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Judge Grants MSJ For Defense in Convenience Fee Case

A District Court judge in Illinois has granted a defendant’s motion for summary judgment after it was sued for allegedly violating the Fair Debt Collection Practices Act because it charged a $3 service fee for payments made online via a debit or credit card.

A copy of the ruling in the case of Alleman v. Collection Professionals, Inc., can be accessed by clicking here.

Class certification had previously been denied in this case.

The plaintiff received eight communications from the defendant in regards to an unpaid medical debt. The communications all offered online, check, and in-person payment options to the plaintiff. The plaintiff chose to use an online portal to make a partial payment and was charged a $3 service fee. The plaintiff sued, alleging the fee violated Section 1692e and 1692f of the FDCPA because it was an unfair or unconscionable attempt to collect on a debt not not expressly authorized by the contract that created the debt and because the defendant allegedly made false or misleading representations about whether the defendant had a legal authority to assess the fee.

The underlying agreement between the plaintiff and the healthcare provider bound the plaintiff to “pay the balance on the account plus the late charge fee, all reasonable collection costs, court, and reasonable attorneys’ fees.” The $3 service fee was assessed by the payment processing company that was used by the plaintiff to make the partial payment and none of that $3 was passed on to the defendant. The issue, for Judge Marvin Aspen of the District Court for the Northern District of Illinois, Eastern Division, was whether the $3 represented a “reasonable collection cost.”

“Consumers are not exploited more because they pay less than the full cost a debt collector pays to a service vendor,” Judge Aspen wrote. “In fact, reading pass-through costs restrictively would lead to the perverse result of encouraging debt collectors to charge consumers all of their costs, rather than only a component of their costs. Thus, the general interpretive principle of reading the FDCPA for consumers’ benefit suggests we should adopt a combined reading of Acosta and Johnson-Morris‘s reading of ‘pass-through costs.’ As explained above, under this reading, there is no genuine issue of material fact about whether CPI’s cost is a pass-through cost, since its convenience fee account always operated at a loss in the relevant period. As a result, the convenience fee is at least a partial pass-through cost, and thus protected from liability under the FDCPA, because CPI did not attempt to collect an incidental cost; instead, CPI merely sought to pass through a cost, not collect an incidental obligation itself. Had Alleman chosen a different method of payment, CPI would not have charged Alleman anything, because BillingTree would not have charged CPI to process her payment.”

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