Opinion
No. C04-1514 BZ.
February 22, 2005
ORDER ON CROSS MOTIONS FOR SUMMARY JUDGMENT
On April 19, 2004, plaintiffs Daniel and Teri Edstrom filed a complaint alleging violations of the Fair Debt Collection Practices Act ("FDCPA"), 15 U.S.C. § 1692 et seq., and the Rosenthal Fair Debt Collection Practices Act ("RFDCPA"), California Civil Code §§ 1788- 1788.32, against defendant All Services and Processing, also known as A.S.A.P. Collection Services. Now before me are the parties' cross-motions for summary judgment.
All parties have consented to my jurisdiction pursuant to 28 U.S.C. § 636(c).
When plaintiffs bought their house in Brentwood, California, they became members of the Apple Hill Association ("Association"). Joint Statement of Undisputed Facts ¶ 8. As members of the Association, plaintiffs became subject to the Association's Covenants, Conditions, and Restrictions ("CCR's") and Assessment Collection Policy ("Collection Policy"). Id. at ¶ 9. Defendant contends, and plaintiffs do not dispute, that they fell behind on their monthly payments, and incurred financial obligations to the Association. Id. at ¶ 10. The Association granted defendant authority to collect on the debt. Id. at ¶ 11. Defendant subsequently sent a letter to plaintiff regarding the debt owed to the Association dated July 18, 2003, which plaintiffs received. Id.
The only issue in dispute is whether the July 18, 2003 letter complies with the FDCPA and the RFDCPA. The letter explains that the Association retained defendant to represent it in the collection of plaintiffs' delinquent account. Declaration of Robert L. Hyde, Esq. ("Hyde Decl."), Ex. 1; Tom Fier's Aff. in Support of Def's. Mot. for Summ. Judgment ("Fier Aff."), Ex. G. It states that on August 18, 2003, plaintiffs' account balance will be $955.49. Id. It also breaks down the account balance to include $644.00 in regular assessments, $60.00 in late fees, $28.72 in interest, a $180 collection fee, and $42.77 in collection costs. Id. It requests "payment in full to A.S.A.P. in the amount stated above, payable to the Association and postmarked by the due date." Id. It states, "In accordance with the Fair Debt Collection Practices Act we will assume that this debt is valid unless you dispute it in writing within 30 days of the date of this letter." Id. It further states, "Upon receipt of written disputes, a $75.00 Dispute Claim Processing Fee is added to the account and will remain if the Association's records are correct or if a request for a credit is denied by the Board." Id. In bold lettering, it states, "Partial payments received without an established payment plan will be returned and a $45.00 processing fee will be added to your account to return the payment." Id. A copy of the Collection Policy is attached to the letter. Id. The letter also notifies plaintiffs that they may obtain additional information about the Association's collection rights and remedies by referring to the "Assessments Section" of the CCR's. Id.
The parties have agreed that plaintiffs are "consumers" and defendant is a "debt collector" for purposes of the FDCPA, and that plaintiffs are "debtors" and defendant is a "debt collector" for purposes of the RFDCPA. Id. at ¶¶ 3-6. The parties also agree that defendant's letter was both a "communication" and an "initial communication" as defined by sections 1692a(2) and 1692g(a) of the FDCPA. Id. at ¶ 13.
Plaintiffs contend that the July 18, 2003 letter violated section 1692g(a) of the FDCPA. 15 U.S.C. § 1692g(a). Section 1692g(a) provides:
Defendant argues that plaintiffs waived their rights under the FDCPA and the RFDCPA by not disputing the debt in an August 7, 2004 notice to the Association. See Def.'s Reply Mem. in Supp. of Def's Mot. for Summ. J., Ex. J (containing a copy of defendant's letter with the words "We never got any notices from Applehill about collections, we had no idea we were behind" handwritten on the front.) (emphasis in original). A debtor's communication to the creditor does not constitute an admission of liability or a waiver of the protections of the FDCPA or the RFDCPA. See 15 U.S.C. § 1692g(c); Cal. Civ. Code § 1788.33;Johnson v. Eaton, 873 F. Supp. 1019, 1028 (M.D. La. 1995). Further, a plaintiff has standing to sue under the FDCPA regardless of whether a valid debt exists. Baker v. G.C. Services Corp., 677 F.2d 775, 777 (9th Cir. 1982).
(a) Notice of debt; contents
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;
(2) the name of the creditor to whom the debt is owed;
(3) a statement that unless the consumer, within thirty days after receipt of the notice, disputes the validity of the debt, or any portion thereof, the debt will be assumed to be valid by the debt collector;
(4) a statement that if the consumer notifies the debt collector in writing within the thirty-day period that the debt, or any portion thereof, is disputed, the debt collector will obtain verification of the debt or a copy of a judgment against the consumer and a copy of such verification or judgment will be mailed to the consumer by the debt collector; and
(5) a statement that, upon the consumer's written request within the thirty-day period, the debt collector will provide the consumer with the name and address of the original creditor, if different from the current creditor.15 U.S.C.A. § 1692g(a). "The FDCPA is a strict liability statute and thus does not require a showing of intentional conduct on the part of the debt collector." Irwin v. Mascott, 112 F. Supp. 2d 937, 958 (N.D. Cal. 2000). "Validation requirements are strictly construed under the least sophisticated consumer standard." Irwin, 112 F. Supp. 2d at 953 (citingBaker, 677 F.2d at 778) (internal quotation marks ommitted);see also Smith v. Financial Collection Agencies, 770 F. Supp. 232, 235 (D. Del. 1991) ("Generally, a validation notice will comport with section 1692(g) if the content of the notice complies with the literal terms of the statute. At a minimum, this requires that the validation notice is actually included with either the initial communication or within five days of the initial communication, . . . and if included, that it contains all the information dictated by the statute.").
The statement in the letter that defendant "will assume the debt is valid unless you dispute it in writing within 30 days of the date of the letter" violates section 1692g(a)(3). In interpreting the FDCPA, words and phrases must be given their natural and ordinary meaning. See Romine v. Diversified Collection Services, Inc., 155 F.3d 1142, 1146-47 (9th Cir. 1998) (citing Heintz v. Jenkins, 514 U.S. 291, 294 (1995)). I am also obliged to "give effect, if possible, to every word Congress used." Baker, 677 F.2d at 778 (citing Reiter v. Sonotone Corp., 442 U.S. 330, 339 (1979)). "Where, as here, the language of the statute is plain and unambiguous, resort to legislative history is unnecessary." Rucker v. Davis, 203 F.3d 627, 636 (9th Cir. 2000).
The statute clearly requires the letter to state that the debtor may dispute the debt "within thirty days after receipt of this notice." 15 U.S.C. § 1692g(a)(3). Because defendant's letter requires plaintiffs to dispute the letter within thirty days of the date of the letter, it violates section 1692g(a)(3).See Cavallaro v. Law Office of Shapiro Kreisman, 933 F. Supp. 1148 (E.D.N.Y. 1996) (holding that a letter stating that a dispute had to be made "within thirty days from the date of this notice" violated section 1692g(a)). Defendant's contention that this violation is de minimis because plaintiff still likely had approximately thirty days to respond is erroneous. "Congress has consciously protected against abusive tactics of debt collectors, such as the backdating of notices or other practices that might shorten debtors [sic] time to respond." Id. at 1154.
The statement in the letter that the debt will be assumed to be valid unless the debtor disputes the debt "in writing" also contravenes the express language of the statute and violates the FDCPA. See 15 U.S.C. § 1692g(a)(3). Subsection (a)(3) does not require a dispute to be in writing. See 15 U.S.C. § 1692g(a)(3); In re Sanchez, 173 F. Supp. 2d 1029, 2033-35 (N.D. Cal. 2001); 15 U.S.C. § 1692g(a)(3). Other subsections of section 1692g, by contrast, do require a writing, which triggers additional duties on the part of the debt collector. See 15 U.S.C. §§ 1692g(a)(4)-(5) (b). For example, subsection (a)(4) requires the debt collector to obtain verification of the debt or a copy of a judgment and to mail a copy to the consumer if the consumer disputes the debt in writing. 15 U.S.C. § 1692g(a)(4). Subsection (a)(5) requires the debt collector to provide the original creditor's name and address upon the consumer's written request. 15 U.S.C. § 1692g(a)(5). Finally, subsection (b) requires the debt collector to cease its collection efforts if the consumer disputes the debt in writing. 15 U.S.C. § 1692(b). While the Ninth Circuit has not yet ruled on this issue, a judge of this district has held that section 1692g(a)(3) does not require a writing. In re Sanchez, 173 F. Supp. 2d 1029, 2033-35 (N.D. Cal. 2001). Other districts have similarly held that a statement requiring that the dispute be in writing violates the FDCPA. See e.g., Rosado v. Taylor, 324 F. Supp. 2d 917, 929 (N.D. Ind. 2004); King v. Int'l Data Services, 2002 WL 32345923, at *4 (D. Haw. 2002); Sambor v. Omnia Credit Services, Inc., 183 F. Supp. 2d 1234, 1240 n. 4 (D. Haw. 2002); Reed v. Smith, Smith Smith, 1995 WL 907764, at *2 (M.D. La. 1995); Harvey v. United Adjusters, 509 F. Supp. 1218, 1221 (D. Or. 1981); but see Graziano v. Harrison, 950 F.2d 107, 112 (3d Cir. 1991).
Defendant violated subsection (a)(3) by failing to inform the debtors of their right to dispute any portion of the debt. See 15 U.S.C. § 1692g(a)(3); Baker, 677 F.2d at 778; McCabe v. Crawford, 272 F. Supp. 2d 736, 744 (N.D. Ill. 2003); Harvey, 509 F. Supp. at 1221. The letter also stated in bold lettering, "Partial payments received without an established payment plan will be returned and a $45.00 processing fee will be added to your account to return this payment." Fier Aff., Ex. G. This statement, complied with the failure to affirmatively advise of the right to dispute a portion of the debt, would likely have confused the least sophisticated consumer as to his or her right to dispute a portion of the debt. See Terran v. Kaplan, 109 F.3d 1428, 1431 (9th Cir. 1997) ("Whether the initial communication violates the FDCPA depends on whether it is likely to deceive or mislead a hypothetical least sophisticated consumer.").
The letter's failure to include the statements required by section 1692g(a)(4) and (5) further violates the statute. See 15 U.S.C. §§ 1692g(a)(4) (5); Irwin, 112 F. Supp. 2d at 953. Section 1692g(a)(4) requires "a statement that if the consumer notifies the debt collector in writing within the thirty-day period that the debt, or any portion thereof, is disputed, the debt collector will obtain verification of the debt or a copy of a judgment against the consumer and a copy of such verification or judgment will be mailed to the consumer by the debt collector." 15 U.S.C. § 1692g(a)(4). While defendant's letter stated that plaintiffs may dispute the debt in writing, it did not contain an offer to obtain verification of the debt and provide it to plaintiffs upon request. See Fier Aff., Ex. G.
Section 1692g(a)(5) requires "a statement that, upon the consumer's written request within the thirty-day period, the debt collector will provide the consumer with the name and address of the original creditor, if different from the current creditor." 15 U.S.C. § 1692g(a)(5). The letter included the name of the original creditor, the Apple Hill Association, but did not provide the Association's address or notify plaintiffs of their right to request the address. Fier Aff., Ex. G. While defendant contends that plaintiffs knew the Association's address because they sent a notice to the Association within the thirty-day time period, this is not relevant to my determination of whether the letter violated section 1692g. "The language of section 1692g is clear that notice of debt must contain the enumerated disclosures; it does not require that a debtor must actually be misled by a failure to do so." Kuhn v. Account Control Tech., Inc., 865 F. Supp. 1443, 1450 (D. Nev. 1994).
Finally, plaintiffs contend that defendant's attempts to collect amounts in addition to the original debt owed to the Association violate section 1692f of the FDCPA. These charges include (1) $60.00 in late fees, (2) $28.72 in interest, (3) a $180 collection fee, (4) $42.77 in collection costs, (5) a $75.00 dispute claim processing fee, (6) a $45.00 processing fee for partial payments, and (7) additional late fees. Section 1692f provides, "A debt collector may not use unfair or unconscionable means to collect or attempt to collect any debt." 15 U.S.C. § 1692f. "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" violates section 1692f. 15 U.S.C. § 1692f. Defendant justifies the fees as being expressly authorized by the Collection Policy and the CCRS or being permitted by California Civil Code § 1366.
The Collection Policy expressly provides for late charges and interest. Section 9.0 of the Collection Policy provides, "Delinquent accounts become subject to the following additional charges as contained in Civil Code section 1366 and the governing documents: costs of collection including reasonable attorney's fees, a late charge of $10.00 or 10% of the delinquent amount, whichever is greater and interest on all sums (including the delinquent assessment, collection fees and costs, and reasonable attorney's fees) at an annual interest rate not to exceed 0.12 commencing 30 days after the assessment becomes due." Fier Aff., Ex. C. Section 1366(d) of the California Civil Code provides that a homeowner's association may recover a late charge not exceeding ten percent of the delinquent assessment or ten dollars, whichever is greater, as well as interest on all sums, at an annual interest rate of twelve percent. Cal. Civ. Code § 1366(e)(2) (3). At the hearing, plaintiff's counsel clarified that they were challenging only the amount of, not defendant's right to impose, late fees and interest. I therefore find that defendants did not violate section 1692f of FDCPA by seeking late fees or interest in the letter
express no view as to whether the amount of the late fees or interest were properly calculated, as the parties did not brief this issue.
Plaintiffs also challenge the $180 collection fee, the $42.77 in collection costs, the $75.00 dispute claim processing fee, the $45.00 processing fee for partial payments, and additional late fees. Defendant asserts these fees are expressly authorized by the Collection Policy and/or permitted by law. However, the parties have not briefed many of the legal and factual issues these fees present. Neither side has briefed the issue of whether, to be "expressly authorized," the amount of the fee must be stated in the Collection Policy. Nor have the parties briefed whether these fees are permitted by Cal. Civ. Code § 1788.14(b) ("No debt collector shall . . . [collect or attempt] to collect from the debtor the whole or any part of the debt collector's fee or charge for services rendered, or other expense incurred by the debt collector in the collection of the consumer debt, except as permitted by law"). Even assuming these fees are authorized or permitted, I would still not grant summary judgment for either party. Both the Collection Policy and Cal. Civ. Code § 1366(e)(1) restrict defendant to recovering fees that were incurred and the statute adds the requirement that they be reasonable. Here, the record is unclear whether the charged collection fee and costs had actually been incurred, whether the amounts of the other fees were related to costs that would be incurred and whether any of the fees were reasonable. See e.g., Hyde Decl., Ex. 5 at 44-45, 47; Pltfs' Mem. of Pts. Auth. in Opp. to Def's Mot. for Summary Judgment, Ex. A at 23-24 (suggesting that the fees are arbitrary and were not incurred). Given these unresolved legal and factual issues, I deny both parties summary judgment on the issue of whether these fees violate section 1692f of the FDCPA.
The Collection Policy authorizes recovery of "any costs and fees incurred in processing and collecting delinquent amounts".See Fier Aff., Ex. C, Collection Policy, § 10.0 Cal. Civ. Code § 1366(e)(1) permits only the recovery of "[r]easonable costs incurred in collecting the delinquent assessment, including reasonable attorney's fees".
Plaintiffs contend that defendant's violations of the FDCPA also constitute violations of the RFDCPA. The RFDCPA provides, in relevant part, "Notwithstanding any other provision of this title, every debt collector collecting or attempting to collect a debt shall comply with the provisions of Sections 1692b to 1692j, inclusive, of, and shall be subject to the remedies in Section 1692k of Title 15 of the United States Code." Cal. Civ. Code § 1788.17. The FDCPA does not preempt the RFDCPA, as defendant suggests. See Alkan v. Climortgage, Inc., 336 F. Supp. 2d 1061, 1065 (N.D. Cal. 2004). "Instead, California has simply incorporated by reference the text of certain federal provisions into the [RFDCPA], rather than copying them verbatim into the California code." Id. I find that defendant's violations of section 1692g of the FDCPA also constitute violations of RFDCPA.
For the foregoing reasons, plaintiffs' motion for summary judgment that the letter violated sections 1692g(a) of the FDCPA and 1788.17 of the RFDCPA is GRANTED. Plaintiffs' motion for summary judgment as to the fees imposed in the letter is DENIED. Defendant's motion for summary judgment is GRANTED to the extent that I have ruled that the late fees and interest are expressly authorized by the Collection Policy and permitted by California Civil Code § 1366(e)(2) and is DENIED in all other respects. Any remaining issues shall proceed as set forth in my August 18, 2004 Order scheduling jury trial and pretrial matters.