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Fair Debt Collection Practices Act “Safe Harbor” Turns Rocky for Debt Collectors

Norman D. Farnam

February 12, 2018

As most businesses know, getting paid can sometimes be difficult and time consuming.  Unfortunately, in certain cases trying to collect on an outstanding debt can also be risky. The U.S. Seventh Circuit Court of Appeals (covering Illinois, Indiana and Wisconsin) recently ruled that a debt collector who used the Seventh Circuit’s recommended safe harbor language in its dunning letter to a debtor violated the Fair Debt Collection Practices Act.  In Boucher v. Finance System of Green Bay, the Court determined that the debt collector’s use of the safe harbor language was deceptive when applied to the facts of the case.  The dunning letter stated that the debtor might owe “late charges and other charges” when, in fact, the debt collector could not impose such charges.  Therefore, the Court concluded that the debt collector was not entitled to safe harbor.

The Fair Debt Collection Practices Act (FDCPA) was born out of abusive collection practices.  Debt collectors have long sent debtors written demands to pay their debts, called dunning letters.  Dunning letters were often aggressive, intimidating and sometime contained materially false statements to induce the debtors to pay their debts.  Dunning letters might threaten debtors with dire consequences if they fail to pay their debt, even if those consequences were not possible under the law.  The FDCPA places limitations on the collection process, including the communications that debt collectors have with debtors.  For instance, the FDCPA requires that debt collectors send debtors a written notice stating the “amount of the debt.”  The written notice needs to be accurate and cannot be “false, deceptive, or misleading” in such a way that it would confuse or mislead an unsophisticated consumer.

Although the FDCPA attempts to establish rules for debt collectors, the devil is in the details and the FDCPA has proven difficult for debt collectors to interrupt and implement in practice.  In particular, debt collectors have struggled to ensure that their dunning letters comply with the FDCPA’s requirement that the amount of the debt be identified in cases where the amount of the debt changes over time.  This confusion has resulted in significant litigation.  Recognizing the problem, in 2000 the Seventh Circuit took the unusual step of drafting specific language for debt collectors to use in their dunning letters.  This “safe harbor” language advises debtors that:

As of the date of this letter, you owe $[the exact amount due]. Because of interest, late charges, and other charges that may vary from day to day, the amount due on the day you pay may be greater. Hence, if you pay the amount shown above, an adjustment may be necessary after we receive your check, in which event we will inform you before depositing the check for collection. For further information, write the undersigned or call 1-800-[phone number].

Debt collectors came to believe that the use of this language would satisfy the requirement that the amount of the debt be identified and that their dunning letters would not be “false, deceptive or misleading.”  Debt collectors were not technically required to use the Seventh Circuit language, but the language was widely adopted verbatim by debt collectors both in the Seventh Circuit and nationwide.

In recent years, the scope of the safe harbor has been questioned by some courts.  In Boucher, the Court that authored the safe harbor language has made it clear that the safe harbor is not completely safe.  In that case, the debt collector used the Seventh Circuit’s safe harbor language thinking that by simply using the language it was immune from liability under the FDCPA.  The Court disagreed, stating that a debt collector cannot “copy and paste” the safe harbor language.  The Court explained that use of the safe harbor language created by the Court is not the same thing as complying with the FDCPA.  The language used must be tailored to the facts of the case.  “A debt collector is only entitled to safe harbor protection if the information he furnishes is accurate and he does not obscure it by adding confusing other information (or misinformation).”  Because the debt collector in the Boucher case used the safe harbor “late charges and other charges” language, despite the fact that late charges and other charges were not permitted by law, the Seventh Circuit determined that the debt collector failed to comply with the FDCPA.

The problem is that harbors are either safe or they’re not.  The Boucher case tells us that the Seventh Circuit’s safe harbor language is not a panacea, but is only the beginning of the inquiry.  The debt collector must match the recommended language to the facts of the case and tailor the language accordingly.  Of course, once the safe harbor language has been altered, the debt collector can no longer be confident that courts will treat the language as a safe harbor.  Failing to tailor the language when required by the facts, likewise, takes away the safe harbor.

After Boucher, debt collectors are left to ponder whether the Seventh Circuit’s safe harbor language really provides any safety at all.  At the minimum, it will no longer be enough to simply use the language verbatim in every dunning letter.  The debt collector will need to review the details of each debt and determine whether the Seventh Circuit’s language needs to be adjusted.  Moreover, without a safe harbor, debt collectors should anticipate more claims that they have violated the FDCPA.


If you have any questions about how the information in this article may affect you or your business, please contact Norm Farnam at nfarnam@stroudlaw.com or (608) 257-2281 or your Stroud attorney.

 DISCLAIMER: The information in this article is provided for general informational purposes only, is not necessarily updated to account for changes in the law, and should not be considered tax or legal advice.  This article is not intended to create, nor does the receipt of it constitute, an attorney-client relationship.  You should consult with your own legal and/or financial advisors for legal and tax advice tailored to your specific circumstances.