The full case caption appears at the
end of this opinion. Posner, Chief Judge. This is a suit under theFair Debt Collection Practices Act, 15 U.S.C.sec.sec. 1692 et seq., against two related lawfirms engaged in debt collection. The plaintiff(the debtor) claims that the defendants violatedthe Act by failing to state “the amount of thedebt” in the dunning letter of which hecomplains. See sec. 1692g(a)(1). They reply thatthey did state the amount and that anyway theletter is outside the scope of the Act becausethey were trying to collect a business debtrather than a consumer debt, and the Act islimited to the collection of consumer debts. sec.1692a(5); First Gibraltar Bank, FSB v. Smith, 62F.3d 133 (5th Cir. 1995). The district courtgranted summary judgment for the defendants onthe latter ground, and let us start there. The plaintiff bought a house in Atlanta in 1992,and took out a mortgage. He lived in the houseuntil 1995, when he accepted a job in Chicago;from then on, he rented the house. He receivedthe dunning letter from one of the defendant lawfirms on behalf of the mortgagee in 1997. By thistime, renting the property to strangers, theplaintiff was making a business use of theproperty and so the mortgage loan was financing abusiness rather than a consumer debt. But theplaintiff argues that the relevant time fordetermining the nature of the debt is when thedebt first arises, not when collection effortsbegin. The defendants riposte that since the Actunder which the plaintiff is suing, unlike theTruth in Lending Act, governs debt collection,the relevant time is when the attempt atcollection is made. Oddly, there are no reportedappellate decisions on the issue, though it wasassumed in Bloom v. I.C. System, Inc., 972 F.2d1067, 1068-69 (9th Cir. 1992), that the relevanttime is when the loan is made, not whencollection is attempted. The language of the statute favors thisinterpretation. “Debt” is defined as “anyobligation or alleged obligation of a consumer topay money arising out of a transaction in whichthe money, property, insurance, or services whichare the subject of the transaction are primarilyfor personal, family, or household purposes.”sec. 1692a(5). The defendants don’t deny that theplaintiff is a “consumer,” even though he is inthe “business” of renting his house (they can’tdeny this, because “the term ‘consumer’ means anynatural person obligated or allegedly obligatedto pay any debt,” sec. 1692a(3)), and theantecedent of the first “which” in the clause “inwhich the money, property, insurance, or serviceswhich are the subject of the transaction areprimarily for personal, family, or householdpurposes” is, as a matter of grammar anyway, thetransaction out of which the obligation to repayarose, not the obligation itself; and thattransaction was the purchase of a house for apersonal use, namely living in it. Grammarneedn’t trump sense; the purpose of statutoryinterpretation is to make sense out of statutesnot written by grammarians. But we cannot saythat it is senseless to base the debt collector’sobligation on the character of the debt when itarose rather than when it is to be collected. Theoriginal creditor is more likely to know whetherthe debt was personal or commercial at itsincipience than either the creditor or the debtcollector is to know what current use the debtoris making of the loan (in this case, theplaintiff is using the loan, in effect, togenerate income from the house that secures theloan). Against this the defendants argue that theplaintiff’s interpretation creates a loophole.Suppose the plaintiff had bought the house to useas an office, and later converted it to personaluse; on the plaintiff’s interpretation of the Actthe debt collector would not have to give him thestatutory warnings. But this makes perfect sense.The Act regulates the debt collection tacticsemployed against personal borrowers on the theorythat they are likely to be unsophisticated aboutdebt collection and thus prey to unscrupulouscollection methods. See S. Rep. No. 382, 95thCong., 1st Sess. 2 (1977); Keele v. Wexler, 149F.3d 589, 594 (7th Cir. 1998); McCartney v. FirstCity Bank, 970 F.2d 45, 47 (5th Cir. 1992).Businessmen don’t need the warnings. Abusinessman who converts a business purchase topersonal use does not by virtue of thatconversion lose his commercial sophistication andso acquire a need for statutory protection. Andwe agree with the plaintiff’s concession that ifa borrower for a personal use were to assign theloan that financed that use to a business, thedebt would then arise out of the assignment,rather than out of the original loan, and so theAct would be inapplicable–rightly so since therecipient of the dunning letter would be abusinessman, not a consumer. So the Act is applicable and we move to thequestion whether the defendants violated thestatutory duty to state the amount of the loan.15 U.S.C. sec. 1692g(a)(1). The dunning lettersaid that the “unpaid principal balance” of theloan (emphasis added) was $178,844.65, but addedthat “this amount does not include accrued butunpaid interest, unpaid late charges, escrowadvances or other charges for preservation andprotection of the lender’s interest in theproperty, as authorized by your loan agreement.The amount to reinstate or pay off your loanchanges daily. You may call our office forcomplete reinstatement and payoff figures.” An800 number is given. The statement does not comply with the Act(again we can find no case on the question). Theunpaid principal balance is not the debt; it isonly a part of the debt; the Act requiresstatement of the debt. The requirement is notsatisfied by listing a phone number. It isnotorious that trying to get through to an 800number is often a vexing and protractedundertaking, and anyway, unless the number isrecorded, to authorize debt collectors to complyorally would be an invitation to just the sort offraudulent and coercive tactics in debtcollection that the Act aimed (rightly orwrongly) to put an end to. It is no excuse thatit was “impossible” for the defendants to complywhen as in this case the amount of the debtchanges daily. What would or might be impossiblefor the defendants to do would be to determinewhat the amount of the debt might be at somefuture date if for example the interest rate inthe loan agreement was variable. What theycertainly could do was to state the total amountdue–interest and other charges as well asprincipal–on the date the dunning letter wassent. We think the statute required this. In a previous case, in an effort to minimizelitigation under the debt collection statute, wefashioned a “safe harbor” formula for complyingwith another provision of the statute. Bartlettv. Heibl, 128 F.3d 497, 501-02 (7th Cir. 1997);see also Herzberger v. Standard Ins. Co., 205F.3d 327, 331 (7th Cir. 2000). We think it usefulto do the same thing for the “amount of debt”provision. We hold that the following statementsatisfies the debt collector’s duty to state theamount of the debt in cases like this where theamount varies from day to day: “As of the date ofthis letter, you owe $___ [the exact amount due].Because of interest, late charges, and othercharges that may vary from day to day, the amountdue on the day you pay may be greater. Hence, ifyou pay the amount shown above, an adjustment maybe necessary after we receive your check, inwhich event we will inform you before depositingthe check for collection. For furtherinformation, write the undersigned or call 1-800-[phone number].” A debt collector who uses thisform will not violate the “amount of the debt”provision, provided, of course, that theinformation he furnishes is accurate and he doesnot obscure it by adding confusing otherinformation (or misinformation). E.g., Marshall-Mosby v. Corporate Receivables, Inc., 205 F.3d323, 326 (7th Cir. 2000); Bartlett v. Heibl,supra, 128 F.3d at 500. Of course we do not holdthat a debt collector must use this form of wordsto avoid violating the statute; but if he does,and (to repeat an essential qualification) doesnot add other words that confuse the message, hewill as a matter of law have discharged his dutyto state clearly the amount due. No reasonableperson could conclude that the statement that wehave drafted does not inform the debtor of theamount due. Cf. Walker v. National Recovery,Inc., 200 F.3d 500, 503 (7th Cir. 1999). It remains to consider the independent argumentof one of the two defendant law firms that it isnot a “debt collector” within the meaning of thestatute. See sec. 1692a(6). The firm that sentthe dunning letter to the plaintiff is McCalla,Raymer, Padrick, Cobb, Nichols & Clark, L.L.C.,and the other firm is Echevarria, McCalla,Raymer, Barrett & Frappier. The first firm, theMcCalla firm we’ll call it, is a partner in theEchevarria firm. (The purpose of this unusualarrangement, presumably, is to preserve theMcCalla firm’s limited liability, but the partiesdo not discuss the purpose and it is notmaterial.) The Echevarria firm argues that itshould not be liable for its partner’s statutoryviolation, analogizing its relation to itspartner as one of affiliated corporations andpointing to the rule that, save in exceptionalcircumstances not demonstrated here, oneaffiliated corporation is not liable for thedebts of the other, e.g., Papa v. KatyIndustries, Inc., 166 F.3d 937 (7th Cir. 1999)–aprinciple applicable to suits under the Fair DebtCollection Practices Act. Pettit v. RetrievalMasters Creditors Bureau, Inc., No. 99-1797, 2000WL 558945, at *1 (7th Cir. May 9, 2000); White v.Goodman, 200 F.3d 1016, 1019 (7th Cir. 2000);Aubert v. American General Finance, Inc., 137F.3d 976, 979-80 (7th Cir. 1998). The flaw isthat partners, unlike corporations, do not enjoylimited liability. The liability of a partnershipis imputed to the partners, and so the plaintiffwas entitled to sue the partners as well as thepartnership. Bartlett v. Heibl, supra, 128 F.3dat 499-500; Fla. Stat. sec. 620.8305(1) (theEchevarria firm is a Florida partnership). The judgment in favor of the defendants isreversed and the case is remanded to the districtcourt for further proceedings consistent withthis opinion. Reversed and Remanded.
Miller v. McCalla, Raymer, Padrick, Cobb, Nichols, and Clark, L.L.C. In the United States Court of Appeals for the Seventh Circuit Kevin Miller, Plaintiff-Appellant, v. McCalla, Raymer, Padrick, Cobb, Nichols, and Clark, L.L.C., and Echevarria, McCalla, Raymer, Barrett, and Frappier, Defendants-Appellees. No. 99-3263 Appeal from the United States District Court for the Northern District of Illinois, Eastern Division. No. 98 C 5563–Elaine E. Bucklo, Judge. Argued: March 31, 2000 Decided: June 5, 2000 Before: Posner, Chief Judge, and Ripple and Rovner, Circuit Judges.
