PAUL M. WARNER, Chief Magistrate Judge.
Chief District Judge David Nuffer referred this matter to Chief Magistrate Judge Paul M. Warner pursuant to 28 U.S.C. § 636(b)(1)(B).
On August 18, 2014, the United States Department of Education ("Department of Education") placed Mr. Berry's defaulted student loans with Van Ru for collection.
Mr. Berry told Mr. Khayou that when he spoke to someone previously regarding repayment of his student loans, he was advised he would have to pay $900 per month.
The Affordable Rehabilitation Program has two options for debtors to rehabilitate their defaulted loans into good standing: (1) the 15% Rehabilitation and (2) the Financial Information Statement ("FIS") Rehabilitation.
Mr. Khayou informed Mr. Berry that depending on his annual income, he may qualify for monthly payments as low as $5.00.
Mr. Berry provided Van Ru with paperwork proving his annual income, including pay stubs and tax returns.
As a debt collection business, Van Ru has written policies and procedures regarding live telephone calls with consumers.
Van Ru's representatives are provided initial and ongoing training with respect to FDCPA and Van Ru's procedures regarding telephone calls with consumers.
In regard to the August 19, 2014 call, Mr. Khayou failed to follow the policies and procedures of Van Ru. While Mr. Khayou had online access at all times to the written procedures and received all of the training described above, he nevertheless failed to identify that he was calling from Van Ru on behalf of the Department of Education. As a matter of regular company practice and custom, every phone call initiated or received by an employee of Van Ru with respect to collection of an account is recorded.
Summary judgment is appropriate when "the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a). Factual assertions may be supported by "citing to parts of materials in the record, including depositions, documents, electronically stored information, affidavits or declarations, stipulations . . ., admissions, interrogatory answers, or other materials; or . . . showing that the materials cited do not establish the absence or presence of a genuine dispute, or that an adverse party cannot produce admissible evidence to support the fact." Fed. R. Civ. P. 56(c)(1). A primary purpose of the summary-judgment rule "is to isolate and dispose of factually unsupported claims or defenses." Celotex v. Catrett, 477 U.S. 317, 324 (1986).
In the instant case, the parties have filed cross-motions for summary judgment, albeit Mr. Berry seeks only partial summary judgment. The party moving for summary judgment bears the initial burden of showing "that there is an absence of evidence to support the non-moving party's case." Id. at 325. This burden may be met merely by identifying portions of the record which show an absence of evidence to support an essential element of the opposing party's case. See Johnson v. City of Bountiful, 996 F.Supp. 1100, 1102 (D. Utah 1998). Once the moving party satisfies its initial burden, "the burden then shifts to the nonmoving party to make a showing sufficient to establish that there is a genuine issue of material fact regarding the existence of [the disputed] element." Id. Rule 56 requires "the nonmovant that would bear the burden of persuasion at trial" to "go beyond the pleadings and set forth specific facts that would be admissible in evidence in the event of a trial from which a rational trier of fact could find for the nonmovant." Adler v. Wal-Mart Stores, 144 F.3d 664, 671 (10th Cir. 1998) (quotations and citation omitted). The specific facts put forth by the nonmovant "must be identified by reference to an affidavit, a deposition transcript or a specific exhibit incorporated therein." Thomas v. Wichita Coca-Cola Bottling, 968 F.2d 1022, 1024 (10th Cir. 1992). Mere allegations and references to the pleadings will not suffice. See id. However, the court must "examine the factual record and reasonable inferences therefrom in the light most favorable to the party opposing the motion." Lopez v. LeMaster, 172 F.3d 756, 759 (10th Cir. 1999). With this standard in mind, the court now examines the parties' respective arguments.
Mr. Berry alleges that Van Ru violated the FDCPA by: (1) consenting to a rehabilitation agreement for $5.00 per month, and then reneging on the agreement and demanding more money;
The FDCPA prohibits a debt collector from using "any false, deceptive, or misleading representation[s] or means in connection with the collection of any debt." 15 U.S.C. § 1692e. This portion of the Act specifically prohibits the following conduct: "The threat to take any action that cannot legally be taken or that is not intended to be taken." Id. § 1692e(5). Several courts have held that a false statement must be material for it to be actionable under the FDCPA. See Donahue v. Quick Collect, Inc., 592 F.3d 1027, 1033 (9th Cir. 2010) (mislabeling combined sum of late fees and interest as interest is not actionable under §§ 1692e or 1692f because it is not material); Hahn v. Triumph P'ships, LLC, 557 F.3d 755, 758 (7th Cir. 2009) (labeling original principal plus compounded interest as "principal" was not a material misstatement under the FDCPA); Miller v. Javitch, Block & Rathbone, 561 F.3d 588, 596-97 (6th Cir. 2009) (holding that materiality requirement applies to a claim under § 1692e). Similarly, this court has previously noted that most courts assessing materiality under § 1692(e), employ an "objective analysis that considers whether `the least sophisticated debtor would likely be misled by a communication.'" Wade v. Bonneville Billing and Collections, Inc., No. 2:13-cv-0023, 2014 WL 3530146, at *2 (D. Utah July 15, 2014) (quoting Donohue, 592 F.3d at 1027). "[F]alse but nonmaterial representations are not likely to mislead the least sophisticated consumer and therefore are not actionable under 1692e." Id. (quoting Donohue, 592 F.3d at 1027). "The least sophisticated consumer standard ensures protection to all consumers, even the naive and the trusting, against deceptive debt collection practices, and . . . protects debt collectors against liability for bizarre or idiosyncratic interpretations of collection notices." Deporter v. Credit Bureau of Carbon Co., No. 14-cv-00882-KMT, 2015 WL 1932336, *3 (D. Colo Apr. 28, 2015) (quotations and citations omitted).
While the Tenth Circuit has not specifically addressed materiality under § 1692e, it has done so in considering a claim under § 1692g. See Maynard v. Cannon, 401 F. App'x 389, 397 (10th Cir. 2010) (unpublished). Specifically, the court stated that the "FDCPA does not result in liability for every statement later alleged to be inaccurate, no matter how small or ultimately harmless." Id. Furthermore, "[m]ateriality is assessed in light of the purpose of the FDCPA, which is to provide information that helps consumers to choose intelligently, and by definition immaterial information neither contributes to that objective (if the statement is correct) nor undermines it (if the statement is incorrect)." Hudspeth v. Cap. Mgmt Servs., L.P., No. 2013 WL 674019, *4 (D. Colo. Feb. 25, 2013) (quotations and citations omitted). This court sees no reason to require that a false statement be material in the context of a claim under § 1692g but not a claim under § 1692e.
As noted above, Mr. Berry alleges that during the initial call, Mr. Khayou threatened "garnishment" and "imprisonment" in violation of § 1692e(5).
The Department of Education and its collection agencies may issue an administrative wage garnishment of up to 15% of a debtor's disposable earnings. See 34 C.F.R. § 34.4(a) ("We may start proceedings to garnish your wages whenever we determine that you are delinquent in paying a debt owed to the United States under a program [the Department of Education] administer[s]."); Department of Labor, Fact Sheet #30: The Federal Wage Garnishment Law, Consumer Credit Protection Act's Title III, Revised Nov. 2016, available at
In addition, there is no evidence to suggest that Mr. Berry was threatened with imprisonment. As the call recordings reflect, at no time did Mr. Khayou threaten Mr. Berry with imprisonment for his defaulted loans or even insinuated that was a possibility. Thus, summary judgment should also be granted with respect to Mr. Berry's FDCPA claims arising out of alleged threats of imprisonment; there is simply no issue of material fact as to whether Van Ru violated 15 U.S.C. § 1692e(5).
Section 1692g of the FDCPA requires, among other things, that debt collectors inform consumers that they have the right to dispute the validity of a debt claim within thirty days of receiving notice of a debt collection action. See 15 U.S.C. § 1692g(a)(3). In addition, § 1692g(b) states that "[a]ny collection activities and communications during the 30-day period may not overshadow or be inconsistent with the disclosure of the consumer's right to dispute the debt or request the name and address of the original creditor." Id. § 1692g(b). Mr. Berry alleges that Van Ru overshadowed the required disclosures by "threatening immediate garnishment" during the initial call.
Under § 1692g(a), a collection agency is required to send the validation notice regarding a debtor's right to dispute the debt or request the name and address of the original creditor within five days of the initial communication. Van Ru sent the required notice the same day the initial contact between Mr. Berry and Mr. Khayou occurred. Because the contact occurred prior to Mr. Berry receiving the notice, there was nothing in that initial contact that could have been overshadowed. Mr. Khayou merely informed Mr. Berry that his employment had been verified and that the Department of Education had the right to enforce an administrative wage garnishment if he did not voluntarily make efforts to repay his defaulted student loans. Mr. Khayou did not threaten "immediate" garnishment, nor did he provide any timeframe for which garnishment would take place. Van Ru did not convey a sense of urgency to Mr. Berry which could have overshadowed his validation rights. Mr. Berry has not provided any evidence to suggest that Van Ru overshadowed the required disclosures. Accordingly, this court recommends that summary judgment be granted in favor or Van Ru with respect to Mr. Berry's claim under § 1692g(b).
The FDCPA prohibits a debt collector from using "any false, deceptive, or misleading representation[s] or means in connection with the collection of any debt." 15 U.S.C. § 1692e. This portion of the Act specifically prohibits the following conduct: "[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. § 1692e(10). The court will address each violation of this section of the FDCPA in turn.
Mr. Berry alleges that Van Ru violated § 1692e(10) by agreeing to a rehabilitation agreement for $5.00 per month and then failing to uphold that agreement and requiring him to pay $76.00 per month instead.
After verifying that Mr. Berry's income qualified him for monthly payments of $76.00, Van Ru's representative, Tara, informed Mr. Berry that if he could not afford that amount he could fill out an additional form regarding his monthly income that would allow for payments of $5.00 per month.
Thus, Van Ru never reneged on the $5.00 per month rehabilitation agreement, and Mr. Berry has failed to provide evidence to the contrary. Accordingly, this court recommends that summary judgment be granted in favor of Van Ru with respect to Mr. Berry's FDCPA claims arising out of his allegations that Van Ru reneged on its rehabilitation agreement.
Mr. Berry alleges that Van Ru violated § 1692e(10) by stating that a previous policy for rehabilitation agreements requiring that Mr. Berry pay $900 per month was replaced by a new program in July 2014. Mr. Berry argues that this previous policy never existed. However, the recording of the initial call demonstrates that it was Mr. Berry who stated that "when they called me, they told me that I would have to pay $900 a month."
As discussed above, the Affordable Rehabilitation Program and the FIS Rehabilitation option that would allow Mr. Berry to make payments of $5.00 per month were not available prior to July 1, 2014. This was not a false representation or a deceptive practice in order to collect the debt. Nor did Van Ru inform Mr. Berry that he would be required to pay $900 per month. Furthermore, Mr. Berry ultimately qualified for the $5.00 monthly payments, rehabilitated his loan, and his loans are no longer in a default status with the Department of Education.
Because Van Ru provided Mr. Berry accurate information, this court recommends summary judgment be granted in favor of Van Ru on Mr. Berry's FDCPA claim arising out of his allegations that Van Ru provided false representations regarding the Standard Rehabilitation or Affordable Rehabilitation Programs.
Mr. Berry argues that Van Ru violated § 1692e(10) through Mr. Khayou's statement in the initial call that "all agreements have to be verbal" in relation to the rehabilitation program.
However, even assuming that this statement was false and deceptive, this court concludes that it does not constitute a violation of § 1692e. As noted above, for a statement to violate this portion of the Act, it must be material. See Wade, 2014 WL 3530146, at *2. A false statement is considered material if it would impact the least sophisticated consumer's decisions with respect to a debt. See Hudspeth, 2013 WL 674019, at *4 (citation omitted). Mr. Khayou's statement may have been false but it was non-material. It was "not likely to mislead the least sophisticated consumer," nor did it in fact mislead Mr. Berry. Wade, 2014 WL 3530146, at *2 (quoting Donohue, 592 F.3d at 1027).
Because Van Ru's false statement that all rehabilitation agreements must be verbal was not material, this court recommends summary judgment be granted in favor of Van Ru on this claim.
Mr. Berry alleges that Van Ru violated § 1692d(6) through Mr. Khayou's failure to state that he was calling from Van Ru during the initial call. "A debt collector may not engage in any conduct the natural consequence of which is to harass, oppress, or abuse any person in connection with the collection of a debt," which includes, "the placement of telephone calls without meaningful disclosure of the caller's identity." 15 U.S.C. § 1692d(6). While Mr. Khayou stated that he was calling on behalf of the Department of Education, he failed to inform Mr. Berry that he was a representative of Van Ru. Thus, Van Ru violated this portion of the FDCPA.
However, Van Ru argues that it is entitled to the bona fide error defense because it did not intend to violate the FDCPA. Van Ru states that it has specific policies and procedures to avoid such a violation. Van Ru further contends that had Mr. Khayou followed the training he received on these policies and procedures, he would have provided the required meaningful disclosure of Van Ru's identity during the initial call.
Under the FDCPA, "[a] debt collector may not be held liable in any action . . . if the debt collector shows by a preponderance of the evidence that the violation was not intentional and resulted from a bona fide error notwithstanding the maintenance of procedures reasonably adapted to avoid such errors." 15 U.S.C. § 1692k(c). To assert the bona fide error defense Van Ru must demonstrate "that the violation was (1) unintentional, (2) a bona fide error, and (3) made despite the maintenance of procedures reasonably adapted to avoid the error." Johnson v. Riddle, 443 F.3d 723, 727-28 (10th Cir. 2006). To succeed on a motion for summary judgment, Van Ru must "establish a bona fide error for each and every alleged violation of the FDCPA." Caputo v. Prof'l Recovery Servs, Inc., 261 F.Supp.2d 1249, 1259 (D. Kan. 2003). Conversely, Mr. Berry "must establish that there was no bona fide error for each and every alleged violation of the FDCPA." Id. In particular, Van Ru "must demonstrate that no disputed material fact exists regarding the affirmative defense asserted. If [Van Ru] meets this initial burden, [Mr. Berry] must then demonstrate with specificity the existence of a disputed material fact." Johnson, 443 F.3d at 724 n.1. If Mr. Berry fails to specify a disputed material fact, the bona fide error defense bars his claim, and Van Ru is entitled to summary judgment as a matter of law. See id.
With regard to the intention prong, "a violation is unintentional . . . if the debt collector can establish the lack of specific intent to violate the Act." Id. at 728. This "prong of the bona fide error defense is a subjective test," and "subjective intent can often only be shown by inferential evidence." Id. at 728-29. However, "the bona fide and the procedures prongs are necessarily objective tests." Id. at 729. "[T]he bona fide component serves to impose an objective standard of reasonableness upon the asserted unintentional violation." Id. (citation and quotations omitted). "[T]he procedures component . . . involves a two-step inquiry: first, whether the debt collector maintained—i.e., actually employed or implemented—procedures to avoid errors; and, second, whether the procedures were reasonably adapted to avoid the specific error at issue." Id. (citations and quotations omitted).
"A debt collector must show that the violation was unintentional, not that the underlying act itself was unintentional. In other words, a violation is unintentional for purposes of the FDCPA's bona fide error defense if the debt collector can establish the lack of specific intent to violate the Act." Id. at 728. There is no evidence in the record to support a finding that Van Ru intentionally violated the FDCPA through Mr. Khayou's failure to disclose that he was calling from Van Ru. Mr. Berry argues that Van Ru is required to provide testimony from Mr. Khayou to prove that his failure to comply with Van Ru's policies and procedures was unintentional. This court does not agree. Van Ru has provided evidence of several other calls between Mr. Berry and Mr. Khayou, in which Mr. Khayou provided meaningful disclosure of his identity to Mr. Berry. This evidence supports Van Ru's assertion that the violation was unintentional. Furthermore, Mr. Berry's contention that Mr. Khayou was somehow motivated to omit that he was calling from Van Ru is without merit. As explained in Van Ru's extensive procedures, if Van Ru's representatives make materially false statements, they are subject to discipline, including termination.
Mr. Khayou's identification of Van Ru's client, the Department of Education, further demonstrates that any error was in good faith, genuine, and bona fide. As noted above, Van Ru maintains specific and extensive procedures to avoid such errors. This court concludes that Van Ru has carried its burden of establishing bona fide error by showing that Mr. Khayou's failure to disclose that he was calling from Van Ru was an unintentional error, the error was made in good faith, and Van Ru has established procedures reasonably designed to avoid such errors.
Because "[a] debt collector has no liability . . . if he violates the act in any manner, including with regard to the act's coverage, when such a violation is unintentional and occurred despite procedures designed to avoid such violations," Johnson, 443 F.3d at 728 (quotations and citation omitted), this court concludes that Van Ru is entitled to the bona fide error defense. Based on the foregoing, this court recommends that summary judgment be granted in Van Ru's favor on Mr. Berry's § 1692d(6) claim.
Based on the foregoing,
Copies of this Report and Recommendation are being sent to all parties, who are hereby notified of their right to object. See 28 U.S.C. § 636(b)(1); Fed. R. Civ. P. 72(b). The parties must file any objection to this Report and Recommendation within fourteen (14) days after being served with a copy of it. See 28 U.S.C. § 636(b)(1); Fed. R. Civ. P. 72(b). Failure to object may constitute waiver of objections upon subsequent review.
