In a Fair Debt Collection Practices Act class action, the Seventh U.S. Circuit Court of Appeals has ruled that a bill collector’s failure to correctly break down a bill into principal and interest does not violate that Act. Wahl v. Midland Credit Management, No. 08-1517 (7th Cir. Feb. 23, 2009) was a class action lawsuit alleging that debt collectors violate the FDCPA when they send out bills that state the correct total amount but break down the charges incorrectly.
Plaintiff Barbara Wahl had just $66.98 on a credit card when she sustained a stroke and racked up much larger medical bills during a time when she couldn’t work. The credit card went unpaid and eventually, the balance was $1,149.09, mostly in interest and late fees. Midland purchased the debt in January of 2005 and started sending demand letters to Wahl. The letter at issue arrived April 15, 2005, listing both the “current balance” and “amount due” at $1,160.57. On the back side, it listed the “principal” as $1,149.09 and the “accrued interest” as $11.48. This was followed by a similar letter listing a higher interest. The letters construed the “principal” as the total value of the debt Midland had bought, including interest accrued with the original creditor.
Wahl filed a proposed class-action lawsuit in federal court for the Northern District of Illinois. One of her two claims was that Midland had violated the FDCPA by incorrectly stating that the principal on her account was $1,149.09 rather than breaking down the original principal, the original interest and the new interest. Debt collectors are not required by law to break down charges, it said — but when they do, the law requires that the breakdown not contain false or misleading information. On cross-motions for summary judgment, the trial court ruled in favor of Midland. Wahl appealed.
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