                             In the

    United States Court of Appeals
                For the Seventh Circuit
                    ____________________
No. 19-1296
MABEL L. HEREDIA,
                                              Plaintiff-Appellant,
                               v.

CAPITAL MANAGEMENT SERVICES, L.P.,
                                             Defendant-Appellee.
                    ____________________

       Appeal from the United States District Court for the
                   Eastern District of Wisconsin.
      No. 1:17-cv-00284-WCG — William C. Griesbach, Judge.
                    ____________________

 ARGUED SEPTEMBER 20, 2019 — DECIDED NOVEMBER 8, 2019
               ____________________

    Before WOOD, Chief Judge, and MANION and ROVNER, Cir-
cuit Judges.
    ROVNER, Circuit Judge. Capital Management Services, L.P.
(CMS) is a debt collector, and therefore regularly sends out
dunning letters to debtors hoping to collect past-due debts.
The Fair Debt Collection Practices Act (FDCPA) highly regu-
lates the content of those letters to prevent debt collectors
from using abusive practices that prey on vulnerable debtors.
See 15 U.S.C. § 1692(e). Mabel L. Heredia received four
2                                                   No. 19-1296

collection letters from CMS—and claims that the language in
this correspondence violated the FDCPA. CMS disagreed and
filed a motion to dismiss under Fed. R. Civ. P. 12(b)(6), which
the district court granted. Upon our de novo review (see
Marquez v. Weinstein, Pinson & Riley, P.S., 836 F.3d 808, 810
(7th Cir. 2016)), we find that Heredia has plausibly alleged
that the dunning letter violated the FDCPA. We therefore re-
verse the order dismissing the matter and remand to the dis-
trict court for further proceedings.
                                 I.
   Because this case comes before us on a motion to dismiss,
we must accept as true all well-pleaded factual allegations
and draw all reasonable inferences in favor of the plaintiff.
Marquez, 836 F.3d at 810. Generally, the question of whether a
disputed statement is false, deceptive, or misleading is a fact-
laden one and therefore a district court may not dismiss a
complaint unless the disputed statement is plainly, on its face,
not misleading or deceptive. Dunbar v. Kohn Law Firm, S.C.,
896 F.3d 762, 765 (7th Cir. 2018). In Marquez, we noted that:
       [I]n determining whether a statement is confus-
       ing or misleading, a district court must tread
       carefully because district judges are not good
       proxies for the ‘unsophisticated consumer’
       whose interest the statute protects. Accord-
       ingly, Rule 12(b)(6) dismissal on that issue is ap-
       propriate only if there is no set of facts con-
       sistent with the pleadings under which the
       plaintiffs could obtain relief.
No. 19-1296                                                   3

Marquez, 836 F.3d at 812 (internal citations omitted). With this
standard in mind, we turn to the specifics of this case.
                                 II.
    Like most debt collectors, CMS sends out form letters to
debtors hoping to convince them to pay what they owe on
their debt. But, of course, most debt collectors, in reality,
would be happy to receive any amount of money from a
debtor. This is so because, by the time a debt collector gets
involved in the collection process, many of the debts will be
unrecoverable. Although CMS sends form letters, it personal-
izes those letters, offering an individualized payment option,
and often multiple options, to debtors to clear their debt. For
example, CMS sent a letter to Heredia, dated November 11,
2016, which stated:
       In an effort to liquidate as many files as possible,
       we are making the following settlement offers:
       A.     29% reduction of your present balance
       to the amount of $1343.63, if paid in full on or
       before 11/30/2016. (A savings of: $548.80)

       B.     24% reduction of your present balance
       to the amount of $1438.25. The first payment of
       $719.13 or more is due on or before 11/30/2016.
       The second and final payment of $719.12 or
       more is due on or before 12/30/2016. (A savings
       of: $454.18)

       C.     19% reduction of your present balance
       to the amount of $1532.87. The first payment of
       $510.96 or more is due on or before 11/30/2016.
4                                                     No. 19-1296

       The second payment of $510.96 or more is due
       on or before 12/30/2016. The third and final
       payment of $510.95 or more is due on or before
       01/30/2017. (A savings of $359.56)
                                 ***
       Settling a debt for less than the balance owed
       may have tax consequences and Discover may
       file a 1099C form. We cannot provide you with
       tax advice. If you have any questions, Discover
       encourages you to consult a tax advisor of your
       choosing.
R. 32 at 25. CMS sent Heredia three other letters dated Octo-
ber 5, 2016, December 7, 2016, and January 5, 2017, but the
letter above is the most pivotal to the resolution of this matter,
as we will explain below.
   The language at the crux of this lawsuit is the part of the
sentence which contains the following six words: “Discover
may file a 1099C form.” (We will refer to this as the “1099C
Clause.”) That statement does not occur in a vacuum, but ra-
ther, it is the clause that follows on the heels of the one stating
that “[s]ettling a debt for less than the balance owed may have
tax consequences.” (We will refer to this as the “Tax Conse-
quences Clause.”) The question presented by this lawsuit is
whether the 1099C Clause violated the FDCPA.
    Heredia alleged that CMS violated sections 1692e and
1692f of the FDCPA. Language in a dunning letter violates
section 1692e of the FDCPA if the creditor used false, decep-
tive, or misleading representation or means in connection
with the collection of debt. 15 U.S.C. § 1692e(10). And under
section 1692f, a debt collector may not use unfair or
No. 19-1296                                                     5

unconscionable means to collect or attempt to collect any
debt. 15 U.S.C. § 1692f. The language of a collection letter can
be literally true and still be misleading in a way that violates
the Act. O'Boyle v. Real Time Resolutions, Inc., 910 F.3d 338, 344
(7th Cir. 2018). When evaluating “false, deceptive or mislead-
ing” or “unfair or unconscionable,” we view the disputed lan-
guage from the objective point of view of an “unsophisticated
debtor.” In this circuit we have had much to say about this
hypothetical unsophisticated debtor. Her knowledge is not as
great as that of a federal judge but is more than that of the
least sophisticated consumer. Pettit v. Retrieval Masters Credi-
tor Bureau, Inc., 211 F.3d 1057, 1060 (7th Cir. 2000). She is “un-
informed, naive, or trusting,” but at the same time “possesses
rudimentary knowledge about the financial world, is wise
enough to read collection notices with added care, possesses
‘reasonable intelligence,’ and is capable of making basic logi-
cal deductions and inferences.” Id. (internal citations omit-
ted). And although “our unwary debtor may tend to read col-
lection letters literally, he does not interpret them in a bizarre
or idiosyncratic fashion.” Id. “The Act protects the unsophis-
ticated debtor, but not the irrational one.” White v. Goodman,
200 F.3d 1016, 1020 (7th Cir. 2000).
    As is often the case, a good place to begin our legal analy-
sis is with that which is settled. Recently, in Dunbar, 896 F.3d
at 762, we evaluated a very similar tax consequences clause.
That clause stated, “NOTICE: This settlement may have tax
consequences.” Id. at 764. We held that this “tax-consequences
warning is literally true and not misleading under the objec-
tive ‘unsophisticated consumer’ test,” and thus did not violate
the FDCPA. Id. at 768. This was so even though the debtors at
issue in that particular case were insolvent and would not
have had to pay taxes on any discharged debt. Id. at 764. We
6                                                  No. 19-1296

noted that the word “may” does not mean “will,” and that
therefore the statement is true on its face. Id. at 765. We also
found that the clause was not misleading because, among
other reasons, an insolvent debtor can become solvent at any
moment and “a debt collector has no reason or way to know
whether an individual debtor is solvent or insolvent at a given
time.” Id. at 766. In other words, by saying “may” rather than
“will,” the debt collector described an accurate scenario. Set-
tlement may or may not have tax consequences depending on
the financial situation of the debtor, and that information is
only in the hands of the debtor herself, and not the debt col-
lector.
    Information about filing a 1099C form, on the other hand,
is information within the knowledge of the creditor. This
makes the 1099C Clause materially different than the tax con-
sequences clause at issue in Dunbar. Only the debtor knows
whether, given her financial situation as a whole, she will
have to pay taxes on the forgiven debt. The creditor, however,
knows whether it will have to file a 1099C form or not. The
Internal Revenue Service requires a creditor to file a 1099C
form if it has forgiven at least $600 in principal. 26 C.F.R. §
1.6050P-1(a) & (d)(2)–(3); 26 U.S.C. § 6050P. The creditor
knows for certain whether it is offering to forgive more or less
than $600 in principal. The debtor, on the other hand, may
have a difficult time determining how much she owes in prin-
cipal versus interest, as the dunning letter may not identify
the amount of each. This was certainly the case in CMS’s let-
ter. Although we know that Heredia owed a balance of
$1,892.43, even now as the case has wound its way to this
No. 19-1296                                                             7

court, we still do not have a clear statement about the amount
of principal that CMS was willing to forgive.1
    To summarize the law, it is permissible for a creditor to
make a “may” statement if there is any possibility that an
event might happen. Dunbar, 896 F.3d at 765 (“An unsophis-
ticated consumer would not understand the word ‘may’ to
mean ‘will.’”). And thus Dunbar holds that it is permissible for
a creditor to say, “Settling a debt for less than the balance
owed may have tax consequences.” Id. at 768.
    On the other hand, it is impermissible for a creditor to
make a “may” statement about something that is illegal or im-
possible. And so, for example, a creditor may not state that “a
court could allow … attorney fees” where the contract be-
tween the debtor and creditor did not provide for them. Lox
v. CDA, Ltd., 689 F.3d 818, 824, 826 (7th Cir. 2012). Nor may a
creditor state that late charges might apply when legally, they
could not. Boucher v. Fin. Sys. of Green Bay, Inc., 880 F.3d 362,
367 (7th Cir. 2018).
   Although it is not technically illegal or impossible for Dis-
cover to file a 1099C form with the IRS if the amount is under
$600, “a collection letter can be literally true” and still mis-
leading. Dunbar, 896 F.3d at 765. Heredia alleges, and the de-
fendants do not dispute, that Discover would never file a
1099C form with the IRS unless required to do so by law—

1 Because we do not know which portion of the offer was principal, we
cannot make a determination as to whether the December and January
letters also contained false, deceptive, or misleading statements. In De-
cember, CMS made a single offer to save Heredia $738.05 and in January,
the offer stated that she would save $927.29. We do not know if the amount
of principal forgiven in either case would have been $600 or more. This is
a matter for fact-finding on remand, if it becomes relevant.
8                                                             No. 19-1296

that is, unless it was forgiving $600 or more of principal. In
the case of the November 11, 2016 letter, Discover would
never file a 1099C form regardless of which settlement offer
Heredia accepted, because in no circumstances would Dis-
cover be forgiving at least $600 in principal (the amounts it
would be forgiving would be $548.80, $454.18, or $359.56 in
combined interest and principal, depending on which option
Heredia chose).2 In regard to the November 11 letter, there-
fore, Heredia could plausibly allege that it is, in fact, mislead-
ing to state that Discover may file a Form 1099C, when it never
would. And unlike the situation in Dunbar, the debt collector
has within its own knowledge all of the information it needs
in order to know whether such a form will or will not be re-
quired.
    In this case, CMS was sending out individualized form let-
ters with settlement offers tailored to each recipient’s debt. It
had both the knowledge (or at least the ability to acquire the
knowledge) and capability to include the 1099C Clause in sit-
uations in which it would be forgiving at least $600 in princi-
pal and to exclude the clause for less than $600. This was not
true in the Dunbar case, where the debt collector could not


2 The December 7, 2016 letter offered to settle Heredia’s debt for $1,154.38,

thus forgiving $738.05, and the January 5, 2017 letter offered to settle the
debt for $965.14, thus forgiving $927.29. CMS did not demarcate—either
in the letters themselves or in briefing—how much of this forgiveness was
principal and how much interest. Both of these letters also contained the
statement “Discover may file a 1099C form.” The complaint alleges that
the settlement offers in these third and fourth letters, although offering
total reductions over $600, did not reduce the amount of principal owed
by $600 or more. Whether the 1099C Clauses in these later letters were
misleading is a matter to be determined on remand, if necessary to the
resolution of the case.
No. 19-1296                                                      9

have known whether any particular debtor would have a tax
liability or not. The district court relied on the reasoning of the
Dunbar case without recognizing the material distinction be-
tween the Tax Consequences Clause and the 1099C Clause.
Heredia v. Capital Mgmt. Servs., L.P., No. 17-C-284, 2019 WL
288122, at *4 (E.D. Wis. Jan. 22, 2019); R. 43 at 9.
    Moreover, the language is misleading in a material way.
The reference to a report to the IRS may instill angst in the
unsophisticated debtor. The district court focused on whether
the 1099C Clause might cajole a debtor into paying more of
the debt to avoid the economic consequences of tax liability,
without considering the psychological coercion that a threat
to involve the IRS might have on such a consumer. See, e.g.
Schultz v. Midland Credit Mgmt., Inc., 905 F.3d 159, 162 (3d Cir.
2018) (agreeing with plaintiffs that by including the language
about reporting to the IRS, the debt collector presented a false
or misleading view of the law designed to intimidate the
plaintiffs into paying the outstanding debts).
    Our decision is in line with this recent decision of the
Third Circuit in Schultz. The collection letter at issue in that
case stated, “We will report forgiveness of debt as required by
IRS regulations. Reporting is not required every time a debt is
canceled or settled, and might not be required in your case.”
Id. at 161. The Schultz court held that such language, even with
the conditional statement that not all debt would be reported,
“presented a false or misleading view of the law—one de-
signed to scare or intimidate the [debtors] into paying the out-
standing debts listed on the debt collection letters even
though [the debt collector] knew that any discharge of the
[debtor’s] debt would not result in a report to the IRS.” Id. at
162. See also Foster v. AllianceOne Receivable Mgmt., Inc.,
10                                                    No. 19-1296

No. 15-cv-11108, 2016 WL 1719824, at *1, 2 (N.D.Ill. Apr. 28,
2016) (finding the “mention of the IRS in a situation where
there is no set of circumstances in which the IRS would be in-
volved could mislead ‘a person of modest education and lim-
ited commercial savvy,’” even where the dunning letter listed
the balance on the account as $718.96 and stated, “[p]lease be
advised that any settlement which waives $600.00 or more in
principal of a debt may be reported to the Internal Revenue
Service by our client.”); Good v. Nationwide Credit, Inc., 55
F. Supp. 3d 742, 744, 748–49 (E.D. Pa. 2014) (drawing all rea-
sonable inferences in favor of the plaintiffs and finding the
following language deceptive and misleading: “[The Credi-
tor] is required to file a form 1099C with the Internal Revenue
Service for any cancelled debt of $600 or more” where the
creditor offered to allow the plaintiff to settle his $613 debt for
$183.90). CMS does point to one district court opinion in
which the court found that a 1099C clause was not mislead-
ing, but in that case the dunning letter combined two pieces
of information—first, the amount of debt, which was clearly
under $600, and second the statement that “any settlement
write-off of $600 or more may be reported to the Internal Rev-
enue Service by our client.” Rhone v. AllianceOne Receivables
Mgmt., Inc., No. 1:14-CV-02034-JMS, 2015 WL 4758786, at *2
(S.D. Ind. Aug. 12, 2015). This type of letter arguably places
the knowledge back in the hands of the debtor by allowing
the debtor to determine, from the face of the letter, whether
the conditional reporting will or will not happen in that par-
ticular instance. Moreover, and importantly, we cannot make
any predictions about whether this court would find the
No. 19-1296                                                                  11

language at issue in any of these district court opinions mis-
leading in light of our currently evolving precedent.3
                                        III.
   For the reasons we discussed, applying the requisite pre-
sumptions in a motion to dismiss, here we cannot say that
“there is no set of facts consistent with the pleadings under
which [Heredia] could obtain relief.” Marqeuz, 836 F.3d at 812.
At least for the November 11 dunning letter, it is certain that
Discover would never file a 1099C form, as the amount of debt
CMS was proposing to discharge in each offer was less than
$600. Heredia has plausibly alleged that a statement that CMS
might file a 1099C form is misleading.
   Because these questions of whether particular statements
are deceptive or misleading, however, are almost always


3 The remainder of the cases that CMS lists as “similar,” in fact, are not
similar enough to have any bearing on this case, as they address the per-
missibility of a tax consequences clause (which we held in Dunbar was
permissible), rather than the permissibility of a 1099C clause. Taylor v. I.C.
Sys., Inc., No. 17 CV 00541, 2018 WL 3637354, at *1 (N.D. Ill. July 30, 2018);
Ceban v. Capital Mgmt. Servs., L.P., No. 17CV4554ARRCLP, 2018 WL
451637, at *1 (E.D.N.Y. Jan. 17, 2018); Remington v. Fin. Recovery Servs., Inc.,
No. 3:16-CV-865 (JAM), 2017 WL 1014994, at *1 (D. Conn. Mar. 15, 2017);
Taylor v. Fin. Recovery Servs., Inc., 252 F. Supp. 3d 344, 347 (S.D.N.Y.
2017), aff'd, 886 F.3d 212 (2d Cir. 2018); but see Moses v. LTD Fin. Servs. I,
Inc., 275 F. Supp. 3d 893, 894–95 (N.D. Ill. 2017) (finding, on summary
judgment, that the following language was not misleading, “IRS requires
certain amounts that are discharged as a result of the cancellation of debt
to be reported on a Form 1099–C. You will receive a copy of the Form
1099–C if one is required to be filed with the IRS,” where the plaintiff owed
$951.29 and the debt collector offered him the opportunity to pay $237.82
to resolve the debt without identifying the amount of principal and inter-
est).
12                                                 No. 19-1296

questions of fact, the ultimate decision on this question is one
in the province of a district court. We therefore VACATE the
judgment of the district court and REMAND this case for fur-
ther proceedings consistent with this opinion.
