In Lox v. CDA, Ltd., — F.3d —-, 2012 WL 3124781 (7th Cir. 2012), the Court of Appeals for the Seventh Circuit found that extrinsic evidence was not required to demonstrate material falsity of a collection letter that stated that a consumer “may” have to pay attorneys’ fees, when there was neither a statutory nor contractual basis for recovery of such fees.
Contrary to some other circuits, see, e.g., Gonzales v. Arrow Fin. Servs., LLC, 660 F.3d 1055, 1061 n. 3 (9th Cir.2011), we treat the question of whether an unsophisticated consumer would find certain debt collection language misleading as a question of fact. See Walker v. Nat’l Recovery, Inc., 200 F.3d 500, 503 (7th Cir.1999). As an outgrowth of this practice, we have determined that there are three categories of § 1692e cases. Ruth, 577 F.3d at 800. The first category includes cases in which the allegedly offensive language is plainly and clearly not misleading. Id. In cases of this nature, no extrinsic evidence is needed to show that the reasonable unsophisticated consumer would not be confused by the pertinent language. Id. The second category of cases includes debt collection language that is not misleading or confusing on its face, but has the potential to be misleading to the unsophisticated consumer. Id. If a case falls into this category, “we have held that plaintiffs 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.” Id. The final category includes cases involving letters that are plainly deceptive or misleading, and therefore do not require any extrinsic evidence in order for the plaintiff to be successful. Id. at 801. ¶  Thus, to succeed on this appeal, Lox must convince us that CDA’s statement regarding attorney fees is not only false, but would mislead the unsophisticated consumer.
The Court of Appeals found materially deceptive collection letters that stated that a consumer “may” have to pay attorneys’ fees, when there was neither a statutory nor contractual basis for recovery of such fees. The Court of Appeals found that
Ruth and Gonzales establish that it is improper under the FDCPA to imply that certain outcomes might befall a delinquent debtor when, legally, those outcomes cannot come to pass. See Ruth, 577 F.3d at 801; Gonzales, 660 F.3d at 1063. We have that situation here, since there is only one reasonable interpretation of CDA’s attorney fees language: that a lawsuit is a possible outcome of nonpayment, and that attorney fees are a possible outcome of a lawsuit. As explained above, the latter part of this proposition is false. While it is true that the unsophisticated consumer has a “rudimentary knowledge about the financial world,” Wahl, 556 F.3d at 645, we do not presume that the same consumer has knowledge of relevant legal precedent. Cf. Peters v. Gen. Serv. Bu-reau, Inc., 277 F.3d 1051, 1056 (8th Cir.2002) (“[A]n unsophisticated consumer cannot be expected to know the legal meanings of terms….”). The naive, trusting, unsophisticated consumer is therefore likely to believe a debt collector when it says that attorney fees are a potential consequence of nonpayment, and the language at issue is therefore misleading. . . For the reasons discussed, the statement at issue was not only false, but misleading. Further, the letter is misleading on its face, and extrinsic evidence is unnecessary. CDA baldly argues that the attorney fees statement is not plainly misleading, and thus extrinsic evidence is necessary to illustrate confusion. But assuming that attorney fees could not, under any circumstances, have been assessed against Lox in an action brought by CDA—which we must, since they did not argue otherwise—there is no question of interpretation remaining. To believe the letter was to believe a statement that, in reality, was false. The only question remaining would be whether the hypothet-ical, unsophisticated consumer is aware of the “American Rule,” and thus would disbelieve CDA’s assertion. This is not the type of legal knowledge we can presume the general public has at its disposal. We therefore find CDA’s language to be misleading on its face. . . .¶ CDA suggests that the statement at issue here, like the statements in Donahue and Hahn, was immaterial, since no additional amount of debt was reported, and thus Lox would not have taken a different course of action if the attorney fees statement were absent from the dunning letters. We disagree. In Hahn and Donahue, the alleged false statements did not, and could not, have any effect on the amount of debt owed by the plaintiff, regardless of when plaintiff decided to pay off the debt. Here, Lox would not have had to pay any additional money if he paid his debt immediately upon receipt of the dunning letters, but if CDA’s statement regarding attorney fees were accurate, a decision to contest the debt could have turned out to be much more costly. Whether or not this fact would have led Lox to alter his course of action, it would have undoubtedly been a factor in his decision-making process, and very well could have led to a decision to pay a debt that he would have preferred to contest. The false statement was therefore material.