KEVIN McNULTY, District Judge.
Plaintiff Britton Thomas ("Thomas") brings a putative class action based on a statement in a debt collection letter he received (the "Letter") advising that if Thomas took the option of paying the reported debt by credit card, a $3.00 convenience fee (the "Convenience Fee") would be added. Thomas contends the Convenience Fee is neither authorized by contract nor permitted by law, and therefore the Letter contains false, deceptive, and misleading language, violating provisions of the Fair Debt Collections Practice Act (the "FDCPA"), 15 U.S.C. §§ 1692e, 1692f, and 1692g. The defendants, the alleged debt collectors who sent the Letter, move to dismiss Thomas's amended complaint for lack of standing and for failure to state a claim pursuant to Fed. R. Civ. P. 12(b)(6).
Because I find that Thomas has standing and that he has adequately stated claims under 15 U.S.C. §§ 1692e, 1692e(2), 1692e(10), 1692f, and 1692f(1), I will deny the defendants' motion to dismiss as to those claims. I will grant the defendants' motion to dismiss, however, with respect to Thomas's claims alleging violations of 15 U.S.C. §§ 1692e(5) and 1692g(a)(1) for failure to state a claim, pursuant to Fed. R. Civ. P. 12(b)(6).
Thomas alleges defendant John A. Youderian Jr., an attorney, and his debt collection business, defendant John A. Youderian Jr., LLC (collectively, "Youderian"), engage in debt collection for individuals' past-due or defaulted debts "incurred primarily for personal, family or household purposes." (AC ¶¶ 5-7, 10-11)
Thomas alleges the Letter, dated March 12, 2015, was the first written communication he received from Youderian. That Letter reports that Thomas owes $327.80 to Allergy Consultants PA — Thomas's original creditor, which assigned Thomas's past-due account to Youderian for collection. (Id. ¶¶ 17-27, Ex. A) Two payment options are offered. The first option is to pay by mailing a check or money order. The second option is to pay by credit card.
The Letter states, in part: "You may pay by credit card by filling out the bottom portion of this letter and sending it to our office or by calling us at (856)376-[XXXX] . . . . If you pay by check or money order, your check or money order should be made out to `John A. Youderian Jr. Esq.' and sent to the address at the top of this page." (Id. ¶ 28, Ex. A). The bottom portion of the Letter is essentially a removable coupon, which can be cut off and returned with payment. The Letter cautions:
Thomas alleges — counterintuitively — that because the only way to avoid the Convenience Fee according to the Letter is to mail a check or money order, "Defendants' collection letters . . . are designed to drive least sophisticated consumers, such as Plaintiff, to make payments by credit card." (Id. ¶¶ 32-34) He also alleges that the Convenience Fee language is "intended to falsely convey that Defendants are legally and/or contractually permitted to charge a $3.00 `convenience fee'. . . when in fact such a fee/charge is neither authorized by contact nor permitted by law," and that the original creditor — Allergy Consultants PA — does not charge consumers a $3.00 convenience fee to pay by credit card. (Id. ¶¶ 35, 39). Further, alleges Thomas, the language concerning the Convenience Fee is materially false and intended to confuse letter recipients "about the exact amount of money they allegedly owed." (Id. ¶ 41) Thomas claims that Youderian, as a matter of policy and practice, makes false representations in debt collection letters concerning services rendered or compensation received and collects unauthorized amounts "incidental to the principal obligation." (Id. ¶ 48).
Seeking actual and statutory damages, attorney's fees, and costs for Youderian's violation of the FDCPA, as authorized by 15 U.S.C. § 1692k, (see generally Id. ¶¶ 64-73, VIII), Thomas seeks to join as a class of "consumers" (as defined by 15 U.S.C. § 1692a(3)), all persons with an address in New Jersey who paid the Convenience Fee and/or to whom Youderian sent a letter containing a statement about the Convenience Fee. (Id. VIII, ¶ 52)
Thomas alleges Youderian has violated several provisions of the FDCPA, as follows:
(AC ¶ 71(a)-(h))
Under Fed. R. Civ. P. 12(b)(6), the defendant, as the moving party, bears the burden of showing that no claim has been stated. Animal Science Products, Inc. v. China Minmetals Corp., 654 F.3d 462, 469 n. 9 (3d Cir. 2011). For the purposes of a motion to dismiss, the facts alleged in the complaint are accepted as true and all reasonable inferences are drawn in favor of the plaintiff. New Jersey Carpenters & the Trustees Thereof v. Tishman Const. Corp. of New Jersey, 760 F.3d 297, 302 (3d Cir. 2014).
Federal Rule of Procedure 8(a) does not require that a complaint contain detailed factual allegations. Nevertheless, "a plaintiff's obligation to provide the `grounds' of his `entitlement to relief' requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). Thus, the complaint's factual allegations must be sufficient to raise a plaintiff's right to relief above a speculative level, so that a claim is "plausible on its face." Id. at 570; see also West Run Student Housing Assocs., LLC v. Huntington Nat. Bank, 712 F.3d 165, 169 (3d Cir. 2013). That facial-plausibility standard is met "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) (citing Twombly, 550 U.S. at 556). While "[t]he plausibility standard is not akin to a `probability requirement'. . . it asks for more than a sheer possibility." Iqbal, 556 U.S. at 678.
In addition to seeking to dismiss pursuant to Fed. R. Civ. P. 12(b)(6), the defendants contend that Thomas lacks standing. Standing has a Constitutional aspect, which implicates the court's subject matter jurisdiction under Rule 12(b)(1).
Rule 12(b)(1) challenges may be either facial or factual attacks. See 2 Moore's Federal Practice § 12.30 (3d ed. 2007); Mortensen v. First Fed. Sav. & Loan Ass'n, 549 F.2d 884, 891 (3d Cir. 1977). A facial challenge asserts that the complaint does not allege sufficient grounds to establish subject matter jurisdiction. Iwanowa, 67 F. Supp. 2d at 438. A court considering such a facial challenge assumes that the allegations in the complaint are true, and may dismiss the complaint only if it nevertheless appears that the plaintiff will not be able to assert a colorable claim of subject matter jurisdiction. Cardio-Med. Assoc., Ltd. v. Crozer-Chester Med. Ctr., 721 F.2d 68, 75 (3d Cir. 1983); Iwanowa, 67 F. Supp. 2d at 438. A factual attack, on the other hand, permits the Court to consider evidence extrinsic to the pleadings. Gould Elecs. Inc. v. United States, 220 F.3d 169, 178 (3d Cir. 2000), holding modified on other grounds by Simon v. United States, 341 F.3d 193 (3d Cir. 2003). Thus "Rule 12(b)(1) does not provide plaintiffs the procedural safeguards of Rule 12(b)(6), such as assuming the truth of the plaintiff's allegations." CNA v. United States, 535 F.3d 132, 144 (3d Cir. 2008).
Youderian protests that the $3.00 fee was authorized by agreement and by law. The Court's assessment of Article III standing, however, occurs upstream of that Rule 12(b)(6) merits analysis. The standing question is generally not an inquiry about the validity of the plaintiff's claim, but "an inquiry about the plaintiff: is this the right person to bring this claim." (Pl. Br. 11 (citing Davis v. Wells Fargo, 824 F.3d 333, 348 (3d Cir. 2016) (citing Raines v. Byrd, 521 U.S. 811, 818, 117 S.Ct. 2312 (1997))). I must determine whether Thomas's claim of an FDCPA violation is adequately connected to a claim of a concrete injury-in-fact suffered by Thomas himself.
I am cognizant of the law's reifying tendency to treat "standing" as an identifiable thing that a plaintiff does or does not "have." A court can go astray in ascribing objective reality to what are in truth policy choices. I am persuaded, however, that Thomas has pled a concrete injury-in-fact of the kind this statute was intended to redress.
Under Article III of the U.S. Constitution, a plaintiff must establish that standing to sue. As the Supreme Court recently summarized in Spokeo, Inc. v. Robins:
136 S.Ct. 1540, 1547 (2016), as revised (May 24, 2016).
That constitutional injury-in-fact must be "concrete and particularized" and "fairly traceable to the challenged action of the defendant and likely to be redressed by a favorable judicial decision." Lexmark Int'l, Inc. v. Static Control Components, Inc., 134 S.Ct. 1377, 1386 (2014) (citing Lujan, supra). A particularized injury is one that affects the plaintiff in a "personal and individual way" and a concrete injury is one that actually exists, though it need not be tangible. Spokeo, Inc., 136 S.Ct. at 1548-49 (quoting Lujan, 504 U.S. at 560 n.1).
Youderian argues that Thomas fails to establish any injury-in-fact. There is no doubt that Thomas's alleged injury is particularized; it clearly is, because Thomas personally received the Letter, and the debt reported therein is said to be his. Rather, Youderian claims the injury Thomas alleges is not sufficiently concrete because it amounts to nothing more than a bare procedural violation. The amended complaint does not allege that Thomas paid his reported debt using a credit card, thereby incurring the $3.00 fee, or indeed that he paid the debt at all, by any means. (Br. 8)
In Spokeo, the plaintiff alleged that Spokeo, the operator of an online "people search engine" that conducts computerized background checks, violated the Fair Credit Reporting Act of 1970 ("FCRA") by providing inaccurate personal information about the plaintiff to Spokeo's customers. The plaintiff did not allege actual damages, prompting Spokeo to challenge the plaintiff's standing to sue. Id. at 1546. Reasoning that the plaintiff's allegation of a "bare procedural violation" of the FCRA might result in no harm at all,
Thomas cannot "allege a bare procedural violation, divorced from any concrete harm, and satisfy the injury-in-fact requirement of Article III." (Br. 8 (quoting Spokeo, Inc., 136 S.Ct. at 1549)). But does Thomas merely allege a "bare procedural violation" here, or does he also identify concrete, albeit intangible, harm? In Spokeo, the Supreme Court explained that whether an intangible harm rises to the level of injury-in-fact depends on historical practice and Congressional judgment. Id. at 1549. Specifically, courts should look to (a) whether the right violated was one traditionally recognized at law, and (b) whether Congress has elevated it to the status of a legally cognizable, redressable injury. In re Horizon Healthcare Servs. Inc. Data Breach Litig., No. 15-2309, 2017 WL 242554, at *9 (3d Cir. Jan. 20, 2017) (citing Spokeo, 136 S.Ct. at 1549).
Thus, "the violation of a procedural right granted by statute can be sufficient in some circumstances to constitute injury in fact. . . . [A] plaintiff in such a case need not allege any additional harm beyond the one Congress has identified." Id. (quoting Spokeo, 136 S.Ct. at 1549). See also In re Nickelodeon Consumer Privacy Litig., 827 F.3d 262, 273 (3d Cir. 2016), cert. denied sub nom. C. A. F. v. Viacom Inc. (U.S. Jan. 9, 2017) ("in some cases an injury-in-fact may exist solely by virtue of statutes creating legal rights, the invasion of which creates standing."). But, "Congress's role in identifying and elevating intangible harms does not mean that a plaintiff automatically satisfies the injury-in-fact requirement whenever a statute grants a person a statutory right and purports to authorize that person to sue to vindicate that right. Article III standing requires a concrete injury even in the context of a statutory violation." Spokeo, 136 S.Ct. at 1549. "Essentially, `the question framed by [Spokeo's] discussion [is] whether the particular procedural violations alleged in [a] case entail a degree of risk sufficient to meet the concreteness requirement.'" Bock v. Pressler & Pressler, LLP, 658 F. App'x 63, 65 (3d Cir. 2016) (quoting Spokeo, 136 S.Ct. at 1550).
b. Post-Spokeo cases alleging FCRA violations and privacy breaches
The U.S. Court of Appeals for the Third Circuit has not explicitly resolved whether, in light of Spokeo, a bare violation of the FDCPA constitutes concrete injury.
A debt collector's disclosure of private information, even if it did not lead to economic loss, might give rise to standing. Privacy is a right traditionally recognized at law, and Congress might permissibly declare certain information to be protected, elevating its disclosure to the status of an actionable harm. Id.
c. Post-Spokeo FDCPA cases in this District
I take guidance from cases by judges in this district that have applied Spokeo to FDCPA claims. For example, on nearly identical allegations of an unauthorized convenience charge (albeit on summary judgment, not a motion to dismiss), Judge Martinotti held that a complaint alleging violations under Sections 1692e and 1692f(1) had failed to set forth a concrete injury. See Benali v. AFNI, Inc., No. CV 15-3605-BRM-DEA, 2017 WL 39558, at *1 (D.N.J. Jan. 4, 2017). There, however, the plaintiff had also alleged that he recognized, on reading the letter, that the debt was not his. Id. at *5. Because the plaintiff could not have been confused, and would not have paid the debt, Judge Martinotti concluded that "Defendant's alleged FDCPA violations did not, in fact, result in any actual or threatened harm. . . ." Id. at *6.
On different facts, however, Judge Martinotti reached the opposite conclusion in Carney v. Goldman, No. CV 15-260-BRM-DEA, 2016 WL 7408849 (D.N.J. Dec. 22, 2016). There, on a motion to dismiss, he found that the plaintiff had alleged standing based on "informational injury" and "risk of economic injury." In Carney, the defendant's debt collection letters demanded an amount that included attorney's fees and costs not yet due. Such demands, Judge Martinotti held, were legitimately alleged to have inflicted a concrete injury redressable by the FDCPA Section 1692e. Id. at *2, 5. To arrive at this determination, Judge Martinotti looked to the historical practice and Congressional judgment concerning the FDCPA:
Id., at *5.
Similarly, in another recent case in this district, Blaha v. First National Collection Bureau, Case No. 16-2791, slip op. at 13-16 (D.N.J. Nov. 10, 2016), Judge Walls found sufficient concrete injury-in-fact where the plaintiff alleged that the defendants' collection letter failed to disclose that the debt sought was time-barred. Plaintiffs thus had "made a plausible claim under 1692e(2)(A), which specifically prohibits the false representation of the character or legal status of any debt." Id. at 12, 15. There, Judge Walls considered Congress's motivation in enacting the FDCPA — "`abundant evidence of the use of abusive, deceptive, and unfair debt collection practices' and the inadequacy of existing laws and procedures designed to protect consumers." Id. (quoting 15 U.S.C. § 1692(a), (b)).
These and other recent cases trend in favor of finding concrete injury under the FDCPA where the amount or validity of the debt has been misstated.
To my mind, such cases fit easily within the Spokeo rationale. The right not to be given false information about the true amount owed is rooted in an interest traditionally recognized at law. Congress, in enacting the FDCPA, could give content to that interest and elevate particular violations of it to the status of a viable federal cause of action.
d. This case
In this case, the question is a closer one, for at least two reasons. First, the $3.00 convenience fee is not rolled into the balance of the debt, but is presented separately as a cost of selecting the option of paying the debt by credit card. Second, Thomas didn't pay the $327.80 debt, whether by credit card or by any other means, and he did not incur the $3.00 fee.
The amended complaint alleges that the Convenience Fee is improper. It is not controversial that standing would exist if Thomas had taken the credit card option and paid the fee. He could then point to a concrete injury in the amount of $3.00. But he did not. The injury must be found elsewhere.
The amended complaint suggests that there is an injury because some "Consumers" pay medical bills using insurers' prepaid cards, or pay them from health savings accounts. (AC ¶¶ 37, 38) Neither, according to the amended complaint, would reimburse such a "Consumer" for the $3.00 fee. But Thomas does not allege that he ever pays medical bills this way. And he does not allege that he paid, or sought to pay, this medical bill at all. Personal standing based on a hypothetical injury to third-party "Consumers" is highly problematic.
In his brief, Thomas offers another theory of injury.
"Luring" a consumer into not paying a $3.00 fee does not comport with my intuitive concept of an injury. Still, the claim is that paying by credit card is something convenient or desirable for the consumer — and that claim is not implausible in light of everyday experience.
Nevertheless, I think there is barely enough for standing in this case. Here, the claim, whether under 1692f or 1692e, rests on an allegedly misleading statement in the Letter. Thomas alleges that the language concerning the Convenience Fee is false and deceptive. (See ¶¶ 35-36, 40.) The Letter is alleged to misrepresent the fee as a pass-along of an expense, while it actually represents an additional source of profit to the debt collector. The Letter is alleged to impliedly represent that the debt collector is authorized to charge what is in fact an unauthorized fee. The least sophisticated consumer, then, is at risk of being misled into paying the $3.00 Convenience Fee. Alternatively, such a consumer is at risk of forgoing the convenience of paying the bill on credit (or, I suppose, at risk of giving up on paying it for lack of ready money). I do not suggest that Thomas has a personal cause of action to assert the rights of others who actually lost money (he doesn't). I mean only that these are the kind of misleading statements which, if sent to a debtor, might give rise to an actionable injury under this statute. Deprivation of the right to be free of false or deceptive debt collection information, with the attendant risk of economic injury, is an interest recognized by the statute, and one reasonably rooted in the traditions of the common law. Under Spokeo, it may give rise to Article III standing.
The pitfalls of such a claim, at the merits stage, are many. But these allegations are sufficient to support Article III standing and permit an examination of the merits.
Failure to State a Claim
To state a claim under the FDCPA, a plaintiff must allege that "(1) [he] is a consumer, (2) the defendant is a debt collector, (3) the defendant's challenged practice involves an attempt to collect a `debt' as the Act defines it, and (4) the defendant has violated a provision of the FDCPA in attempting to collect the debt." Douglass v. Convergent Outsourcing, 765 F.3d 299, 303 (3d Cir. 2014); see also Piper v. Portnoff Law Assocs., Ltd., 396 F.3d 227, 232 (3d Cir. 2005); Johns v. Northland Grp., Inc., 76 F.Supp.3d 590, 597 (E.D. Pa. 2014). Thomas clearly alleges the first three factors and Youderian does not dispute this. (See 15 U.S.C. § 1692a; AC ¶¶ 17-19, 21, 65). What must be determined is whether Thomas has plausibly alleged that Youderian's debt collection efforts violated some provision of the FDCPA.
Youderian first argues that the amended complaint must be dismissed because the Convenience Fee is valid: both permitted under New Jersey law and authorized under an agreement Thomas entered into with his medical creditor, Allergy Consultants PA. Alternatively, says Youderian, even if the Convenience Fee is not authorized, the representations about it in the Letter are not material.
a. Standards: "Least Sophisticated Debtor" and "Materiality"
Before addressing Youderian's arguments, I will say a word about the legal standards governing FDCPA claims based on misleading communications in connection with collection of a debt.
Courts routinely apply the "least sophisticated debtor" standard when "analyzing] the communication giving rise to the FDCPA claim," Kaymark v. Bank of Am., N.A., 783 F.3d 168, 174 (3d Cir. 2015) (quoting Rosenau v. Unifund Corp., 539 F.3d 218, 221 (3d Cir. 2008)). As the Third Circuit explained in Jensen v. Pressler & Pressler.
791 F.3d 413, 418-19 (3d Cir. 2015).
The Letter — the relevant communication between debt collector and consumer — is implicated in each of Thomas's claims. It must therefore be read with the eyes of the least sophisticated debtor. See Brown v. Card Serv. Ctr., 464 F.3d 450, 454 (3d Cir. 2006) ("[A]ny lender-debtor communications potentially giving rise to claims under the FDCPA . . . should be analyzed from the perspective of the least sophisticated debtor.").
"[W]hether the least sophisticated debtor would be misled by a particular communication is a question of law that may be resolved in a Rule 12(b)(6) motion." Smith v. Lyons, Doughty & Veldhuius, P.C., No. CIV.A. 07-5139, 2008 WL 2885887, at *3 (D.N.J. July 23, 2008). See also Wilson v. Quadramed Corp., 225 F.3d 350, 353 (3d Cir. 2000), as amended (Sept. 7, 2000) ([W]hether language in a collection letter contradicts or overshadows the validation notice is a question of law."); Galuska v. Collectors Training Inst. of Ill., Inc., No. 3:07-CV-2044, 2008 U.S. Dist. LEXIS 39508, at *8, 2008 WL 2050809 (M.D.Pa. May 13, 2008) ("Whether a communication is misleading under the FDCPA presents a question of law for the court; disputed facts must be resolved by a jury.").
Section 1692e contains an additional materiality requirement, but it "is simply a corollary of the well-established `least sophisticated debtor' standard." Jensen v. Pressler & Pressler, 791 F.3d 413, 418 (3d Cir. 2015). "[A] statement in a communication is material if it is capable of influencing the decision of the least sophisticated debtor." Id. at 420-21. That is not a high bar. "[T]he materiality requirement, correctly applied, effectuates the purpose of the FDCPA by precluding only claims based on hypertechnical misstatements under § 1692e that would not affect the actions of even the least sophisticated debtor." Id. at 422.
b. § 1692f (claims f and g)
Section 1692f is a catchall provision providing that a "debt collector may not use unfair or unconscionable means to collect or attempt to collect any debt." 15 U.S.C. § 1692f. Section 1692f's subsections then itemize nonexclusive examples of conduct that constitute a violation of the catchall provision. Although Thomas seeks relief under several provisions of the FDCPA (listed supra), the parties' briefing focuses on subsection 1692f(1): "The collection of any amount (including any interest, fee, charge, or expense incidental to the principal obligation) unless such amount is expressly authorized by the agreement creating the debt or permitted by law." 15 U.S.C. § 1692f(1).
Courts have often applied Section 1692f(1) in the context of convenience fees, also known as service charges. It is settled that such a fee does not violate the FDCPA (1) where it is expressly permitted under state law; or (2) if state law does not expressly authorize or prohibit the charge, where the customer expressly agreed to the fee in the contract creating the debt. Tuttle v. Equifax Check, 190 F.3d 9, 15 (2d Cir. 1999); Pollice v. Nat'l Tax Funding, L.P., 225 F.3d 379, 407-408 (3d Cir. 2000) (adopting the interpretation set forth in Tuttle and FTC Staff Commentary).
Youderian argues that New Jersey law expressly permits imposition of credit card convenience fees. In support, he cites N.J. Stat. Ann. § 40A:5-46 (and a related regulation, N.J. Admin. Code 5:30-9.9). (Br. 11) The statute does not, however, remotely approach an explicit authorization of credit card service charges by debt collectors, or indeed any private party. It reads:
N.J. Stat. Ann. § 40A:5-46. That statute is part of Title 40A, "Municipalities and Counties." The particular statutory section cited is part of the "Local Fiscal Affairs Law," N.J. Stat. Ann. § 40A:5-1 et seq. A "local unit," as used therein, refers to a local governmental unit: a county, a municipality, or other listed public authority. See N.J. Stat. Ann. § 40A:5-2 (Definitions); N.J. Admin. Code § 5:30-15.2. A "local unit" does not include a private creditor or debt collector. And indeed, the statute phrases its authorization as a governmental exemption from rules that might apply to other entities ("Notwithstanding the provisions of any other law to the contrary. . . .").
Youderian has thus failed to identify any New Jersey law expressly authorizing private parties like himself to impose this Convenience Fee. On the other hand, neither party points to any New Jersey law that prohibits the Convenience Fee, either. Where a fee is neither expressly authorized nor prohibited by law, it may be imposed if it is authorized by the agreement that created the debt at issue. See Tuttle, supra; Pollice, supra.
To establish that Thomas agreed to this Convenience Fee, Youderian submits with his motion a copy of the "Financial Policy/Patient Guarantor Agreement" between Thomas and Allergy Consultants PA (the "Agreement"). (See Certification of Meredith Kaplan Stoma, Ex. H (ECF no. 12-2 at 22), hereinafter "Agreement") It is that Agreement which allegedly gave rise to the $327.80 debt in question. It appears to be signed by Thomas, and no objection is raised to its authenticity.
Youderian's argument immediately runs into trouble. Support for it cannot be found in the plain wording of the Agreement, which states:
(Agreement ¶¶ 5, 6) As Thomas points out (Opp. 23), the Agreement does not "expressly authorize" a $3.00 convenience fee for credit card charges, as Section 1692f(1) requires. True, it authorizes a 30% "collection fee," and 30% of this $327.80 debt comes out to $98.34, a sum far in excess of $3.00. But I cannot indulge some "no harm, no foul" rule that the debt collector could have charged some other fee, calculated in a different manner, that would have been even larger than the one it did charge. Viewing the Letter through the eyes of the least sophisticated debtor and taking the alleged facts in the light most favorable to Thomas, the amended complaint adequately alleges that this particular Convenience Fee for use of a credit card was not explicitly authorized. And having so alleged, the amended complaint states a claim under the FDCPA.
Citing Lee v. Main Accounts, Inc., 125 F.3d 855 (6th Cir. 1997), Youderian suggests (but does not expressly argue) in the alternative that the Convenience Fee does not fall within the ambit of Section 1692f(1) in the first place. Youderian stresses that this was not his fee, "but a third-party charge triggered when the debtor chose the option of paying by credit card." Id. (See Br. 10) Reasonable or not, this argument is factual, and hence premature; Lee was dealing with summary judgment and a factual record. See, e.g., Weast v. Rockport Fin., LLC, 115 Supp. 3d 1018, 1022-23 (E.D. Mo. 2015) ("Defendant's reliance on Lee . . . is misplaced. In that case the court determined on summary judgment that a five percent charge on payments made by credit card did not violate the FDCPA, because the defendant `would not have received any additional compensation from the credit card fee.' Such evidence may be forthcoming at the summary judgment stage, but based on the record before it, the Court cannot say that Defendant would not receive any profit from charging $3.00 for each credit/debit card transaction."); Quinteros v. MBI Assocs., Inc., 999 F.Supp.2d 434, 439-41 (E.D.N.Y. 2014) (rejecting defendant's reliance on Lee because the collection letter at issue did not indicate that a reported $5.00 processing fee would be collected by anyone but the defendant).
Youderian's only other argument challenges the materiality of the allegedly misleading statement in the Letter. (Br. 12). Thomas responds that the Third Circuit has only established materiality as a required element of an FDCPA violation with respect to Section 1692e, and therefore the standard does not apply to Section 1692f violations. (Opp. 24)
I raise one final argument, sua sponte, because it has come up in a number of cases addressing Section 1692f(1). Thomas has not alleged that he paid the Convenience Fee, or any of his debt whatsoever — he alleges only that "[a]t all times relevant . . . Defendants acted in an attempt to collect the Debt." (AC ¶ 23 (emphasis added)) Section 1692f(1), however, refers only to the "collection" of an amount, not the "attempted" collection. This omission has prompted at least the Second Circuit to hold that an attempted collection does not violate 1692f(1). Bank v. Cooper, Paroff, Cooper & Cook, 356 F. App'x 509, 511 (2d Cir. 2009) (unpublished) ("[D]efendants never actually collected a $35 bad check fee. Therefore, we do not find a violation of section 1692f(1), which prohibits the collection of unauthorized fees.").
I am hesitant to adopt that analysis; Section 1692f(1) is one of a number of nonexclusive examples of conduct that violates the more general proscription of 1692f, which outlaws attempts. Post-Bank cases within the Second Circuit have since determined that the attempted collection of an unauthorized fee violates that backstop provision, Section 1692f. See Campbell, 98 F. Supp. 3d at 583 (attempted collection of unauthorized amount violated Sections 1692f as well as 1692e(2));
Other courts, including some within the Third Circuit, have taken the more direct route of finding that Section 1692f(1) itself reaches both collection and attempted collection. See, e.g., Gigli v. Palisades Collection, L.L.C., No. 3:CV-06-1428, 2008 WL 3853295, at *5 (M.D. Pa. Aug. 14, 2008) ("Actual collection of such amounts, however, is not required, as § 1692f(1) proscribes the attempted collection of unauthorized debts."); Barrows v. Chase Manhattan Mortg. Corp., 465 F.Supp.2d 347, 354, 358 (D.N.J. 2006) (although defendants argued plaintiff lacked standing because she never paid the unauthorized fee requested, plaintiff still stated a claim under Section 1692f(1));
The Third Circuit has not squarely addressed this interpretive debate, but in an unpublished opinion, embraced the broader interpretation:
Dibattista v. Buckalew, Frizell & Crevina, LLP, 574 F. App'x 107, 113 (3d Cir. 2014) (unpublished) (emphasis added). See also Salvati v. Deutsche Bank Nat. Trust Co., 575 F. App'x 49, 56 (3d Cir. 2014) (citing 15 U.S.C. § 1692k(a)) (where district court dismissed plaintiff's Section 1692e(2)(A) and 1692f(1) claims because the plaintiff had not actually paid any of the costs and fees he alleged were illegal, "the District Court's conclusion was error because it ignored the fact that, under the FDCPA, a plaintiff may collect statutory damages even if he has suffered no actual damages.") (unpublished).
I am satisfied that the amended complaint sufficiently pleads a claim under either Section 1692f(1) or 1692f. For clarity, I state that I would adopt the broader interpretation of 1692(f)(1), supra.
c. § 1692e (claims a-e)
The amended complaint also asserts that Youderian's Letter violated Section 1692e, including subsections 1692e(2)(A) and (B), 1692e(5), and 1692e(10). (AC ¶ 71, claims a-e) Section 1692e provides that "a debt collector may not use any false, deceptive, or misleading representation or means in connection with the collection of any debt." 15 U.S.C. § 1692e. The Section includes a non-exhaustive list of violative conduct. See 15 U.S.C. §§ 1692e(1)-(16). Subsection (2) prohibits "the false representation of (A) the character, amount, or legal status of any debt; or (B) any services rendered or compensation which may be lawfully received by any debt collector for the collection of a debt." Id. Subsection (5) prohibits a "threat to take any action that cannot legally be taken or that is not intended to be taken." Id. And subsection (10) prohibits "[t]he use of any false representation or deceptive means to collect or attempt to collect any debt or to obtain information concerning a consumer." Id.
To the extent Youderian argues that the Convenience Fee was authorized, his contentions were disposed of in the preceding section. Youderian's remaining argument, particularly applicable to claims a through e, is that the Convenience Fee language, even if a misrepresentation, is not a material one. (Br. 14; Reply 11-12)
i. § 1692e, (2) and (10) (claims a, b, c, e)
Youderian's materiality defense comes to the fore with respect to the alleged violations under Section 1692e generally (claim a) and subsections 1692e(2) (claims b-c) and (10) (claim e). The Convenience Fee language is not material, says Youderian, because "[i]t could not, in any fashion, affect the least sophisticated debtor's `ability to make intelligent decisions.'" (Opp. 14 (quoting Jensen, 791 F.3d at 422)).
Turning first to claims b and c, Thomas's claims under subsection 1692e(2)(A) and (B), the question is not whether the Convenience Fee language accurately discloses the fee; rather, the question is whether the Convenience Fee language "violates the statute because it falsely implies that Defendant is entitled to collect the processing fee in the first place." Quinteros v. MBI Assocs., Inc., 999 F.Supp.2d 434, 439 (E.D.N.Y. 2014). The amended complaint alleges that Youderian is without authority to collect the Convenience Fee, and Youderian's motion, as discussed above, is insufficient to repel that allegation. Therefore, the Letter's implicit representation that Youderian does have such authority would likely deceive the least sophisticated debtor about "the character, amount, or legal status of any debt." 15 U.S.C. § 1692e(2)(A). It would also likely deceive such a debtor into believing that the "services rendered or compensation . . . may be lawfully received. . . ." 15 U.S.C. § 1692e(2)(B). The representation is therefore a materially false representation that violates Section 1692e(2).
I join other courts in holding that convenience or processing fee language supporting a Section 1692f(1) claim naturally supports a claim under 1692e(2) as well. For example, in Quinteros v. MBI Assocs., Inc., the court reasoned that the hypothetical least sophisticated consumer would likely read language stating "There will be a $5.00 processing fee for all credit cards or checks over the phone," and believe, incorrectly, that the defendant was legally entitled to collect the five-dollar fee. 999 F. Supp. 2d at 435, 440. The court explained that "even a shrewd consumer would be unlikely to question the legality of a seemingly reasonable five-dollar processing fee, much less turn to the statute books." Id. at 440. Therefore, "[b]ecause the Court ha[d] concluded that Plaintiff ha[d] stated a claim under § 1692f(1) of the FDCPA, Plaintiff ha[d] also stated a claim under § 1692e(2).'" Id.
Thomas's claim under Section 1692e(10) (claim e) survives for similar reasons. Indeed, it is difficult even to meaningfully distinguish subsection 1692e(10) from 1692e(2). If Youderian's allegedly false representation of authority to collect the Convenience Fee could be a material misrepresentation of "the character, amount, or legal status of any debt" or the "compensation which may be lawfully received," and it appears in a debt collection letter, then surely Thomas has also alleged a "false representation . . . to collect or attempt to collect any debt. . . ." in violation of Section 1692e(10). Perhaps for this reason, "[c]ourts have long held that after finding a valid claim under a more specific subsection of § 1692e . . . further analysis under § 1692e(10) is `somewhat duplicative.'" Chulsky v. Hudson Law Offices, P.C., 777 F.Supp.2d 823, 831-32 (D.N.J. 2011) (quoting Gervais v. Riddle & Associates, P.C., 479 F.Supp.2d 270, 276-77 (D. Conn. 2007)). Likewise, the viability of claims under Section 1692e's subsections implies that a direct claim under Section 1692e itself (claim a) has been stated.
Therefore, Youderian's motion to dismiss will also be denied with respect to claims a, b, c, and e, under Section 1692e and subsections e(2) and (e)(10).
ii. § 1692e(5) (claim d)
It is clear, however, that Thomas fails to state a claim under subsection 1692e(5) (claim d). The Letter is a solicitation to pay, or perhaps an offer to settle, Thomas's debt. Even the least sophisticated debtor would not plausibly read it as a threat to take any action. More to the point, the amended complaint does not allege that Youderian threatened Thomas with any action, such as the filing of a lawsuit. See Kaymark, 783 F.3d at 176; Skinner v. Asset Acceptance, LLC, 876 F.Supp.2d 473, 478-79 (D.N.J. 2012).
Therefore, Youderian's motion to dismiss will be granted as to claim (d), under subsection 1692e(5).
d. § 1692g(a)(1) (claim h)
Finally, in claim h of the amended complaint, Thomas asserts that Youderian's Letter violated FDCPA subsection 1692g(a)(1), which provides: "Within five days after the initial communication with a consumer in connection with the collection of any debt, a debt collector shall, unless the following information is contained in the initial communication or the consumer has paid the debt, send the consumer a written notice containing — (1) the amount of the debt." 15 U.S.C. § 1692g(a)(1).
First, the Letter cannot be the follow-up communication within five days that is required by 1692g. The amended complaint alleges that "[t]he Letter [was] the first written communication" from Youderian to Thomas regarding the debt. (AC ¶ 26 (emphasis added)). There is not an allegation of a prior communication that would have set the five-day clock running. Assuming arguendo that the Letter is a communication covered by 1692g, it is facially compliant. The letter plainly states the amount of Thomas's debt: $327.80. Even assuming that the $3.00 Convenience Fee is part of the debt, the Letter discloses that as well. And the arithmetic required to combine the two figures is not confusing or beyond the scope of even an unsophisticated reader. See generally Dibattista v. Buckalew, Frizell & Crevina, LLP, 574 F. App'x 107, 111 (3d Cir. 2014) (affirming dismissal of Section 1692g(a)(1) claim based on language reporting debt owed in two separate sums because "it is not unreasonable to expect even the least sophisticated debtor to be able to perform the simple addition of two sums . . ., and [plaintiff's] argument consist[ed] of nothing more than repeating the language of § 1692g(a)(1) while asserting, without support, that the Letter violates the section."); Smith v. Lyons, Doughty & Veldhuius, P.C., No. CIV.A. 07-5139, 2008 WL 2885887, *6 (D.N.J. July 23, 2008) (where debt collection letter did not indicate the date on which interest was calculated or disclose that interest would continue to accrue, plaintiff stated claim under Section 1692g(a)(1) because such "omissions could confuse the leas[t] sophisticated debtor.").
I find that the amended complaint fails to state a claim under Section 1692g(a)(1) and therefore, I will grant Youderian's motion to dismiss as to claim h.
For the reasons expressed above, the Defendants' motion to dismiss (ECF no. 12) is granted as to Thomas's claims under FDCPA Sections 1692e(5) and 1692g(a)(1) (claims d and h) and denied as to Thomas's claims under FDCPA Sections 1692e, 1692e(2), 1692e(10), 1692f, and 1692f(1) (claims a-c and e-g). This dismissal is without prejudice to the plaintiffs' filing within 30 days of a proposed second amended complaint. A separate order will issue.
Here, if Thomas's claim were merely that he should not be charged $3.00, the fact that he didn't pay the charge might be fatal to standing. But he also alleges an informational injury of the kind addressed by FDCPA: The debt collection letter's language, he says, is false and deceptive in that it deprives him of correct information and implies that an illegitimate $3.00 charge is in fact proper. Whether the charge is truly unauthorized, or bears the necessary relation to the underlying debt, is a merits question, not a standing question. I focus here on the claim and Thomas's standing to assert it.
The consumer's agreement to a charge or fee, according to the FTC Staff Commentary on the FDCPA, may take the form of acquiescence when disclosure of the charge is clear (for example, by a sign posted at the merchant's premises): "A debt collector may establish an `agreement' without a written contract. For example, he may collect a service charge on a dishonored check based on a posted sign on the merchant's premises allowing such a charge, if he can demonstrate that the consumer knew of the charge." Statements of General Policy or Interpretation Staff Commentary On the Fair Debt Collection Practices Act, 53 FR 50097-02.
More generally, the Agreement is properly considered on a motion to dismiss without converting it to one for summary judgment. See Fed. R. Civ. P. 12(d). The amended complaint cites and relies on the Agreement. Most pertinently, the amended complaint preemptively alleges that the Convenience Fee "is not expressly authorized by the agreement creating the debt." (AC ¶ 42).
"As a general matter, a district court ruling on a motion to dismiss may not consider matters extraneous to the pleadings. However, an exception to the general rule is that a `document integral to or explicitly relied upon in the complaint' may be considered `without converting the motion [to dismiss] into one for summary judgment.'" In re Burlington Coat Factory Sec. Litig., 114 F.3d 1410, 1426 (3d Cir. 1997) (quoting Shaw v. Digital Equip. Corp., 82 F.3d 1194, 1220 (1st Cir. 1996)). "[W]hat is critical is whether the claims in the complaint are `based' on an extrinsic document and not merely whether the extrinsic document was explicitly cited." Id. The court may also consider any "undisputedly authentic document that a defendant attaches as an exhibit to a motion to dismiss if the plaintiff's claims are based on the document." In re Asbestos Products Liability Litigation (No. VI), 822 F.3d 125, 134 & n.7 (3d Cir. 2016) (quoting PBGC v. White Consol. Indus., 998 F.2d 1192, 1196 (3d Cir. 1993)).
Datiz v. Int'l Recovery Assocs., Inc., No. 15CV3549ADSAKT, 2016 WL 4148330, at *5 (E.D.N.Y. Aug. 4, 2016). The cases cited in Datiz were pre-Spokeo, and are therefore of limited assistance as to the standing issues, but they remain good law as to the merits of an FDCPA claim. See also Johnson-Morris v. Santander Consumer USA, Inc., No. 16 C 1456, 2016 WL 3671468, at *6 (N.D. Ill. July 11, 2016); Wittman v. CB1, Inc., No. CV 15-105-BLG-BMM, 2016 WL 3093427, at *3 (D. Mont. June 1, 2016). But see Flores v. Collection Consultants of Cal., No. 14-0771, 2015 WL 4254032 (C.D. Cal. Mar. 20, 2015) (holding that $5 convenience fee did not violate § 1692f(1) because it was separate and not incidental to the principal obligation).