365 F. Supp. 3d 319
W.D.N.Y.2019Background
- Plaintiff Alex J. Cole received a debt-collection letter from Einstein seeking $2,597 for a charged-off Lowe's credit-card account; the letter listed "Charges or Fees: $0.00" and "post-charge off interest: $0.00."
- Plaintiff alleged the letter was misleading under the FDCPA because "Charges or Fees: $0.00" could be read to mean no fees had ever accrued since account inception, and that Defendants attempted to collect interest that exceeded New York usury limits.
- Defendants (Einstein and Second Round) moved to dismiss and sought sanctions; Plaintiff filed an amended complaint and cross-moved for sanctions.
- Court treated earlier motions as moot after the amended complaint and analyzed Defendants’ third motion to dismiss the operative pleading.
- Court applied the FDCPA "least sophisticated consumer" standard and considered whether the collection letter was misleading and whether collecting a principal that included pre-sale interest could violate New York usury law and thereby the FDCPA.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the letter's "Charges or Fees: $0.00" was misleading under §1692e | The phrase could reasonably be read to mean no fees ever accrued since account inception | The letter correctly stated amounts owing to the collector (post-charge-off) and was not misleading under the least-sophisticated-consumer standard | Dismissed: not misleading; a reasonable consumer understands amounts are those sought by the debt collector (post-charge-off) |
| Whether stating zero post-charge-off interest/fees violates FDCPA because defaulted accounts always accrue fees | Cole argued any defaulted account accrues fees, so stating $0.00 was false | Defendants: letter refers to fees accruing after charge-off; pre-charge-off amounts are reflected in the principal bought by collector | Dismissed: interpretation that it referred to pre-charge-off fees is unreasonable; collector may state amounts it seeks |
| Whether collecting a principal that includes interest charged by a federal savings association (Synchrony) violates New York usury and creates FDCPA liability | Cole urged extension of Madden: interest charged by a savings association in another state makes principal collection usurious and unlawful under NY law, so FDCPA violated | Defendants: Madden does not support liability for a purchaser/collector; past interest becomes principal and collecting principal is not "taking" usurious interest by the collector | Dismissed: Madden does not extend to bar collection of principal composed of lawfully charged interest; no bad-faith usury claim against collector |
| Requests for sanctions (Rule 11, §1927, inherent power) | Plaintiff sought sanctions for Defendants' sanction motion; argued Defendants improperly sought sanctions | Defendants sought sanctions against Plaintiff for bringing meritless claims | Denied both ways: Defendants’ Rule 11 motion procedurally defective and §1927/inherent-power sanctions unwarranted (no clear bad faith); Plaintiff's cross-request also denied |
Key Cases Cited
- Bell Atl. Corp. v. Twombly, 550 U.S. 544 (establishes plausibility standard for pleadings)
- Clomon v. Jackson, 988 F.2d 1314 (2d Cir. 1993) (adopts "least sophisticated consumer" standard for FDCPA claims)
- Taylor v. Fin. Recovery Servs., Inc., 886 F.3d 212 (2d Cir. 2018) (collection notice mentioning no accruing interest/fees is not misleading if none are accruing)
- Madden v. Midland Funding, LLC, 786 F.3d 246 (2d Cir. 2015) (NBA preemption does not allow assignees to assert bank powers when they are not acting on the bank's behalf)
- Barnes v. Advanced Call Ctr. Techs., LLC, 493 F.3d 838 (7th Cir. 2007) (collection letters are to be read as statements of the debt owed to the collector, not the original creditor)
- Wahl v. Midland Credit Mgmt., Inc., 556 F.3d 643 (7th Cir. 2009) (interest charged by creditor becomes part of principal as viewed by the collector)