted a model safe harbor letter, noting that “debt collectors who want to avoid suits by disgruntled debtors standing on their statutory rights would be well advised to stick close to the form we have drafted.” Three years later in Miller, he cited the earlier safe harbor as part of the court’s “effort to minimize litigation” under that statute, and said that the court found it “useful to do the same thing for the ‘amount of debt’ provision.” In July, the 7th Circuit affirmed a federal district judge in Chicago who not only dismissed a consumer’s case against a debt collector that used Posner’s safe harbor advice in Bartlett, but sanctioned the plaintiffs’ firm that filed the action more than $18,000 for “objectively unreasonable and vexatious” conduct in bringing the action. Riddle & Associates v. Kelly, 414 F.3d 832 (7th Cir. 2005) Rubin called the Bartlett letter “the poster child for reining in the activist strain in the federal judiciary — from both the liberal and the conservative sides.” ‘HELPFUL TO LAWYERS’ However, attorneys who represent debt collectors disagree. Posner’s advisory opinions are “very helpful for lawyers to follow in order to avoid unnecessary litigation,” said George W. Heintz of Bowman, Heintz, Boscia & Vician of Merrillville, Ind., which does consumer debt-collection work for credit card companies and several major automakers’ finance companies. Heintz added that he doubts very much that the safe harbor language violates ethical standards. “It’s simply, in my opinion, fairly informing a debtor of a debt collector’s intent to collect the debt during that 30-day period,” Heintz said of Posner’s advice in Bartlett. Rozanne M. Andersen, general counsel and senior vice president of legal and government affairs for Minneapolis-based ACA International, the Association of Credit and Collection Professionals, gives the 7th Circuit credit for having “really taken responsibility for trying to clarify ambiguous areas of the FDCPA.” She said further that problems critics ascribe to the court are more the fault of ambiguities in the statute. “We’re very pleased with many of the decisions coming out of the 7th Circuit, clarifying a number of things such as offers of settlement and validation notices, and the opinions have shed light on a number of issues,” even if they are not “the be all and end all” because they are nonbinding beyond the 7th Circuit, Andersen said. The 7th Circuit, based in Chicago, covers Illinois, Indiana and Wisconsin. PLAINTIFFS’ COUNTRY A factor contributing to the busy FDCPA docket in Chicago is the number of consumer plaintiffs’ firms based there, Andersen said. Newburger, of Texas consumer protection firm Barron & Newburger, agreed. “There are multiple first-rate plaintiff consumer class action firms all officing in the Chicago area,” Newburger said. “There are more quality law firms on the plaintiff side, therefore more cases get filed there,” he said. “This isn’t forum-shopping: It’s easy to find a lawyer who represents consumers in class action cases, and there’s no shortage of debtors, therefore there’s no shortage of cases,” he added. Also, the ambiguities in the statute and its provision for actual and statutory damages and attorney fees, have fostered a “cottage industry” of plaintiffs lawyers who “try to litigate the very, very technical aspects of the FDCPA,” Andersen said. Another factor driving the litigation is incorrect information concerning consumers’ and debt collectors’ rights posted on consumer Web sites, she said further. Consumers use this information “to retain a consumer lawyer to right the wrongs that have been done to them, though wrongs have not always occurred. So we see an increase in litigation,” she said. REQUESTS FOR CLARIFICATION The FTC’s 2005 annual report to Congress on the FDCPA released in July recommends eight “clarifications” of the act, which include a number of issues with which the courts have been grappling, including:
� Establishing a clarity standard for collectors’ notices to consumers. � Clarifying that debt collectors can continue collection activities during the 30-day dispute period. � Exempting attorneys who pursue debtors solely through litigation. � Allowing the commission to issue model debt-collection letters.

The report notes that the “commission has recommended proposals one through four in past annual reports.” “If you’re looking for a solution, let the FTC write the regulations,” Rubin said. “Let the technicians-lawyers and experts who really know this area of the law-write the regulations, not judges who are generalists,” he said.

AN ACTIVE 7TH CIRCUIT Key debtor-creditor rulings, and reaction:

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