RHODES v. ENHANCED RECOVERY COMPANY, LLC

UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF INDIANA

INDIANAPOLIS DIVISION

PAULA RHODES, )

)

Plaintiff, )

)

v. ) No. 1:17-cv-04297-SEB-TAB

)

ENHANCED RECOVERY )

COMPANY, LLC, )

)

Defendant. )

ORDER ON CROSS-MOTIONS FOR SUMMARY JUDGMENT

Plaintiff Paula Rhodes brings this action on behalf of herself and

those similarly situated1 against Defendant Enhanced Recovery

Company, LLC ("Enhanced Recovery"), alleging that Enhanced

Recovery violated various provisions of the Fair Debt Collection

Practices Act ("FDCPA"), 15 U.S.C. § 1692, et seq., through the sending

of a form debt collection letter that failed to properly identify the

original creditor as well as the creditor to whom the debt was then owed.

1 A class was certified in this case on October 19, 2018.

This cause is now before the Court on the parties' cross motions for

summary judgment [Dkt. Nos. 89 and 91], both filed on September 30,

2019.2 For the reasons detailed below, the parties' cross-motions are

GRANTED IN PART and DENIED IN PART.

Factual Background

Over ten years ago, Ms. Rhodes opened a Kohl's Department Store

("Kohl's") credit card account in order to purchase consumer goods. The

credit card billing statements Ms. Rhodes received in connection with

the Kohl's card displayed the Kohl's logo at the top of the page, referred

to the account as the "Kohl's Charge" and, on the first page of the billing

statement, directed the cardholder to make payments either on

Kohls.com or by mailing a check payable to Kohl's to Kohl's Payment

Center. The reverse side of the billing statements informed the

consumer that the Kohl's credit card account "is issued by Capital One,

N.A. and is governed by the Cardmember Agreement" and that Capital

One is the entity to which disputes should be addressed. Dkt. 97-1. Ms.

2 On April 22, 2020, Plaintiff filed a Motion for Leave to File Supplemental Authority in Support

of Motion for Summary Judgment [Dkt. 108]. Defendant did not respond to Plaintiff's motion.

Accordingly, that motion is hereby GRANTED.

Rhodes testified that "[o]ne time [she] saw Chase on the bill …," but it is

not clear when she saw that reference or in which communication it

appeared. Rhodes Dep. at 17.

Ms. Rhodes at some point stopped paying on her Kohl's credit card

account debt. She received a letter on Kohl's letterhead dated March 7,

2017, stating that Kohl's agreed to settle the "Kohl's Credit Card

Account issued by Capital One Bank, N.A." with a balance of $742.35.

Dkt. 92-3. The letter directed Ms. Rhodes to call Kohl's to make a

payment or to send a check or money order (payable to Kohl's) to

"Kohl's Department Stores Inc., Attn: Collection Support, N54 W13600

Woodale Dr., Menomonee Falls, WI 53051." Id.

Defendant Enhanced Recovery, a company in the business of

servicing debts on behalf of its clients, was retained by Kohl's to collect

Ms. Rhodes's debt. On June 28, 2017, Enhanced Recovery sent Ms.

Rhodes a collection letter which included the following information:

Creditor: Kohl's Department Store, Inc.

Original Creditor: Chase Bank USA N.A.

Re: Your Kohl's Credit Card Account: XXXXXXXX4452

Amount of Debt: $519.36

Reference Number: ******802

Settlement Amount: $259.68

Dkt. 90-1. The letter provided as follows: "Our records indicate that

your balance with Kohl's Department Stores, Inc. remains unpaid;

therefore[,] your account has been placed with [Enhanced Recovery] for

collection efforts. We are willing to reduce your outstanding balance by

offering a discounted payoff amount of $259.68." Id.

It is undisputed that, at the time Enhanced Recovery sent this

letter, Capital One was the financial backer and issuer of the Kohl's

credit card. Ms. Rhodes claims that it was therefore Capital One, not

Kohl's, who was the creditor to whom the debt was owed. Although

Kohl's had allegedly informed Enhanced Recovery that Capital One

should have been identified in some manner in the collections letter, due

to an alleged "mapping error," this information was not included in the

letters sent to Ms. Rhodes and the other class members. It is not clear

how this mapping error occurred.

At her deposition, Ms. Rhodes testified that she was confused and

upset by the debt collection letter she received from Enhanced Recovery.

Specifically, she testified that when she applied for the Kohl's credit

card, she believed that she had applied with Capital One, but then

received a letter referencing Chase as the original creditor. According to

Ms. Rhodes, she "wasn't really sure what was going on" and was

"overwhelmed with all of this." Rhodes Dep. at 32–33, 41, 43, 51.

Following receipt of the collection letter from Enhanced Recovery,

Ms. Rhodes received a second letter on Kohl's letterhead, dated July 30,

2017, referencing her "Kohl's Credit Card Account issued by Capital

One Bank, N.A." and informing Ms. Rhodes that a payment she had

scheduled had been declined. Dkt. 92-14. That letter directed Ms.

Rhodes to contact Kohl's at the number provided or to visit "My Kohl's

Charge" to reschedule the payment(s). Id. She was instructed to make

her check or money order payable to Kohl's, to include her Kohl's

account number on the check or money order, and to mail the payment

to "Kohl's Payment Center, P.O. Box 2983, Milwaukee, WI 53201-

2983." Id. The letter is signed by Kohl's Customer Service and

Operation Center.

Ms. Rhodes filed the instant action on behalf of herself and those

similarly situated on November 16, 2017, alleging that Enhanced

Recovery violated §§ 1692e, 1692g, and 1692f of the FDCPA through

the form debt collection letter it sent by misidentifying the original and

current creditors. A class was certified in this action on October 19,

2018 of all 509 persons in the State of Indiana who received a form debt

collection letter similar to the letter Enhanced Recovery sent to Ms.

Rhodes at any time between November 16, 2016 to the present. Dkt. 60;

Dkt. 84-1. On September 30, 2019, the parties filed cross-motions for

summary judgment which are now before the Court for decision.

Legal Analysis

I. Summary Judgment Standard

Summary judgment is appropriate where there are no genuine

disputes of material fact and the movant is entitled to judgment as a

matter of law. Fed. R. Civ. P. 56(a); Celotex Corp. v. Catrett, 477 U.S.

317, 322–23 (1986). A court must grant a motion for summary

judgment if it appears that no reasonable trier of fact could find in favor

of the nonmovant on the basis of the designated admissible evidence.

Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247–48 (1986). We

neither weigh the evidence nor evaluate the credibility of witnesses, id.

at 255, but view the facts and the reasonable inferences flowing from

them in the light most favorable to the nonmovant. McConnell v.

McKillip, 573 F. Supp. 2d 1090, 1097 (S.D. Ind. 2008).

Because these are cross-motions for summary judgment and the

same Rule 56 standards apply, our review of the record requires us to

draw all inferences in favor of the party against whom a particular issue

in the motion under consideration is asserted. See O’Regan v.

Arbitration Forums, Inc., 246 F.3d 975, 983 (7th Cir. 2001) (citing

Hendricks-Robinson v. Excel Corp., 154 F.3d 685, 692 (7th Cir. 1998)).

II. The FDCPA

The FDCPA aims at remedying the use of “abusive, deceptive, and

unfair debt collection practices.” 15 U.S.C. § 1692(a). To prevail on a

claim under the FDCPA, a plaintiff must prove that he or she has been

the object of collection activity arising from a consumer debt, that the

defendant is a debt collector as defined by the statute, and that the

defendant has engaged in an act or omission that the FDCPA prohibits.

See 15 U.S.C. § 1692.

As relevant in this case, the FDCPA requires that a debt collector,

within five days of its first communication with a consumer, provide the

consumer with a written notice containing, among other information,

"the name of the creditor to whom the debt is owed." 15 U.S.C. §

1692g(a)(2). In addition, the FDCPA forbids debt collectors from

making “false, deceptive, or misleading representation[s],” 15 U.S.C. §

1692e, or from using "unfair or unconscionable means to collect or

attempt to collect any debt," 15 U.S.C. § 1692f.

In determining whether the contents of a debt collector’s

communication with a debtor are “false or misleading,” the Seventh

Circuit has directed district courts to view the communication from the

point of view of an “unsophisticated consumer”—one who is

“uninformed, naive, or trusting,” albeit not a “dimwit.” Wahl v. Midland

Credit Mgmt. Inc., 556 F.3d 643, 645 (7th Cir. 2009) (“The

‘unsophisticated consumer’ isn't a dimwit. She may be ‘uninformed,

naive, [and] trusting,’ but she has ‘rudimentary knowledge about the

financial world’ and is 'capable of making basic logical deductions and

inferences.”) (citations omitted). A plaintiff cannot successfully plead a

violation of § 1692e, however, simply by pointing to some formal, but

immaterial mistake in the debt collector’s form of communication. “A

statement cannot mislead unless it is material, so a false but non-material

statement is not actionable.” Hahn v. Triumph P’ships LLC, 557 F.3d

755, 758 (7th Cir. 2009).

How a particular notice affects its intended audience “is a question

of fact.” See Walker v. Nat’l Recovery, Inc., 200 F.3d 500, 501 (7th Cir.

1999); Headen v. Asset Acceptance, LLC, 383 F. Supp. 2d 1097, 1102

(S.D. Ind. 2005). Where the language of a challenged communication is

"plainly and clearly not misleading," extrinsic evidence is not needed "to

show that the debt collector ought to prevail in such cases." Janetos v.

Fulton Friedman & Gullace, LLP, 825 F.3d 317, 322–23 (7th Cir.

2016). Likewise, in cases in which the challenged language is "plainly

deceptive or misleading," extrinsic evidence is not required "for the

plaintiff to prevail." Id. at 323. However, in cases in which "debt

collection language … is not misleading or confusing on its face, but has

the potential to be misleading to the unsophisticated consumer," the

plaintiff may prevail "only by producing extrinsic evidence, such as

consumer surveys, to prove that unsophisticated consumers do in fact

find the challenged statements misleading or deceptive." Lox v. CDA,

Ltd., 689 F.3d 818, 822 (7th Cir. 2012).

III. Discussion

A. § 1692g(a)(2)

We turn first to address Plaintiffs' claim that Enhanced Recovery's

debt collection notice violated § 1692g(a)(2), which, as discussed above,

requires a debt collector to include "the name of the creditor to whom

the debt is owed" in its initial communication to the debtor or in a

written notice within five days of the first communication. 15 U.S.C. §

1692g(a)(2). Here, Enhanced Recovery's initial communication

identified "Kohl's Department Store, Inc." as the "creditor" and "Chase

Bank USA N.A." as the "original creditor," but did not reference Capital

One anywhere in the letter. Plaintiffs claim that Enhanced Recovery's

failure to identify Capital One as the creditor to whom the debt was

owed violated § 1692g(a)(2)'s disclosure requirements. Enhanced

Recovery rejoins that, because Kohl's is in fact a "creditor" as defined by

the FDCPA and is also the trade name the unsophisticated debtor would

associate with their debt, its initial communication to Plaintiffs

identifying the creditor as Kohl's did not violate § 1692g(a)(2).

In support of its argument, Enhanced Recovery relies heavily on

the analysis of the District Court for the Eastern District of New York in

Bryan v. Credit Control, LLC, No. 18-cv-0865 (SJF)(SIL), 2018 WL

6520730 (E.D.N.Y. Dec. 11, 2018). In Bryan, the defendant debt

collector listed Kohl's as its "client" and Chase Bank as the "original

creditor" but did not reference Capital One, the current creditor,

anywhere in its communication. There, as here, the plaintiffs claimed

that the defendant's failure to list Capital One as the creditor violated

§§ 1692g(a)(2) and 1692e of the FDCPA. In granting the defendant's

motion for judgment on the pleadings, the district court held that Kohl's

qualified as a creditor under the FDCPA because it was the entity

offering credit accounts to its customers, facilitating the incurrence of

monetary obligations through transactions by consumers exclusively at

its stores, and collecting the resulting monies owed. 2018 WL 6520730,

at *4. The district court reasoned that the unsophisticated debtor would

not be concerned with the identity of the technical owner of the debt as

they might never had interacted with Capital One in connection with

their Kohl's credit card but would obviously be familiar with Kohl's and

would understand the communication to be an attempt to collect the debt

incurred using the Kohl's charge. The district court concluded that the

collection letter's reference to Kohl's as the defendant's "client" therefore

complied with the Act's required inclusion of "the name of the creditor

to whom the debt is owed." Id. at *4–*5.

However, the Second Circuit Court of Appeals recently overturned

the Eastern District of New York's decision in Bryan, holding that "the

mere fact that Kohl's participated in the credit card program with Capital

One and played an active role in the servicing of accounts does not

necessarily convert Kohl's into a creditor, and certainly not into the

creditor to whom the debt is owed." Bryan v. Credit Control, LLC, 954

F.3d 576, 581 (2d Cir. 2020). That entity, according to the Second

Circuit, was Capital One, as the Kohl's Cardmember Agreement

identified Capital One as "the creditor and issuer of the Account," and

provided that Kohl's was only "an 'agent' responsible for 'servicing [the]

Account on [Capital One's] behalf.'" Id. Because "the collection letter

did not identify Capital One at all," the Second Circuit held that "it did

not comply with Section 1692g." Id.

We find the reasoning of the Second Circuit persuasive here. The

FDCPA required Enhanced Recovery's letter to identify the "creditor to

whom the debt is owed" in a manner "clear[] enough that the recipient

would likely understand it." Janetos, 825 F.3d at 321. Even if Kohl's

could be considered a creditor under the FDCPA, it is clearly not the

"creditor to whom the debt is owed," despite its role as servicer of the

account. See Dkt. 97-1 ("If you think there is an error on your

statement, write to Capital One, N.A. through our servicer at: Kohl's

…."). Rather, the undisputed evidence makes clear that Capital One, the

issuer and financial backer of the Kohl's account, is the creditor. It is

undisputed that Capital One is not referenced anywhere in Enhanced

Recovery's letter. Thus, on its face, the letter failed to disclose the

information required by § 1692g(a)(2).3

Extrinsic evidence of confusion "is not necessary here, where §

1692g(a)(2) requires a particular disclosure—the name of the current

creditor—and defendant['s] letter[] simply fail[s] to provide it, directly

or indirectly." Janetos, 825 F.3d at 323. "Section 1692g(a) also does

not have an additional materiality requirement, express or implied." Id.

at 319. Accordingly, because the undisputed facts before us establish

that Enhanced Recovery's letter to Plaintiffs violated § 1692g(a)(2) by

3 Enhanced Recovery argues that the Seventh Circuit's ruling in Smith v. Simm Associates, Inc.,

926 F.3d 377 (7th Cir. 2019), supports a finding that it complied with § 1692g(a)(2) by naming

Kohl's as the creditor. In Smith, the communication at issue identified PayPal as the "client" and

listed the actual creditor, Comenity Capital Bank, as the "original creditor." In affirming

summary judgment in favor of the debt collector defendants, the Seventh Circuit held that §

1692g(a)(2) does not require the use of any specific terminology when identifying the creditor,

and thus, the fact that Comenity Capital Bank was listed as the "original creditor" rather than the

"current creditor," as the plaintiffs argued it should have been identified, was not violative of the

FDCPA, particularly since it was the only creditor listed in the communication and the letter also

disclosed the commercial name of PayPal (importantly, as the "client" not as the "creditor"),

which the consumer would be more likely to recognize. However, unlike the communication in

Smith, the letter at issue here does not reference the actual creditor, Capital One, in any fashion,

but instead identifies two other entities as "creditors," neither of which is the current owner of the

debt. The fact that Kohl's—the commercial name with which consumers would likely be most

familiar—is one of the entities identified as a creditor in the letter does not cure Enhanced

Recovery's failure to provide the name of the actual creditor to whom the debt is owed as

required by § 1692g(a)(2). The remaining cases cited by Enhanced Recovery in support of its

position are either similarly distinguishable or are not binding on this court.

failing to identify the creditor to whom the debt is owed, Plaintiffs are

entitled to summary judgment as to liability under that provision.

B. §§ 1692e and 1692f

Plaintiffs also claim that Enhanced Recovery's failure to identify

Capital One as the creditor in its collection letter and instead listing

Kohl's as the "creditor" and Chase as the "original creditor" constituted a

"false, deceptive, or misleading representation … in connection with the

collection of any debt," in violation of § 1692e, and a "fair or

unconscionable means to collect or attempt to collect any debt," in

violation of § 1692f. Because Plaintiffs' § 1692e and § 1692f claims rest

on the same premise, to wit, that Enhanced Recovery's letter was false or

misleading and caused confusion regarding the entity to whom the debt

was owed and thus was also an unfair or conscionable means to collect

their debt, "the two succeed or fail together." Driver v. LJ Ross Assocs.,

Inc., No. 3:18-cv-00220-MPB-RLY, 2019 WL 4060098 (S.D. Ind. Aug.

28, 2019) (citing Wood v. Allied Interstate, LLC, 17 C 4921, 2018 WL

6830333, at *2 (N.D. Ill. Dec. 28, 2018)).

Under the FDCPA, a statement is not "false [or deceptive, or

misleading]" unless "it would confuse the unsophisticated consumer."

Wahl, 556 F.3d at 645–46. Thus, unlike their claim under § 1692g(a)(2),

to prevail on their § 1692e and § 1692f claims, Plaintiffs "must show

either that the text of the challenged letters 'plainly reveal that [they]

would be confusing to a significant fraction of the population,' or that

extrinsic evidence supports the claim of confusion." Simkus v. Cavalry

Portfolio Servs., LLC, 12 F. Supp. 3d 1103, 1110–11 (N.D. Ill. 2014)

(citing Durkin v. Equifax Check Servs., Inc., 406 F.3d 410, 415 (7th Cir.

2005)). Since Plaintiffs have not presented any extrinsic evidence of

confusion on summary judgment, they must show that Enhanced

Recovery's misidentification of the creditor "is plainly and clearly

misleading on its face, thus eliminating any need for evidence of its

deceptive nature." Lox, 689 F.3d at 822.

Here, despite having determined that Capital One is the "creditor to

whom the debt is owed," we are not persuaded that Enhanced Recovery's

failure to identify Capital One as the creditor was "plainly and clearly

misleading on its face" such that extrinsic evidence of confusion is

rendered unnecessary in this case. Given that the Plaintiffs' debts arose

from use of the Kohl's-branded credit card, the billing statements for the

account came from Kohl's, Kohl's name and logo were prominently

displayed on those statements, and the cardholder was instructed to

make payments either on Kohls.com or by mailing a check payable to

Kohl's to Kohl's Payment Center, Kohl's is no doubt the entity that the

unsophisticated consumer would most readily associate with their debt.

A cardholder who has purchased goods from Kohl's using their Kohl's-

branded credit card and then made payments to Kohl's for those

purchases may never have interacted with Capital One (or Chase, for

that matter) in connection with their Kohl's charge and is likely to be

unaware that the precise credit relationship with any entity other than

Kohl's. As recognized by the Second Circuit in Bryan, "it is far from

clear that [the debt collector's] failure to identify Capital One constituted

a materially misleading statement under Section 1692e—indeed it might

be argued that if [the debt collector] had identified Capital One and not

Kohl's, such an action 'likely would have caused confusion' …." 954

F.3d at 582.

This is not a case in which the debt collection language at issue is

on its face so plainly misleading that it would be considered confusing

by a significant fraction of the population.4 To the contrary, we find

that, while having the potential to mislead the unsophisticated consumer,

most consumers upon receiving Enhanced Recovery's letter would

understand the communication to be an attempt to collect the debt

incurred using their Kohl's credit card. Plaintiffs must therefore present

extrinsic evidence of consumer confusion to prevail on their claims

under §§ 1692e and 1692f, and, because they have not done so,

Enhanced Recovery is entitled to summary judgment on these claims.

IV. Conclusion

For the reasons detailed above, the parties' cross motions for

summary judgment are GRANTED IN PART and DENIED IN PART.

4 Plaintiffs cite to our prior decision in Green v. Monarch Recovery Management, Inc., No. 1:13-

cv-00418-SEB-MJD, 2015 WL 4599480 (S.D. Ind. July 29, 2015), for the proposition that a debt

collection letter which misidentifies the creditor is plainly misleading on its face. The facts in

Green are easily distinguishable from those presented here, however. In Green, due to an

inputting error, the collections letter at issue identified as the creditor an entity which had

absolutely no connection to the actual creditor or any relation to the debt, which we found would

undoubtedly be considered confusing by the unsophisticated consumer. Id. at *5. In this case,

Kohl's, while not the actual creditor, is the entity the unsophisticated consumer would most

readily connect with the debt and understand to be associated with their Kohl's credit card

account, making confusion less certain.

Plaintiffs’ Motion for Summary Judgment [Dkt. 89] is GRANTED as to

their claim brought pursuant to 15 U.S.C. § 1692g(a)(2) and DENIED as

to their 15 U.S.C. §§ 1692e and 1692f claims. Defendant's Motion for

Summary Judgment [Dkt. 91] is correspondingly DENIED as to

Plaintiffs’ § 1692g(a)(2) claim and GRANTED as to their §§ 1692e and

1692f claims.

IT IS SO ORDERED.

Date: 7/21/2020 Sy By Bu | ,

SARAH EVANS BARKER, JUDGE

United States District Court

Southern District of Indiana

19

Distribution:

Kari H. Halbrook

LEWIS BRISBOIS BISGAARD & SMITH LLP

kari.halbrook@lewisbrisbois.com

Benjamin Charles Hoffman

LEWIS BRISBOIS BISGAARD & SMITH LLP

ben.hoffman@lewisbrisbois.com

Larissa G. Nefulda

LEWIS BRISBOIS BISGAARD & SMITH LLP

larissa.nefulda@lewisbrisbois.com

Mary E. Philipps

PHILIPPS AND PHILIPPS, LTD.

mephilipps@aol.com

David J. Philipps

PHILIPPS AND PHILIPPS, LTD.

davephilipps@aol.com

Angie K. Robertson

PHILIPPS AND PHILIPPS, LTD.

angie@philippslegal.com

John Thomas Steinkamp

JOHN STEINKAMP & ASSOCIATES

John@johnsteinkampandassociates.com

Stephen H. Turner

LEWIS BRISBOI BISGAARD & SMITH LLP

stephen.turner@lewisbrisbois.com