Boczek v. Pentagon Federal Credit Union d/b/a PENFEDBoczek v. Pentagon Federal Credit Union d/b/a PENFED
Pending before the Court is Defendant Pentagon Federal Credit Union‘s Motion to Dismiss [ECF No. 5]. For the reasons discussed herein, Pentagon Federal Credit Union‘s motion to dismiss is DENIED.
I. BACKGROUND
On or about June 22, 2022, Plaintiff Joseph Boczek entered into a Promissory Note with Pentagon Federal Credit Union (“PenFed” or “Defendant“) to refinance a vehicle loan. ECF No. 1, Compl. at ¶ 18. PenFed is a federal credit union which acts as both a lender and a loan servicer. Id. at ¶ 13. Accordingly, PenFed both “originates and refinances loans, and exercises the servicing rights to collect monthly payments, charge fees, [and] enforce the Promissory Notes.” Id.
Plaintiff alleges he was charged a $5.00 “pay-to-pay” fee for making his monthly loan payment over the telephone. Id. at ¶ 19. However, neither the Promissory Note nor a statute authorizes PenFed to impose the $5.00 fee. Id. at ¶¶ 16-17, 20. Moreover, PenFed charged Plaintiff $5.00 to make his monthly payment over the
Based upon this practice, Plaintiff filed suit alleging PenFed engaged in repeated violations of Article 2 of the West Virginia Consumer Credit and Protection Act, including
II. PROCEDURAL HISTORY
On May 16, 2023, Plaintiff Joseph Boczek, on behalf of himself and all persons similarly situated filed a class action complaint alleging violation of the West Virginia Consumer Credit and Protection Act (“WVCCPA“). ECF No. 1. On August 7, 2023, PenFed moved to dismiss Plaintiff‘s Complaint pursuant to
III. STANDARD OF REVIEW
A court should dismiss a complaint if it does not contain “enough facts to state a claim to relief that is plausible on its face.” Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007). Plausibility exists “when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). A motion to dismiss “does not resolve contests surrounding the facts, the merits of a claim, or the applicability of defenses.” Republican Party of N.C. v. Martin, 980 F.2d 943, 952 (4th Cir. 1992). Dismissal is appropriate only if “it appears to be a certainty that the plaintiff would be entitled to no relief under any state of facts which could be proven in support of its claim.” Johnson v. Mueller, 415 F.2d 354, 355 (4th Cir. 1969).
IV. APPLICABLE LAW AND DISCUSSION
Plaintiff‘s claim relies upon multiple provisions within the West Virginia Consumer Credit and Protection Act (“WVCCPA“). The Supreme Court of Appeals of West Virginia has stated that the “purpose of the CCPA is to protect consumers from unfair, illegal, and deceptive acts or practices by providing an avenue of relief for consumers who would otherwise have difficulty proving their case under a more traditional cause of action.” State ex rel. McGraw v. Scott Runyan Pontiac-Buick, Inc., 194 W. Va. 770, 777, 461 S.E.2d 516, 523 (1995). Furthermore, “the WVCCPA is to be given a broad and liberal construction.” Bourne v. Mapother & Mapother, P.S.C., 998 F. Supp. 2d 495, 500 (S.D.W. Va. 2014). Because the WVCCPA is “clearly remedial in nature, we must construe the statute liberally so as to furnish and accomplish all the purposes intended.” State ex rel. McGraw, 194 W. Va. at 777.
A. Plaintiff has sufficiently pled that PenFed is a debt collector under the WVCCPA.
Plaintiff‘s Complaint alleges facts, which if true, would support that PenFed is a “debt collector” under the WVCCPA. Under the WVCCPA, a “debt collector” includes “any person or organization engaging directly or indirectly in debt collection.”
The Supreme Court of Appeals of West Virginia has further clarified that the plain meaning of
Defendant argues Plaintiff‘s Complaint should be dismissed because PenFed is not a “debt collector” and did not engage in “debt collection.” ECF No. 5-1, at pp. 3-4. Specifically, Defendant contends that the $5.00 pay-to-pay fee does not qualify as a “claim” under the WVCCPA and there was no debt collection. Id. at pp. 3-5.
In contrast, Plaintiff states that PenFed‘s arguments do not support dismissal and that the Complaint alleges Defendant engages in debt collection through the collecting of the monthly auto loan payments. ECF No. 11, at pp. 5-6. The Court agrees. As pled, PenFed is the lender and servicer of Plaintiff‘s automobile loan; thus, PenFed is clearly engaged directly in debt collection.
Defendant further seeks to distinguish PenFed‘s collection of the monthly auto loan payment from the collection of the $5.00 fee, thus arguing there is not a “claim owed” or a “collection“. ECF No. 5-1, at pp. 4-6. However, Plaintiff argues that the “claim owed” in the Complaint is Mr. Boczek‘s automobile loan and that his legal claims arise “from extra amounts collected from him by PenFed on a duty to pay money based on his prior contract.” ECF No. 11, at pp. 7-8. Furthermore, the solicitation of the $5.00 fee, while receiving the auto loan payment amounts to a “collection” under the WVCCPA. Id. at 9.
The allegations in Plaintiff‘s Complaint are sufficient to support that PenFed is a “debt collector” and that it engaged in “debt collection” when collecting the automobile loan payment and the $5.00 pay-to-pay fee. These definitions are to be interpreted broadly and Defendant‘s interpretations are exceedingly narrow, especially at the
B. Plaintiff has sufficiently pled violations of the WVCCPA.
Plaintiff relies upon multiple provisions of the WVCCPA to support his claim against PenFed. The Court will address each WVCCPA Provision in turn.
1. West Virginia Code §46A-2-128
Section 46A-2-128 of the WVCCPA provides that “[n]o debt collector may use unfair or unconscionable means to collect or attempt to collect any claim.”
PenFed argues Plaintiff has failed to plausibly allege any violation of Section 128 because (1) the $ 5.00 pay-to-pay fee is not an “unconscionable or unfair means” of collecting debt and (2) the $5.00 pay-to-pay fee is not incidental to the principal auto loan obligation, but rather is a convenience fee for the additional optional service of paying the loan by phone. ECF No. 5-1, at pp. 6-7. Alternatively, Defendant contends Section 128 is preempted by federal credit union regulations.
a. The Complaint sufficiently alleges violations of “unconscionable or unfair means” of collecting debt.
Plaintiff disputes Defendant‘s arguments and maintains that the Complaint adequately alleges violations of
Plaintiff meets his pleading burden with regard to
b. Plaintiff pled sufficient facts to support that the fee is incidental to the loan payment.
Defendant argues Plaintiff did not allege that the $5.00 pay-to-pay fee was incidental to the auto loan monthly payment. ECF No. 5-1, at pp. 7-8. Defendant relies upon a few federal district court opinions to support its position that the $5.00 fee is for an optional service [payment by telephone] and is thus not incidental to the principal debt. Id. (citing Garbutt v. Ocwen Loan Servicing, LLC, No. 8:20-CV-136-T-36JSS, 2020 WL 5641999, at *4 (M.D. Fla. Sept. 22, 2020; Est. of Campbell v. Ocwen Loan Servicing, LLC, 467 F. Supp. 3d 1262, 1265 (S.D. Fla. 2020); Bardak v. Ocwen Loan Servicing, No. 8:19-cv-1111-24TGW, 2020 WL 5104523 at *4 (M.D. Fla. Aug. 12, 2020); Reid v. Ocwen Loan Servicing, LLC, No. 20-cv-80130, 2020 WL 5104539, at *1 (S.D. Fla. May 4, 2020); and Flores v. Collection Consultants of California, No. SACV140771DOCRNBX, 2015 WL 4254032, at *10 (C.D. Cal. Mar. 20, 2015)).
However, Plaintiff points to multiple cases including a decision from the United States District Court for the Southern District of West Virginia, which reject Defendant‘s argument that the service fees are separate transactions. ECF No. 11, at pp. 11-13 (collecting over fifteen cases). The Court is particularly persuaded by Judge Goodwin‘s opinion in Muhammad v. PNC Bank, N.A., No. 2:15-CV-16190, 2016 WL 815289, (S.D.W. Va. Feb. 29, 2016). In Muhammad, the Court found that speed pay fees — fees related to payment of the underlying loan — are “processing or transaction fees associated with the primary obligation.” Id. at *2. In reaching this conclusion, the Court considered:
Even though neither the Credit & Protection Act nor the Supreme Court of Appeals of West Virginia have defined “incidental” for the purposes of this section, the Supreme Court of Appeals of West Virginia “has consistently stated that the [Credit & Protection Act] is to be given a broad and liberal construction.
Id. (internal citations omitted). The Court also looked to the common dictionary definitions of “incidental” to assess whether the plaintiff‘s claims were sufficient based on the allegations and reasonable inferences. See Id. at *3. Ultimately, the Court concluded that the plaintiff pled enough facts to state a claim for violations under
Here, Plaintiff alleges that he was charged $5.00 when he made his monthly payment over the telephone. ECF No. 1, at ¶ 19. Viewing the allegations in the light most favorable to the Plaintiff, it is certainly reasonable to conclude that the pay-to-pay fee is incidental to the underlying auto loan payment when it was paid in connection with the monthly payment. Moreover, given that the Supreme Court of Appeals for West Virginia has not defined “incidental” or spoken as to whether a pay-to-pay fee is a separate debt, the Court declines to find that Plaintiff‘s claim fails as a matter of law at the pleading stage. Both parties point to case law which they contend supports their position. Thus, further analysis of this matter‘s specific facts would be more appropriate following discovery. Presently, Plaintiff has alleged sufficient facts to plausibly state a claim. See Segal v. Dinsmore & Shohl, LLP, No. 20-CV-267, 2021 WL 10353366, at *3-4 (N.D.W. Va. Sept. 30, 2021). Thus, Defendant‘s Motion to Dismiss [ECF No. 5] is DENIED as it relates to Plaintiff‘s claims under
In the alternative, Defendant contends that Plaintiff‘s claims under Section 128(d) should be dismissed because the National Credit Union Administration (“NCUA“) Board has exclusive authority to regulate loans issued by federal credit unions. ECF No. 5-1, at p. 8. NCUA‘s regulations give the NCAU Board exclusive authority “to regulate the rates, terms of repayment and other conditions of Federal credit union loans and lines of credit” and further provides that the “exercise of the Board‘s authority preempts any state law purporting to limit or affect . . . “other fees“.
The doctrine of preemption is rooted in the Constitution‘s Supremacy Clause. See
A federal law may preempt state or local law, however, in any of three ways:
First, Congress may expressly preempt such laws. Second, in the absence of express preemptive language, Congress’ intent to preempt state law may be implied when “federal law so thoroughly occupies a legislative field as to make reasonable the inference that Congress left no room for the States to supplement it.” Finally, preemption will also be implied if state or local law “actually conflicts with federal law.” Such a conflict occurs “when compliance with both federal and state regulations is a physical impossibility, or when state law stands as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress.”
Meluzio v. Cap. One Bank (USA), N.A., 469 B.R. 250, 253-54 (N.D.W. Va. 2012) (citing S. Blasting Servs., Inc. v. Wilkes Cnty., 288 F.3d 584, 590 (4th Cir. 2002)). In addition to federal statutes, properly enacted and promulgated regulations may also preempt conflicting state or local actions. Anderson, 508 F.3d at 191.
Federal Courts in West Virginia have rejected Section 128 preemption arguments in relation to other banking laws. See Meluzio, 469 B.R. 250 (finding
Preemption of Section 128 would leave plaintiffs without a remedy from a federal credit union debt collector‘s improper fee collection. Moreover, the NCUA savings clause makes clear that the intent of the regulation was not to preempt “state laws concerning . . . unfair credit practices, and debt collection practices.”
2. West Virginia Code §46A-2-127
Section 127 prohibits a debt collector from using “any fraudulent, deceptive or misleading representation or means to collect or attempt to collect claims or to obtain information concerning consumers.”
Defendant argues that Plaintiff failed to plausibly allege any violation under
In contrast, Plaintiff states he has met his burden because PenFed is not authorized by statute or agreement to charge the $5.00 pay-to-pay fee and he alleges in his Complaint that he was charged $5.00 for making his monthly payment over the telephone. ECF No. 11, at pp. 17-18; see ECF No. 1, at ¶ 19. Thus, such conduct, if true, would fall under
Here, the Court finds that Plaintiff has pled facts with sufficient particularity to survive dismissal at the
These facts are sufficient to state a claim under
3. West Virginia Code § 46A-2-124
Section 124 of the WVCCPA provides that “[n]o debt collector shall collect or attempt to collect any money alleged to be due and owing by means of any threat, coercion or attempt to coerce.”
In support of dismissing Plaintiff‘s claim under
However, Plaintiff contends that these cases are distinguishable from the instant matter because the courts found that the plaintiffs in Hill and Patrick did not properly plead a violation of a separate section of the WVCCPA to make an actionable claim under Section 124. ECF No. 11, at pp. 19-20. The Court agrees. In Hill, the Court found that the plaintiffs did not state a claim for relief under
Unlike the plaintiffs in these two cases, Mr. Boczek has plausibly pled violations of Sections 127 and 128 of the WVCCPA. Moreover, “the WVCCPA is a detailed statute that describes factual scenarios constituting a violation of each provision. An allegation that [Defendant] used threats of coercion in its attempts to collect a debt is not converted from a factual allegation to a legal allegation simply because the statute uses the same words.” Snuffer v. Great Lakes Educ. Loan Servs., Inc., 97 F. Supp. 3d 827, 834 (S.D.W. Va. 2015). At the
V. CONCLUSION
For the reasons stated herein, Pentagon Federal Credit Union‘s Motion to Dismiss [ECF No. 5] is DENIED and Plaintiff has sufficiently stated a cause of action under the WVCCPA.
It is so ORDERED.
The Clerk is directed to transmit copies of this Order to counsel of record.
DATED: March 26, 2024
THOMAS S. KLEEH, CHIEF JUDGE
NORTHERN DISTRICT OF WEST VIRGINIA
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