8th Cir. Says Debt Collector’s Dunning Letter Cannot Compound Interest in Violation of State Law and the Contract

It is undisputed that Minnesota law governs Coyne’s alleged credit-card debt. Minn. Stat. § 334.01(1) provides that “[i]n the computation of interest upon any … instrument or agreement, interest shall not be compounded” unless there is a “contract to pay [such] interest.” See Lampert Lumber Co. v. Ram Constr., 413 N.W.2d 878, 883 (Minn. Ct. App. 1987). Coyne alleges he did not agree to pay compound interest on the debt, and at this stage we must accept that allegation as true. See Paddock Labs., 855 F.3d at 954. He further alleges that the debt’s principal balance already contained contractual interest. The district court agreed that an unpaid credit-card debt sold to another party would include “the interest and fees [the credit-card company] originally charged.” Neither party contests that ruling on appeal, and so we hold that Coyne has plausibly alleged that the principal balance that Messerli’s letter mentions contained contractual interest. Cf. Haney v. Portfolio Recovery Assocs., L.L.C., 837 F.3d 918, 921, 924 (8th Cir. 2016) (per curiam).    It is also plausible that the interest charged on the principal balance included interest on the contractual interest: Messerli’s letter to Coyne was dated February 26, 2016, and it asserted that he owed “interest of $3,871.39 at the rate of 6.00%” on “the principal balance of $13,205.30.” This amount of interest is approximately what would accrue on the principal balance under an annual rate of 6.00% simple interest from the date the credit-card company sold the debt—April 14, 2011, according to the final debt-collection letter—to the date of Messerli’s letter. So if the principal balance has contractual interest in it, the interest sought in Messerli’s letter would include interest on that contractual interest. We thus hold that Coyne has plausibly alleged that Messerli tried to collect, and told him that he owed, an amount and a type of interest that state law prohibited in the circumstances.  . . .We now hold that a false representation of the amount of a debt that overstates what is owed under state law materially violates 15 U.S.C. § 1692e(2)(A) as well. It is material not only because the representation violates the plain language of that subsection prohibiting the “false representation” of the “amount” of “any debt,” but also because an overstatement of the debt’s amount necessarily misleads the debtor about the amount he owes under his agreement with the creditor.