Judge Grants MSJ For Defense in FDCPA Suit Over Processing Fee, Who Owed Debt

A District Court judge in Missouri has granted summary judgment in favor of a defendant that was sued for allegedly violating the Fair Debt Collection Practices Act because it charged a processing fee for payments made via a debit or credit card and because the account was originally opened in the plaintiff’s ex-wife’s name.

A copy of the ruling in Ketterman v. I.C. System, Inc., cam be accessed by clicking here.

The plaintiff noted an item on his credit report that said he owed a debt to the defendant. The plaintiff called the defendant and was informed he owed a debt of $449.81, which could be paid by check or debit or credit card. If he paid by card, there would be a third-party processing fee of $24.74. If he paid by check, the plaintiff was told, there would be no additional fee. The debt was for an unpaid utility bill for a house in which the plaintiff used to live with his ex-wife.

In first dealing with the processing fee, Judge Catherine Perry of the District Court for the Eastern District of Missouri, Eastern Division, ruled the fee was permissible because it was being collected and retained by the payment processing company used by the defendant. The processing fee did not violate Section 1692f(1) of the FDCPA, which prohibits using unfair or unconscionable means to collect a debt, including charging a fee that is not included in the underlying agreement between the consumer and the creditor.

The plaintiff also attempted to say the debt was not his because the account was originally opened by his ex-wife. By reporting the debt on the plaintiff’s credit report, he accused the defendant of violating Section 1692e(2)(A) which prohibits making false or misleading statements when collecting on a debt.

But the plaintiff testified he lived at the house where the utilities were being provided, the house was in his name, and, most importantly, he was the one who paid the bill until he moved out. When he contacted the defendant, he did not indicate the debt was not his. As such, Judge Perry ruled, the plaintiff could not accuse the defendant of making a false statement.

Just to put a point on her argument, even if there was a dispute about who owed the debt, the defendant would have been entitled to a favorable ruling under the FDCPA’s bona fide error defense, Judge Perry said.

“Nothing about this account would have alerted defendant to the claim that plaintiff’s ex-wife had opened the account in his name, and in the absence of some kind of red flag, defendant could not have reasonably been expected to discover this claim,” she wrote. “Indeed, the first time defendant ever heard that plaintiff was claiming the debt was not his was when he filed this suit; the evidence shows there is nothing that could have alerted IC to the issue sooner.”

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