Zach S. Whitney
zwhitney@kmksc.com
(414) 962-5110
During Wisconsin’s first 125 years of statehood, consumers had relatively little protection against abusive debt collection practices. Generally speaking, the law did not prevent creditors and debt collectors from using aggressive tactics to compel payment. Creditors could persistently harass debtors, day and night. Creditors would sometimes contact a debtor’s employer, family or neighbors to shame the debtor into paying. In the most extreme cases, creditors even threatened criminal prosecution or physical violence to force payment, all while straddling—and occasionally exceeding—the fine line of legality in so doing.
To curb these abusive practices, the Wisconsin Legislature enacted the Wisconsin Consumer Act (“WCA”) in 1971. Among its many stated goals, the purpose of the WCA is “[t]o protect consumers against unfair, deceptive, false, misleading and unconscionable practices by merchants.” Wis. Stat. § 421.102(2)(b). Along with its sister law, the Fair Debt Collection Practices Act (“FDCPA”) enacted by the Federal government several years later, the WCA is widely regarded as having drastically reduced the frequency of abusive debt collection practices from their pre-enactment levels.
The WCA accomplishes its policy goals by providing consumers with a robust toolbox of remedies to use against creditors who overstep their bounds, including harsh penalties for engaging in prohibited conduct. One such tool is the class action lawsuit, which the WCA permits a consumer to bring on behalf of himself or herself and all persons similarly situated in certain circumstances, including where a creditor or debt collector engages in, “[f]alse, misleading, deceptive, or unconscionable conduct in enforcing debts or security interests arising from consumer credit transactions.” Wis. Stat. § 426.110(2)(c). The Wisconsin Supreme Court recently delved into this provision of the WCA when it decided the case of Gudex v. Franklin Collection Service, Inc., 2026 WI 6.
Gudex follows a familiar fact pattern. Plaintiff Heather Gudex received a letter from defendant Franklin Collection Service, Inc., seeking payment on a debt owed to a third party. Franklin’s letter to Gudex read, in part, “IF YOU ARE NOT PAYING THIS ACCOUNT, CONTACT YOUR ATTORNEY REGARDING OUR POTENTIAL REMEDIES, AND YOUR DEFENSES, OR CALL (877) 264-2172.” The letter further stated, “[w]hen this letter was mailed no attorney has personally reviewed your account.” Franklin admitted that it sent this form letter to other debtors.
Confused by the letter and fearing that she might be sued, Gudex met with an attorney, who subsequently filed a class action lawsuit seeking class-wide damages under the FDCPA and demanding injunctive relief under the WCA. Gudex specifically alleged that Franklin committed an abusive debt collection practice under the WCA by providing the false impression that Franklin would sue Gudex. After further consideration, Gudex elected to also seek monetary damages for the putative class under the WCA and subsequently served Franklin with a notice and demand for monetary damages, which is a prerequisite to maintaining a class action claim for damages under the WCA. The case took an interesting turn thereafter.
In response to Gudex’s demand for damages, Franklin offered individual (instead of class-wide) relief to Gudex consisting of her actual damages and the WCA’s maximum statutory penalty of $1,000 along with a promise that it would not send any more debt collection letters with the same language. Franklin took the position that its offer was “an appropriate remedy” under the WCA’s class action provision, which provides that no class action for damages may be maintained under the WCA “if an appropriate remedy, which shall include actual damages and may include penalties, is given, or agreed to be given within a reasonable time” within 30 days after receiving the notice and demand for damages. Wis. Stat. § 426.110(4)(c).
Gudex rejected Franklin’s offer and subsequently moved for class certification seeking monetary and injunctive relief for class consumers allegedly injured by Franklin’s letter. Franklin opposed the motion on grounds that it had offered “an appropriate remedy” and, thus, Gudex’s attempt to maintain a class action for damages was barred by the WCA. The trial court disagreed with Franklin, concluding that “an appropriate remedy” under the WCA must be appropriate to the whole class, not just to the lead plaintiff as Franklin had offered. Franklin appealed, losing again in the Wisconsin Court of Appeals, before the Supreme Court of Wisconsin agreed to hear the case and, ultimately, reversed the trial court’s decision.
In an opinion joined by six of the seven Justices, the Supreme Court held that, where a customer brings a class action for damages under the WCA, the defendant may avoid the class action if, within the 30-day window of receiving the notice and demand for damages, it gives or agrees to give an appropriate remedy to the party bringing suit and not the whole putative class. Thus, Franklin could avoid the class action for damages by giving or agreeing to give appropriate relief to Gudex herself, as it alleges it did, as opposed to providing relief to the entire class.
For her part, Gudex argued that the rule ultimately adopted by the Supreme Court would have the effect of stopping a class action for damages under the WCA before it begins, provided that the defendant offers an appropriate remedy to the lead plaintiff. The Court did not disagree with this characterization of the rule it was adopting, but further observed that the legislature’s policy choice as reflected by the WCA is, “to incentivize making an affected customer whole as quickly as possible, while still preserving access to the class action lawsuit if the customer does not receive an appropriate remedy.”
Indeed, the Court declared the moral of the case in no uncertain terms: “The legislature provided a strong incentive for a defendant like Franklin: make an injured party whole now, or face a costly and time-consuming class action proceeding that may require you to provide a remedy to a much larger group later.” Businesses involved in consumer credit transactions or debt collection would be well advised to heed this warning.
When it comes to consumer credit transactions or debt collection, the best practice is, of course, to follow the letter of the law and avoid engaging in conduct that runs afoul of the WCA or the FDCPA. That said, even avoidable mistakes are sometimes made. Where an alleged violation of the WCA is at issue, creditors should address the violation appropriately and quickly to avoid having a violation snowball into a class action lawsuit, which could be far more time-consuming and expensive to manage and resolve.
If you would like to discuss debt collection practices, or have other questions about the WCA, please contact KMK Attorney Zach S. Whitney at zwhitney@kmksc.com or (414) 962-5110.