GARRY CURTIS, Plaintiff - Appellee, v. PROPEL PROPERTY TAX FUNDING, LLC; PROPEL FINANCIAL SERVICES, LLC, Defendants - Appellants.
No. 17-2114
UNITED STATES COURT OF APPEALS FOR THE FOURTH CIRCUIT
February 6, 2019
DUNCAN, Circuit Judge
PUBLISHED. Argued: October 30, 2018. Appeal from the United States District Court for the Eastern District of Virginia, at Richmond. John A. Gibney, Jr., District Judge. (3:16-cv-00731-JAG)
PUBLISHED
Argued: October 30, 2018 Decided: February 6, 2019
Before DUNCAN, KEENAN, and DIAZ, Circuit Judges.
Affirmed by published opinion. Judge Duncan wrote the opinion, in which Judge Diaz joined. Judge Keenan wrote a separate opinion concurring in part and dissenting in part.
ARGUED: Charles Kalman Seyfarth, O‘HAGAN MEYER PLLC, Richmond, Virginia, for Appellants. Thomas Dean Domonoske, CONSUMER LITIGATION ASSOCIATES, P.C., Newport News, Virginia, for Appellee. ON BRIEF: Elizabeth Scott Turner, O‘HAGAN MEYER PLLC, Richmond, Virginia, for Appellants. Dale W. Pittman, THE LAW OFFICE OF DALE W. PITTMAN, P.C., Petersburg, Virginia, for Appellee.
Appellants Propel Property Tax Funding, LLC and Propel Financial Services, LLC (collectively “Propel“) entered into a Tax Payment Agreement (a “TPA“) with Appellee Garry Curtis pursuant to
I.
Virginia allows taxpayers to enter into agreements with third parties to finance payment of local taxes.
Curtis owed $13,734.43 in residential property taxes to the city of Petersburg, Virginia and entered into a TPA with Propel to finance payment of them. The parties agree that the TPA at issue operates in conformity with Virginia‘s statutory framework,
Curtis nevertheless challenges the TPA and its associated documents as violating TILA, EFTA, and VCPA on several grounds. For instance, he contends that many of the terms of the TPA included incorrect amounts, that Propel did not include an itemized list of closing costs in the documents, and that the TPA was missing certain allegedly required financial disclosures. He also alleges that, as a condition of the TPA, he was required to agree to repay Propel by preauthorized electronic fund transfers (“EFTs“) and that the required authorization form does not contain a space that would allow him to indicate that he declined to do so.
Curtis brought a proposed class action against Propel in federal district court, alleging violations of TILA, EFTA, and VCPA.3 Propel moved to dismiss for failure to state a claim pursuant to
The district court determined that Curtis had standing under EFTA because the harm that he alleged--making the TPA contingent on Curtis agreeing to preauthorized EFTs--was “exactly the type of harm that Congress sought to prevent when it enacted the EFTA.” Curtis v. Propel Prop. Tax Funding, LLC, 265 F. Supp. 3d 647, 652 (E.D. Va. 2017). The district court also determined that the TPA is subject to TILA and EFTA because, as “third-party financing of a tax obligation” for “personal, family, or household purposes,” the TPA is both a credit transaction and a consumer transaction and thus qualifies as a consumer credit transaction governed by those statutes. Id. at 652-53. However, the court certified for interlocutory review (1) its decision that Curtis has standing to proceed on his EFTA claims and (2) its determination that TPAs sanctioned by
II.
Propel makes two arguments on appeal. First, Propel contends that Curtis does not have standing to bring a claim under EFTA because he did not adequately allege that Propel required him to agree to EFTs or that he made or attempted to cancel any EFT payments. Second, Propel contends that Curtis‘s complaint does not state a claim for relief under either TILA or EFTA because the TPA is not a consumer credit transaction within the terms of those statutes. Before considering these issues, we first set forth the statutory framework to provide the necessary context for our analysis.
TILA and EFTA are consumer protection statutes that regulate the terms of certain transactions.
Guided by the applicable statutes, we affirm the district court. First, we hold that Curtis has standing to bring claims under EFTA because the harm that he alleges is a substantive statutory violation that subjects him to the very risks that EFTA, a consumer protection statute, was designed to protect against. Second, we hold that the TPA is subject to TILA and EFTA because the TPA is a consumer credit transaction. Because the statutes define these terms separately, we consider them as such. We determine that the TPA is a credit transaction because it provides for third-party financing of a tax obligation and that it is a consumer transaction because, as financing of a real property tax debt, it is a voluntary transaction that Curtis entered into for personal or household purposes.
III.
Propel contends that Curtis lacks standing to bring claims under EFTA. “We review legal questions regarding standing de novo,” and “[w]hen standing is challenged on the pleadings, we accept as true all material allegations of the complaint and construe the complaint in favor of the complaining party.” David v. Alphin, 704 F.3d 327, 333 (4th Cir. 2013) (emphasis omitted). In a class action case, we look to the standing of the named plaintiff. Dreher v. Experian Info. Sols., Inc., 856 F.3d 337, 343 (4th Cir. 2017).
To meet the constitutional minimum requirements for standing to sue, a “plaintiff must have ... suffered an injury in fact, ... that is fairly traceable to the challenged conduct of the defendant, and ... that is likely to be redressed by a favorable judicial decision.” Spokeo, Inc. v. Robins, 136 S. Ct. 1540, 1547 (2016). On appeal, Propel challenges the injury-in-fact requirement. A plaintiff meets this requirement if he alleges an injury that is “particularized,” “concrete,” and “actual or imminent, not conjectural or hypothetical.” Id. at 1548 (quoting Lujan v. Defs. of Wildlife, 504 U.S. 555, 560 (1992)).
First, an injury must be particularized; that is, “it must affect the plaintiff in a personal and individual way.” Id. (citation and internal quotation marks omitted). Here, Curtis‘s injury is particularized because it stems from his own TPA with Propel, which allegedly required him to consent to EFT authorization when he entered into the agreement and allegedly waived Curtis‘s right to cancel preauthorized EFTs as conferred by EFTA.
Second, an injury is concrete if it is “real, and not abstract.” Id. (citation and internal quotation marks omitted). While a bare procedural statutory violation does not create a concrete injury, id. at 1549, the concreteness requirement is met where the plaintiff can show that the harm that he suffers as a result of a defendant‘s statutory violation is “the type of harm Congress sought to prevent” when it enacted
Here, Curtis alleges a sufficiently concrete injury to establish standing. The harm he alleges is not a “bare procedural violation,” Spokeo, 136 S. Ct. at 1549, but instead is a substantive violation of the rights conferred by EFTA. Congress enacted EFTA to protect “individual consumer rights” in the context of electronic fund transfers.
Propel contends that Curtis‘s injury is not concrete because Curtis did not adequately allege that Propel required Curtis to agree to EFTs as a condition of the TPA. But on appeal, we construe the complaint in favor of Curtis and accept its material allegations as true. See David, 704 F.3d at 333. In his complaint, Curtis supported his allegation that Propel provided him with no opportunity to decline EFT preauthorization and that Propel violated his substantive rights under EFTA with respect to cancellation of EFTs by pointing to the language and structure of the TPA and its supporting documents. This is sufficient to establish standing. See id.; Spokeo, 136 S. Ct. at 1548.
Finally, an injury must be “actual or imminent, not conjectural or hypothetical.” Spokeo, 136 S. Ct. at 1548 (citation and internal quotation marks omitted). Propel contends that Curtis‘s injury is hypothetical because Curtis has not yet made an EFT payment or attempted to retract his EFT authorization. This argument mischaracterizes the injury. Curtis satisfies the injury requirement because he alleged that he was required to agree to EFT authorization as a condition of the TPA and that the TPA contained terms requiring him to waive EFTA‘s substantive rights regarding EFT withdrawal; whether he made EFT payments or attempted to withdraw EFT authorization is irrelevant. And even if we accept Propel‘s premise that Curtis has not yet been injured, Curtis would still have standing to challenge the TPA immediately because there is a “realistic danger” that Curtis will “sustain[] a direct injury” as a result of the terms of the TPA. Babbitt v. United Farm Workers Nat‘l Union, 442 U.S. 289, 298 (1979). Specifically, because Propel allegedly required Curtis to agree to preauthorized EFTs, when the time comes for Curtis to pay Propel,6 he will either need to make an EFT payment or attempt to withdraw his EFT authorization in response. Therefore,
Thus, we affirm the district court‘s determination that Curtis has standing to proceed on his claims under EFTA because, viewing the complaint in the light most favorable to Curtis, he has alleged that he suffered an injury in fact.
IV.
Propel also contends that the TPA as authorized by
The provisions of TILA and EFTA at issue on appeal only apply to the TPA if the TPA is a “consumer credit transaction.” See
A.
First, the TPA is a credit transaction within the meaning of TILA and EFTA. TILA defines credit as “the right granted by a creditor to a debtor to defer payment of debt or to incur debt and defer its payment.”
Second, the TPA is a financing transaction because it creates third-party obligations between Curtis and Propel. Specifically, the TPA requires Curtis to pay Propel interest and fees--an obligation wholly separate from Curtis‘s tax obligation to the locality and owed only to Propel. Similarly, when a homebuyer takes out a home mortgage, she agrees to pay the bank interest and fees--costs which are unrelated to the homebuyer‘s underlying obligation to pay the listing price to the seller. These characteristics of the TPA--that it allows Curtis to defer payment of his property taxes and that it creates third-party obligations between Curtis and Propel--align precisely with those of third-party financing of a tax obligation as allowed by the statute. To dismiss the third-party nature of the relationship between Curtis and Propel here would be to dismiss the Staff Commentary, which defines third-party financing of tax obligations as credit, altogether.
Propel contends that the TPA is not a credit transaction because it is different from a bank loan. While that may be true, it is also irrelevant. In discussing what constitutes acceptable third-party financing of tax liens and assessments, the Staff Commentary by its terms used a bank loan as an “example,” not a limitation.
Moreover, differences between the TPA and a bank loan do not transform the TPA into something other than third-party financing of a tax obligation. For instance, TILA does not only apply to payments made directly to consumers. We know this because, for example, TILA requires creditors to describe how much credit they provide “to [the consumer] or on [the consumer‘s] behalf.”
In support of its view, Propel cites cases from the Third and Fifth Circuits that are neither binding nor, more importantly, analogous. See Billings v. Propel Fin. Servs., LLC, 821 F.3d 608 (5th Cir. 2016); Pollice v. Nat‘l Tax Funding, L.P., 225 F.3d 379 (3d Cir. 2000), abrogated on other grounds by Tepper v. Amos Fin., LLC, 898 F.3d 364 (3d Cir. 2018). Critically, in those cases, the third-party tax transactions at issue involved transfers of a taxpayer‘s tax lien from a locality to a third party. See Billings, 821 F.3d at 610; Pollice, 225 F.3d at 385-86. The Fifth Circuit reasoned that because “the tax obligation [wa]s simply transferred from the taxing authorities to the transferee lending institution, and there [wa]s no independent line of credit extended to the property owner,” these arrangements were not third-party financing of a tax obligation subject to TILA. Billings, 821 F.3d at 613 n.4 (emphasis added) (citing Pollice, 225 F.3d at 409-11). Central to the Fifth Circuit‘s determination was the fact that the transaction involved a tax lien transfer, bringing the transaction closer to a direct tax obligation held by a third party as opposed to third-party financing of a tax obligation.
In stark contrast to those cases, the locality here does not transfer Curtis‘s tax lien to Propel. Instead, the locality retains the tax lien until Curtis has fully repaid Propel. See J.A. 32 (explaining as a term of the TPA that the locality will retain any tax liens and will not release any judgments until Curtis completely repays his balance to Propel). The tax obligation here is therefore not “simply transferred” from the locality to the third-party lender as it was in the cases on which Propel relies. Billings, 821 F.3d at 613 n.4. Rather, by operation of the TPA, Propel extends a line of credit to Curtis to finance the real property taxes that Curtis owes to the locality. The arrangement here thus severs the direct linkage to a preexisting tax obligation that has led to the general rule excluding tax liens from the definition of credit.10 Instead, like a mortgage or a bank loan, the TPA involves a consumer enlisting a third party to help it defer payment of a debt in exchange for interest and fees.
Propel contends that the fact that the locality retains Curtis‘s tax lien makes the transaction look more like a tax obligation and thus is further evidence that the TPA is not a credit transaction. But the fact that a third party has an interest in the thing being financed does not transform a credit transaction into something else. Indeed, this is common in ordinary consumer
Indeed, straightforward application of the language of TILA, its regulations, and the Staff Commentary tells us unambiguously that the TPA is a credit transaction because it provides for third-party financing of a tax obligation. But even if the plain language were ambiguous, policy considerations would counsel us to interpret TILA and EFTA to cover transactions like the TPA here because “TILA is a remedial consumer protection statute that is read liberally to achieve its goals,” and we “豪construe TILA broadly so that it will provide protection for the consumer.” Phelps, 306 F. Supp. 2d at 596 (citation and internal quotation marks omitted). Under this standard, it would frustrate the purpose of TILA and EFTA to exclude the TPA here from regulation. Accordingly, we conclude that the TPA is a credit transaction under those statutes.
B.
Having established that the TPA is a credit transaction, we next consider whether it is also a consumer transaction within the meaning of TILA and EFTA. Under TILA, a consumer transaction is “one in which the party to whom credit is offered or extended is a natural person, and the money, property, or services which are the subject of the transaction are primarily for personal, family, or household purposes.”11
Propel urges us to look to bankruptcy law by analogy, arguing that because tax obligations are not debt for purposes of bankruptcy, payment of those obligations cannot involve a consumer transaction. This argument is plainly contradicted by the Staff Commentary. The Commentary anticipates that consumer credit may be used to defer payment of tax obligations; indeed, it includes third-party financing of tax obligations within its definition of credit transactions covered by the statute. See
Notwithstanding the Staff Commentary, however, Propel‘s argument fails even under bankruptcy law. When bankruptcy courts consider whether debt is consumer debt, they look “to the purpose for which the debt was incurred” to determine
Propel nevertheless argues that the TPA is not a consumer transaction because the imposition of the underlying obligation--property taxes--is motivated by the public welfare rather than by personal, family, or household purposes. In support of this position, it cites to a non-binding case in which the bankruptcy court held that “a debt for personal property tax is not a consumer debt even where the property being taxed is held for personal, family, or household use.” In re Stovall, 209 B.R. 849, 854 (Bankr. E.D. Va. 1997). In so holding, the bankruptcy court explained that “a consumer debt is one that is ‘incurred‘--implying that some voluntary action is taken before a consumer becomes liable on the debt. A tax, however, is not ‘incurred.‘” Id. (emphasis added) (citation omitted). Rather, it is “involuntarily imposed by a government for the public welfare.” Id. But Stovall is not analogous. In that case, the debt at issue was the unpaid personal property tax itself, not credit obtained to finance the payment of that debt. In contrast, the debt at issue here is not the tax that Curtis owes to the locality. Instead, it is one level removed--it is Curtis‘s obligation to Propel, a third party, to repay Propel‘s financing of Curtis‘s tax obligation.12 Thus, even to the extent that Stovall holds that property taxes are not consumer debts, that holding is inapplicable.
We are therefore constrained to conclude that the TPA entered into pursuant to
V.
We affirm the district court‘s decision that Curtis has standing under EFTA because he alleged that he suffered an injury in fact, and we affirm the district court‘s denial of Propel‘s motion to dismiss Curtis‘s TILA and EFTA claims because the TPA is a consumer credit transaction subject to those statutes.
AFFIRMED
BARBARA MILANO KEENAN, Circuit Judge, concurring in part and dissenting in part:
I concur in Part III of the majority opinion affirming the district court‘s ruling that Curtis has standing to bring claims against Propel under the Electronic Funds Transfer Act,
In my view, the TPA does not qualify as a “credit” transaction because
A TPA is not a “credit transaction,” within the meaning of TILA, because the preexisting obligation of the taxpayer is not severed by the third-party payor‘s payment, and the third-party payor does not grant any right to the taxpayer that is not conferred already by statute. The TPA, a creature of Virginia statute, merely implements those statutory rights, with accompanying benefits to both the taxpayer and the third-party payor. The majority sidesteps this statutory framework and strains to conclude that the TPA must be a credit transaction under TILA because (1) Propel has advanced payment on behalf of the taxpayer, and (2) the taxpayer is required to pay that sum back to Propel, unless (3) the taxpayer later defaults on its TPA obligations and Propel obtains repayment from the locality. Any facial appeal of this approach, however, is undermined by the plain terms of the statute.
Under this plain language, the Virginia statute authorizes the third-party payor to pay the taxpayer‘s outstanding local tax assessment in return for the taxpayer‘s promise to repay the third party in accordance with the TPA payment plan. The material terms of that payment plan are regulated by the Virginia statute. See id. (setting forth the maximum repayment period, the maximum interest rate, and the maximum origination fee). The statute also requires the third-party payor to provide monthly status reports to the local government
The locality‘s oversight of the taxpayer‘s compliance with the TPA continues throughout the repayment process. After the third party pays the locality on behalf of the taxpayer, the locality “toll[s]” any enforcement period for the taxes owed.
Contrary to the majority‘s conclusion, a TPA cannot realign this statutory relationship of the parties and transform the third party‘s payment of the tax assessment into a “credit transaction” under TILA. The Virginia statute merely invites a third-party payor to “front” the money for payment of the taxpayer‘s obligation, in return for receiving fees and interest allowed by the statute, and tolls enforcement of the tax lien against the taxpayer only so long as he complies with the parties’ tax-payment plan. In other words, the TPA “changes only the entity to which” the taxpayer is “indebted for the taxes originally owed, not the nature of the underlying debt.” Billings v. Propel Fin. Servs., LLC, 821 F.3d 608, 613 (5th Cir. 2016) (citation omitted).
Moreover, TPAs authorized by the Virginia statute differ dramatically from typical third-party financing of debt, such as “a mortgage or a bank loan,” in which a “consumer enlist[s] a third party to help” defer payment “in exchange for interest and fees.” Maj. Op. 16. Although the third-party payor under a TPA collects interest and fees from the taxpayer, any similarity to a bank loan ends there. A TPA is not an independent financial agreement in which a lender or its assignee retains full recourse against the individual receiving the benefit of payment. See Billings, 821 F.3d at 613 & n.4 (citing Pollice v. Nat‘l Tax Funding, L.P., 225 F.3d 379, 409-11 (3d Cir. 2000), abrogated on other grounds by Henson v. Santander Consumer USA Inc., 137 S. Ct. 1718 (2017)). And as noted, under a TPA, the taxpayer has a continuing obligation to the taxing locality until the taxpayer has paid the entire amount of the principal due under the TPA.
Because the third-party payor under a Virginia TPA cannot enforce the tax lien upon default by the taxpayer, the TPA bears even less resemblance to a standalone third-party financing of a tax obligation than the transactions at issue in Billings and Pollice. There, the localities had transferred the tax liens to the third-party payors, who thereby obtained that additional avenue of recourse against the taxpayers. See Billings, 821 F.3d at 610; Pollice, 225 F.3d at 385-86. Yet, in holding that these transactions did not qualify as “credit” under TILA, the Fifth and Third Circuits emphasized that the third parties nevertheless did not extend a “line of credit” independent from the tax obligation. Billings, 821 F.3d at 613 n.4; see Pollice, 225 F.3d at 410-11.
The same is true here. The TPA “did not create” a new debt “that would be subject to TILA,” Billings, 821 F.3d at 613, but instead granted Propel the authority to implement a payment plan with Curtis for his existing tax obligation, which is not subject to TILA.
I wish to emphasize that I appreciate the important purposes of TILA in protecting consumers from unfair lending practices. But in my view, any protection for Virginia taxpayers entering into TPAs is an issue to be resolved by Virginia, the sovereign entity creating this form of tax-payment plan. For these reasons, I would vacate the judgment of the district court that the TPA qualifies as “credit transaction” under TILA.2