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Author: Steven Uhrich

Collection Letter Seeking Debtor’s Info May Violate FDCPA

Link: Niland v. ALLIANCE COLLECTION AGENCIES INC., Case No. 17-CV-722 (E.D. Wisc., Sept. 28, 2018).

Debt collector sent a letter stating as follows:

If you are unable to pay the Amount Due in full, please contact our office to complete a financial assessment. This assessment will enable us to determine whether you may qualify for settlement of this debt for less than the full payment. To discuss this option, or if you have questions, you may also contact our office at 1-800-215-1547 and will be happy to assist you.

Plaintiff filed suit alleging this request was a confusing, deceptive, or misleading statement to the unsophisticated consumer, and a material misrepresentation provoking the consumer into providing financial information to a debt collector on false pretenses, all in violation of 15 U.S.C. §§ 1692e, 1692e(5), 1692e(10), and 1692f of the FDCPA.

The court, judge Nancy Joseph, allowed this claim to survive a motion to dismiss:

I find that plaintiffs have adequately pled that Alliance’s letter was a violation of the FDCPA. The Seventh Circuit has described the unsophisticated consumer, for FDCPA purposes, as “uninformed, naïve and trusting,” and only possessing basic knowledge of the financial sphere. Williams v. OSI Educational Services, Inc., 505 F.3d 675, 678 (7th Cir. 2007) (internal citation omitted). Further, the FDCPA provides that consumers have a right to ask a debt collector to refrain from contacting them. See 15 U.S.C. § 1692c; Johnson v. Alltran Education, LP, Case. No. 17-CV-6616, 2018 WL 2096374 at *4 (N.D. Ill. May 7, 2018). Thus, an unsophisticated consumer could view a letter seeking financial information as the only means of settling a debt, when in fact, a consumer could prohibit communication from the debt collector.

Debt Collector Demand for Interest Violates FDCPA

Link: Knepp v. Huffman, Case No. 3:17-CV-282-JD (N.D. Ind., Sept. 28, 2018).

Summary judgment entered by judge Jon E. DeGuilio for plaintiff where debt collector demanded 8% interest despite no statutory authority to do so:

Martin Financial has not pointed the Court to any authority standing for the proposition that Indiana Code § 24-4.6-1-103 allows a debt collector to collect interest on an unpaid debt; where, as here, the debt collector has not produced a contract that provides for the imposition of interest in the first place, or any other evidence that an 8% interest rate would apply [. . .]

Because Martin Financial failed to identify any applicable Indiana statute permitting it to charge interest on Ms. Knepp’s debt, it effectively admitted (through waiver) that the dunning letters falsely imply a possible outcome that cannot legally come to pass.


EFTA Claim for Overdraft Fees Dismissed

Link: Domann v. SUMMIT CREDIT UNION, No. 18-cv-167-slc (W.D. Wisc. Sept. 13 2018).

This case gives a good overview of the recent cases regarding overdraft fees and their relationship to the Electronic Fund Transfer Act and its implementing regulation, Reg. E.

Domann argues that SCU used a method of calculating his balance that deviated from the method described in its contracts with Domann, leading SCU to charge him excess overdraft fees. In this putative class action, Domann brings claims against SCU for breach of contract, breach of the implied covenant of good faith and fair dealing, unjust enrichment, money had and received, violation of Regulation E of the Electronic Fund Transfers Act (EFTA), and violation of the Wisconsin Deceptive Trade Practices Act.

Overdraft fees have attracted the attention of regulators and the media in recent years.[1] In 2009, the Federal Reserve adopted Regulation E, a set of rules intended to “assist consumers in understanding how overdraft services provided by their institutions operate and to ensure that consumers have the opportunity to limit the overdraft costs associated with ATM and one-time debit card transactions where such services do not meet their needs.” Electronic Fund Transfers, 74 Fed. Reg. 59,033-01 (Nov. 17, 2009) (codified at 12 C.F.R. § 205.1). Regulation E “require[s] financial institutions to secure a customer’s `affirmative consent’ before charging overdraft fees,” which must be obtained through an opt-in notice. This opt-in notice must contain a “brief description of the financial institution’s overdraft service” and be “substantially similar” to the Fed’s Model Form A-9. 12 C.F.R. § 1005.17(d).

Overdraft fees are tied to the customer’s account balance. Financial institutions primarily use two methods to calculate an account holder’s checking account balance: the “ledger” balance and the “available” balance. As described by the Consumer Financial Protection Bureau (“CFPB”),

[a] ledger-balance method factors in only settled transactions in calculating an account’s balance; an available-balance method calculates an account’s balance based on electronic transactions that the institutions have authorized (and therefore are obligated to pay) but not yet settled, along with settled transactions. An available balance also reflects holds on deposits that have not yet cleared.

CFPB, Winter 2015 Supervisory Highlights, Section 2.3.[2]

The following example illustrates the distinction:

If a member has a $100 ledger balance but uses his debit card to buy dinner for $40, then there is a pre-authorization hold on his account (at the request of the restaurant), and his available balance (the money he has left to use) is $60.00. In other words, the $40, which the member just spent, is no longer available for use. His ledger balance is still $100 until the restaurant charge is submitted and posted to his account. On the credit side, if he deposits an out-of-the-state check in the amount of $5,000 a hold will be placed on all but $200. In this example, his available balance is $200 and his ledger balance is $5,000, even though the check may never clear.

SCU’s Br. in Supp., dkt. 11, at 3.

Not surprisingly, “[u]sing the available balance method often leads to more frequent overdrafts because there is less money available in the account due to holds and pending transactions.” Tims v. LGE Cmty. Credit Union, No. 1:15-CV-4279-TWT, 2017 WL 5133230, at *1 (N.D. Ga. Nov. 6, 2017). Many account holders who have been subjected to overdraft charges based on “available balance” calculations not only feel blindsided by this, they feel that this practice is a breach of their contract with their credit union or bank. A series of virtually identical lawsuits has been filed across America challenging this practice. See, e.g., Walker v. People’s United Bank, 305 F. Supp. 3d 365 (D. Conn. 2018)Walbridge v. Ne. Credit Union, 299 F. Supp. 3d 338 (D.N.H. 2018)Tims v. LGE Cmty. Credit Union, No. 1:15-CV-4279-TWT, 2017 WL 5133230 (N.D. Ga. Nov. 6, 2017); Smith v. Bank of Hawaii, No. CV 16-00513 JMS-RLP, 2017 WL 3597522 (D. Haw. Apr. 13, 2017); Ramirez v. Baxter Credit Union, No. 16-CV-03765-SI, 2017 WL 1064991 (N.D. Cal. Mar. 21, 2017); Gunter v. United Fed. Credit Union, No. 315CV00483MMDWGC, 2016 WL 3457009 (D. Nev. June 22, 2016)Wodja v. Washington State Employees Credit Union, 2016 WL 3218832 (W.D. Wash. June 9, 2016); Pinkston-Poling v. Advia Credit Union, 227 F. Supp. 3d 848 (W.D. Mich. 2016)Chambers v. NASA Federal Credit Union, 222 F. Supp. 3d 1 (D.D.C. 2016).

TCPA Class Claim Against Uber Subject to Arbitration

Link: Johnson v. UBER TECHNOLOGIES, INC., No. 16 C 5468 (N.D. Ill. Sept. 20, 2018).

Judge John Z. Lee found that Uber’s arbitration click-wrap agreement is enforceable, and as a result tossed the putative class claims under the Telephone Consumer Protection Act:

Illinois law requires that a consumer be provided reasonable notice of all the terms and conditions of an agreement as well as reasonable notice that, by clicking a button, the consumer is assenting to the agreement. See Sgouros, 817 F.3d at 1034-36. “This is a fact-intensive inquiry: we cannot presume that a person who clicks on a box that appears on a computer screen has notice of all contents not only of that page but of other content that requires further action (scrolling, following a link, etc.).” Id. at 1034. As part of this inquiry, the court considers whether a reasonable person would be misled, confused, misdirected, or distracted by the manner in which the terms and conditions are presented. Id.

. . .

Similar to Dell’s website in Hubbert, the app that Johnson used to create his Uber account included the following statement: “By creating an Uber account, you agree to the Terms of Service & Privacy Policy.” See Def.’s LR 56.1(a)(3) Stmt. ¶ 15. The statement appeared in an easy-to-read font on an uncluttered screen, and no scrolling was required to view it. Id. ¶¶ 10, 15, 17. The words “Terms of Service & Privacy Policy” in the statement also served as a hyperlink, which appeared in a larger-sized font, enclosed in an outlined box. See id. The hyperlink, when clicked, brought the user to a screen displaying Uber’s Terms of Service in effect at the time. Id. ¶¶ 15, 18. As in Hubbert, the Court holds that the manner in which this statement and the Terms of Service were presented placed a reasonable person on notice that there were terms incorporated with creating an Uber account and that, by creating an account, he or she was agreeing to those terms.


Collection Calls to Wrong Person Basis for Valid FDCPA, TCPA claims—Not ICFA

Link: Hayes v. RECEIVABLES PERFORMANCE MANAGEMENT, LLC, Case No. 17-cv-1239 (N.D. Ill. Sept. 26, 2018).

This suit, filed by Sulaiman Law Group, Ltd., alleges that employees from RPM called plaintiff numerous times looking to speak with and collect a debt from someone named “Lesha Wayne.” The plaintiff told RPM numerous times they had the wrong number and told them to stop calling. They didn’t. Plaintiff filed suit under the Fair Debt Collection Practices Act (“FDCPA”), 15 U.S.C. § 1692 et seq. (Count I); Telephone Consumer Protection Act (“TCPA”), 47 U.S.C. § 227 et seq. (Count II); and the Illinois Consumer Fraud and Deceptive Business Practices Act (“ICFA”), 815 ILCS 505/1 et seq. (Count III). Defendant filed a motion to dismiss, which the court, judge Robert M. Dow, granted in part and dismissed in part.

The court found Plaintiff did not sufficiently allege facts to show that he qualifies as a consumer under § 1692a(3) of the FDCPA, and dismissed his claim under Section 1692b(3) which requires that:

Any debt collector communicating with any person other than the consumer for the purpose of acquiring information about the consumer shall * * * not communicate with any such person more than once unless requested to do so by such person or unless the debt collector reasonably believes that the earlier response of such person is erroneous or incomplete and that such person now has correct or complete location information.

The court also dismissed his claim under section 1692c(a)(1) which provides:

Without the prior consent of the consumer given directly to the debt collector or the express permission of a court of competent jurisdiction, a debt collector may not communicate with a consumer in connection with the collection of any debt (1) at any unusual time or place or a time or place known or which should be known to be inconvenient to the consumer.

The court dismissed his claim under 1692e finding that Plaintiff didnot allege that he believed he owed the debt, or that Defendant or its agents ever said anything to him that even implicitly suggested he owed the debt. Instead, Plaintiff argued the calls were an attempt to mislead him into paying the debt.

The court also dismissed his f claim:

A Plaintiff who uses the same factual allegations underlying another § 1692 claim for his § 1692f claim, however, fails to state an independent basis on which relief can be granted.

The court did allow the section 1692d(5) claim to stand:

While Defendant asserts these allegations are not enough to state claim, the court in Wright v. Enhanced Recovery Company denied a motion for summary judgment where the parties agreed that the defendant had only been called 21 times but disagreed at what point and how many times the plaintiff had asked for the calls to stop. 227 F. Supp. 3d at 1214-15. In light of Wright, and the fact that Plaintiff alleges he demanded the calls to stop on numerous occasions, Plaintiff has alleged facts to show a plausible violation of the FDCPA with regard to § 1692d(5).

The TCPA claim survived despite Defendant’s argument regarding whether plaintiff alleged they used an autodialer:

Here, Plaintiff alleges both that he has experienced the distinctive “click and pause” after answering calls from Defendant [1, ¶ 18], and that on other occasions he experienced “dead air” and received no response whatsoever when he answered Defendant’s calls, [1, ¶ 19]. Given these experiences, Plaintiff infers that Defendant used an ATDS to make these calls. [1, ¶ 47.] Considering the precedent above, the Court agrees that Plaintiff has pled sufficient facts to support the reasonable inference that Defendant used a ATDS to place the relevant calls.

The Court also dismissed the ICFA claim:

As explained above, Plaintiff has not pled facts sufficient to show that Defendant engaged in a deceptive act or practice under 15 U.S.C. § 1692e. Thus, he has not pled facts to support his claim under the ICFA. While Defendant’s calls may have been annoying, and possibly abusive, nothing in Plaintiff’s complaint suggests that Defendant sought to deceive Plaintiff.

FDCPA Class Certified in E.D. Wisc. Based on Ambiguous Settlement Offer

Link: Al V. Van Ru Credit Corporation, Case No. 17-CV-1738-JPS-JPS (E.D. Wisc. Sept. 25, 2018).

Plaintiff, represented by Ademi & O’Reilly LLP, filed a class action under the Fair Debt Collection Practices Act based on the following language in a dunning letter:

You can settle your account with the above client for lees than the full amount you owe. The balance you owe as of the date of this letter is $462.31. Presently, we are willing to accept $277.39 to settle your account provided that you act promptly. We are not obligated to renew this offer.

The Letter does not define “promptly” and does not state a firm expiration date for the settlement offer. Id. Plaintiff’s overarching theory of liability is that failing to include a better description of the parameters of the settlement offer misleads the recipient into believing that the offer may shortly expire, when this is not true.

Judge J.P. Stadtmueller found that Plaintiffs met their burden under Rule 23 to certify the following class:

“(a) all natural persons in the State of Wisconsin (b) who were sent a collection letter in the form represented by Exhibit A to the complaint in this action, (c) seeking to collect a debt allegedly owed for personal, family or household purposes, (d) between December 13, 2016 and December 13, 2017, (e) that was not returned by the postal service.”

The policy at the very core of the class action mechanism is to overcome the problem that small recoveries do not provide the incentive for any individual to bring a solo action prosecuting his or her rights. A class action solves this problem by aggregating the relatively paltry potential recoveries into something worth someone’s (usually an attorney’s) labor.

True, the FDCPA allows for individual recoveries of up to $1000 [(which is more than is usually obtained for individual class members)]. But this assumes that the plaintiff will be aware of her rights, willing to subject herself to all the burdens of suing and able to find an attorney willing to take her case. These are considerations that cannot be dismissed lightly in assessing whether a class action or a series of individual lawsuits would be more appropriate for pursuing the FDCPA’s objectives. Mace v. Van Ru Credit Corp., 109 F.3d 338, 344 (7th Cir. 1997).

Third Circuit Allows FDCPA Claim Based on Misleading IRS Language

Link: Schultz v. Midland Credit Management, Inc., Case No. 17-2244 (3d. Cir. 2018).

In Schultz, a debt collector sent letters to collect debts less than $600 to consumers that contained the following letter:

“We are not obligated to renew this offer. 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.”

The district court found that as a matter of law this could not be misleading or deceptive to a consumer under See 15 U.S.C. § 1692e, and dismissed the putative class action.

The Third Circuit reversed, finding that:

Midland argues that, in order to conclude that a consumer would be misled by this statement, one would have to read the first sentence in isolation while paying no attention to the second qualifying statement—i.e., that “[r]eporting is not required every time a debt is canceled or settled, and might not be required in your case.” (App. 17). However, even with this qualifying statement, the least sophisticated debtor could be left with the impression that reporting could occur. Indeed, this is precisely what happened in the Schultzes’ case—there was no possibility of IRS reporting in light of the fact that the debt was less than $600, but use of the conditional “might” suggested that reporting was a possibility.

The Third Circuit gave a hat-tip to the Seventh in discussing what might qualify as deceptive or misleading to state a claim under 1692e:

The Seventh Circuit has held that “a dunning letter is false and misleading if it `impl[ies] that certain outcomes might befall a delinquent debtor, when legally, those outcomes cannot come to pass.'” Boucher v. Fin. Sys. of Green Bay, Inc., 880 F.3d 362, 367 (7th Cir. 2018) (quoting Lox v. CDA Ltd., 689 F.3d 818, 825 (7th Cir. 2012)). Thus, it is not merely the inclusion of a lie but also incomplete or inapplicable language in a collection letter that may form the basis for a potential FDCPA violation.

“Breaching the Peace” During Car Repo Can Violate FDCPA

Link: Gable v. UNIVERSAL ACCEPTANCE CORPORATION, Case No. 17-c-463 (E.D. Wisc., Sept. 17, 2018).

Plaintiff sued a towing company and debt collector alleging that they breached the peace in attempting to repossess his car and thus violated the FDCPA. Wisconsin law allows nonjudicial repossession of motor vehicles if the customer has failed to demand a hearing . . . as long as the merchant does not “commit a breach of the peace.” Wis. Stat. § 425.206(1)(d), (2)(a). In this case, the police showed up and told the plaintiff that he had to let them repossess the car. This was wrong, and didn’t let defendants off the hook for FDCPA liability:

The fact that [Plaintiffs] acquiesced in the repossession after the police arrived and informed them the repossession was lawful, however, does not mean that they withdrew their objections to RPI and Chase’s conduct. The police officers were simply wrong in their conclusion that Johnson and Brunette were legally entitled to take the car over the debtor’s objection. See Marcus v. McCollum, 394 F.3d 813, 819 (10th Cir. 2004).

As a result, the court denied the defendants’ motion for summary judgment.

Litigation Expenses From Wrongful Garnishment Actionable Under Spokeo

Link: CIESNIEWSKI v. ARIES CAPITAL PARTNERS, INC., Case No. 16-cv-817-WTL-TAB (S.D. Ind., Sept. 19, 2018).

Plaintiff, represented by Edelman Combs Latturner & Goodwin LLC, successfully defended a wage garnishment on the basis that the debt collector hadn’t showed it was assigned the debt (and thus owned it). After the court agreed, plaintiff filed FDCPA, Indiana Deceptive Consumer Sales Act, and abuse of process claims. Defendants moved to dismiss based on lack of Article III standing.

The court agreed with Plaintiff, finding that unlike the Seventh Circuit’s ruling in Harold v. Steel, 773 F.3d 884 (7th Cir. 2014), plaintiff actually defeated the attempted garnishment:

 Here, like the hypothetical plaintiff who defends garnishment proceedings in an improper judicial district, there is no injury caused by a state court judgment, because Ciesniewski successfully defended the garnishment proceeding. Furthermore, both Ciesniewski and the plaintiff in the hypothetical were forced to defend improper garnishment actions. In Harold, on the other hand, the costs of litigation were associated with a permissible garnishment claim— there was no injury independent of that state court action. Because Ciesniewski alleges that the Defendants’ violation of the FDCPA required expenses he would not have otherwise incurred, Ciesniewski has asserted an injury sufficient to confer standing.

Claims for Botched Servicing of Student Loans May Move Forward

Link: Fleischer v. ACCESSLEX INSTITUTE, Case No. 17-cv-08295 (N.D. Ill., Sept. 19, 2018).

Plaintiff filed suit against the servicer, owner, and collector of his consolidated student loans (Accesslex Institute D/B/A Access Group, Conduent Education Services, LLC F/K/A Acs Education Services, Massachusetts Higher Education Assistance Corporation D/B/A American Student Assistance, Delta Management Associates, Inc., and F.H. Cann & Associates, Inc.). Plaintiff is represented by Kruger & Gruber, LLP.

He alleged that after consolidating his loans in 2011, he entered into a forbearance with his then-servicer Access Group where he would pay only 2.5% interest for three years on his $38,000 balance. 23 months later, Delta Management (whom Plaintiff had never heard of) sent him a letter saying his balance was over $50,000. After years of disputes with the Consumer Financial Protection bureau and the Defendants, the account was sent to debt collectors who went after Plaintiff for the inflated amount.

Plaintiff filed action under the Illinois Consumer Fraud and Deceptive Practices Act against F.H. Cann, Delta, and Conduent; claims under the Fair Debt Collection Practices Act against F.H. Cann and Delta; breach-of-contract and promissory-estoppel claims against Conduent; fraudulent and negligent-misrepresentation claims against Delta; and a fraudulent-concealment claim against Conduent. Defendants filed a motion to dismiss and for judgment on the pleadings.

Judge Manish S. Shah allowed his ICFA claim of unfairness to proceed against Conduent, and found that the ICFA claim against Conduent and Delta would normally be time-barred—but it falls within the “continuing violation” tolling doctrine, which delays accrual of the statute of limitations until (1) the date of the last injury or (2) when the tortious acts cease. Gredell v. Wyeth Laboratories, Inc., 346 Ill.App.3d 51, 59 (1st Dist. 2004).

The court allowed the FDCPA claims against F.H. Cann and Delta to survive, alleging that they failed to give him the required notice under 15 U.S.C. § 1692g and that its statements regarding removing his default status from his credit report was potentially false or misleading.

The court allowed the breach of contract claim to survive, but dismissed the negligent and intentional misrepresentation claims and fraudulent concealment claim.