Credit Service Co., Inc. v. Crasco
2011 MT 211
| Mont. | 2011Background
- Crasco obtained three deferred deposit (payday) loans in 2009, each secured by a postdated check.
- Payday lenders deposited these checks at loan end; checks returned for insufficient funds; lenders assigned the checks to Credit Service, a collection agency.
- Credit Service sent demand letters demanding face value, a $30 per-check service fee, and bad check penalties under § 27-1-717(3).
- Crasco argued payday lenders could not collect bad check penalties; she counterclaimed for damages under § 31-1-724(3) for Credit Service’s alleged illegal pursuit.
- The Justice Court ruled Crasco owed the face value and fees, but that Credit Service could not collect bad check penalties, and Crasco could recover damages; the District Court later reversed to allow penalties.
- The Montana Supreme Court held that the right to collect bad check penalties cannot be extended to collection agencies where prohibited by the Act, and remanded to determine whether Credit Service’s conduct violated § 31-1-724 and the amount of any penalties.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Can a collection agency collect bad check penalties on payday-loan checks? | Credit Service contends collection rights extend to penalties via assignment. | Crasco argues penalties are barred for payday-loan checks under § 31-1-722(3). | Penalties may not be collected by collection agencies for payday-loan checks. |
| May an assignee of a payday loan recover penalties greater than the assignor could recover? | Credit Service argues assignment grants greater rights to collect penalties. | Crasco argues assignee stands in the shoes of the assignor and cannot exceed statutory rights. | An assignee may not obtain greater rights than the assignor. |
| Does § 31-1-704(2)(b) (collection-agency exemption) apply to a collection agency collecting penalties? | Credit Service relies on exemption to avoid applying the Act to collection agencies. | Crasco contends the exemption is narrow and does not permit collection of penalties under § 27-1-717. | Exemption is limited; penalties under § 27-1-717(3) may not be collected by collection agencies. |
| If penalties were improperly pursued, may Crasco recover penalties, costs, and attorney fees under § 31-1-724? | Credit Service disputes applicability and amount of § 31-1-724 remedies. | Crasco seeks penalties, costs, and fees for unlawful collection efforts. | remand to determine if an intentional violation occurred and the appropriate penalties and fees. |
Key Cases Cited
- Massey-Ferguson Credit Corp. v. Brown, 173 Mont. 253 (Mont. 1977) (assignee takes subject to defenses and rights of the assignor)
- Wiard v. Liberty N.W. Ins. Corp., 318 Mont. 132 (Mont. 2003) (ignorance of the law does not excuse violation; intent matters)
- Montco v. Simonich, 947 P.2d 1047 (Mont. 1997) (statutory language must be given effect and not undermined)
- State v. Finley, 360 Mont. 173 (Mont. 2011) (standards for appellate review of district court conclusions of law)
- BNSF Ry. Co. v. Cringle, 247 P.3d 706 (Mont. 2010) (standard of review for district court decisions)