358 F. Supp. 3d 213
W.D.N.Y.2019Background
- Plaintiff Andrew Gissendaner sued Credit Corp Solutions, Inc. (d/b/a Tasman Credit) under the FDCPA after receiving a collection letter for a charged-off Synchrony Bank credit‑card debt.
- Plaintiff alleged Defendant attempted to collect interest in excess of New York's criminal usury limit by seeking the charged‑off principal (which Plaintiff contends incorporated prior interest).
- Defendant moved to dismiss for failure to state a claim and sought sanctions; Plaintiff cross‑moved for sanctions.
- The complaint did not identify the specific interest rate charged by Synchrony in the pleading.
- Court treated past interest that was rolled into a charged‑off balance as part of the principal and concluded collecting that principal is not the collection of "interest on the loan" under NY criminal usury law.
- Court dismissed the FDCPA claims and denied both parties’ requests for sanctions (Defendant’s Rule 11 motion was procedurally defective; neither party established bad faith warranting sanctions under §1927 or the court’s inherent power).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether seeking recovery of a charged‑off balance that includes previously assessed interest violates NY criminal usury statute and thus the FDCPA | Gissendaner: interest charged pre‑charge‑off remains "interest" and collecting the charged‑off principal unlawfully "takes or receives" interest in violation of NY usury law, supporting FDCPA claims | Tasman: once interest is incorporated into the charged‑off balance it is principal; collecting principal is not collecting "interest on the loan," so no usury or FDCPA violation | Held: collecting the charged‑off principal (including past interest) is not collecting "interest on the loan"; FDCPA claims dismissed |
| Whether Madden v. Midland Funding supports Plaintiff’s extension to hold a non‑national buyer/collector liable for interest charged by the original (federal) bank | Gissendaner: Madden’s preemption analysis should extend to this context so state usury rules can defeat collection of balances that contain usurious interest charged by the original creditor | Tasman: Madden does not support this extension; the interest was charged by Synchrony (a federal savings association) and once sold the balance is principal; extending Madden would be inappropriate and undermine debt markets | Held: Court declined to extend Madden to impose liability here; such extension would stretch Madden beyond its scope |
| Whether Defendant’s sanctions motion complied with Rule 11 procedural requirements | N/A | Tasman: sought Rule 11 sanctions against Plaintiff for bringing a meritless claim | Held: Denied as procedurally defective because the Rule 11 motion was not filed separately and there is no evidence of compliance with the 21‑day safe harbor requirement |
| Whether sanctions under 28 U.S.C. §1927 or the court’s inherent authority were appropriate against Plaintiff/counsel | Gissendaner: opposed | Tasman: sought sanctions arguing claim was entirely without color and filed in bad faith | Held: Denied — no clear evidence of bad faith; advancing a novel (though unsuccessful) legal theory is insufficient for sanctions |
Key Cases Cited
- Bell Atl. Corp. v. Twombly, 550 U.S. 544 (plausibility standard for complaints)
- Ashcroft v. Iqbal, 556 U.S. 662 (pleading standards and reasonable inferences)
- DiFolco v. MSNBC Cable L.L.C., 622 F.3d 104 (documents considered on Rule 12(b)(6))
- Clomon v. Jackson, 988 F.2d 1314 (2d Cir.) ("least‑sophisticated consumer" standard for FDCPA claims)
- Avila v. Riexinger & Assocs., LLC, 817 F.3d 72 (2d Cir.) (FDCPA consumer‑protection construction and least‑sophisticated standard)
- Madden v. Midland Funding, LLC, 786 F.3d 246 (2d Cir.) (NBA preemption and limits on applying state usury law to assignees)
- Beneficial Nat. Bank v. Anderson, 539 U.S. 1 (NBA preemption of state usury law for national banks)
- Chambers v. NASCO, Inc., 501 U.S. 32 (court’s inherent power to impose sanctions)