Seventh Circuit Limits Application of State Consumer Act

The United States Court of Appeals for the Seventh Circuit granted summary judgment in favor of Home Depot in a case limiting the application of the Wisconsin Consumer Act. Plaintiffs had argued that Home Depot’s failure to remove a credit card charge of $9,761.64 on a Home Depot credit card issued by Citibank violated sections 427.104(1)(c), 427.104(1)(j), and 427.108 of the Act. The Court affirmed the lower court and ruled that the Act did not create a cause of action for the plaintiffs against Home Depot.

In 2002, plaintiffs applied for and received a Home Depot co-branded credit card issued by Citibank. The card could only be used for Home Depot purchases. Plaintiffs entered into an agreement with Dr. Lee Krahenbuhl such that Krahenbuhl would purchase the materials for and build a log cabin and plaintiffs’ company would resell the cabin. Krahenbuhl used his own Home Depot/Citibank credit card to purchase a log cabin package. These materials were delivered to and signed for by plaintiff or an authorized representative of their company. Plaintiffs and Krahenbuhl terminated their relationship and Krahenbuhl disputed the $9,761.64 charge on his account. Citibank investigated the charge and transferred the charge from Krahenbuhl to the plaintiffs’ Home Depot account. Plaintiffs claim that they did not become aware of the transferred charge until a year later. The balance accrued interest and eventually grew to approximately $21,000. Plaintiffs were unable to pay and their credit deteriorated.

Plaintiffs brought suit, alleging that Home Depot violated sections 427.104(1)(c), 427.104(1)(j), and 427.108 of the Act. Section 427.104(1)(c) of the Act prohibits a debt collector from threatening to enforce a right with knowledge or reason to know that the right does not exist. Section 427.104(1)(j) of the Act prohibits the disclosure of or the threat to disclose information adversely affecting the reputation for creditworthiness with the knowledge or reason to know that the information is false. Section 421.108 of the Act creates a general obligation of good faith in every agreement or duty involving a consumer credit transaction.

The Court stated that the “critical issue” of the case was “whether or not the [plaintiffs] presented sufficient evidence upon which a jury could conclude that Home Depot was acting to collect a debt.” It found that the statute “at a minimum” required some attempt by Home Depot to collect the debt. In this case, the Court found that Citibank, not Home Depot, was owed the debt. Although the credit card had Home Depot’s name on it, the Court found that Home Depot did not extend any credit to the plaintiffs and did not have an agency relationship with Citibank. Thus, a “reasonable jury could not conclude that Home Depot violated the Wisconsin Consumer Act.”