Valenta v. Midland Funding, LLC
| Decision Date | 29 March 2019 |
| Docket Number | No. 17 C 6609,17 C 6609 |
| Parties | TOMAS VALENTA, Plaintiff, v. MIDLAND FUNDING, LLC, and MIDLAND CREDIT MANAGEMENT, INC., Defendants. |
| Court | U.S. District Court — Northern District of Illinois |
MEMORANDUM OPINION AND ORDER
Plaintiff, Tomas Valenta, brings this case under the Fair Debt Collection Practices Act ("FDCPA"), 15 U.S.C. § 1692 et seq, against defendants, Midland Funding, LLC, and Midland Credit Management, Inc. The case is before the Court on the parties' cross-motions for summary judgment. For the following reasons, the motions are granted in part and denied in part.
Plaintiff incurred a debt on a Synchrony Bank credit card account, which he became unable to pay and on which he defaulted. (Defs.' LR 56.1 Resp. ¶¶ 11-12, ECF No. 75.) Plaintiff claims that this was a personal account used solely for personal purposes, but he admits that he works as a handyman, and the debt on which he defaulted appears to stem from a $1,000 purchase of mortar and grout at Lowe's. (Id.; Pl.'s LR 56.1 Resp. ¶¶ 4-9, ECF No. 82.)
Defendant Midland Funding, LLC ("MF"), purchases debt, which it then assigns to Midland Credit Management, Inc. ("MCM"), for servicing and collection. (Pl.'s LR 56.1 Resp. ¶¶ 11, 15.) MF purchased plaintiff's Synchrony Bank credit card debt and assigned it to MCM for collection. (Defs.' LR 56.1 Resp. ¶ 13.)
After receiving numerous phone calls from debt collectors, plaintiff engaged counsel. (Id. ¶ 14.) On August 18, 2017, a Friday, plaintiff's counsel sent out a letter via fax to dispute the amount of the alleged debt. (Id.) The letter is addressed to MF, but MCM admits receiving it. (Id.; Pl.'s LR 56.1 Resp. ¶¶ 3, 17.) On Monday, August 21, 2017, the next business day, MCM processed the fax and marked plaintiff's account as disputed. (Pl.'s LR 56.1 Resp. ¶ 22.)
Every Monday morning following the first and third Sunday of the month, MCM pulls data from its accounts, including those that have been marked as disputed, and uses it to generate a list of accounts to distribute to credit bureaus. (Id. ¶ 23.) On the Friday of that week, MCM furnishes the list to credit bureaus. (Id. ¶ 24.) During the five days between the generation and distribution of the list, MCM runs "quality control checks . . . to ensure that it is conveying accurate information to the credit bureaus." (Id. ¶ 25.)
By the time MCM had processed plaintiff's dispute letter on the evening of August 21, 2017, MCM had already finalized its list of disputed accounts for that week. (Id. ¶¶ 26-27.) On August 25, 2017, MCM communicated information about plaintiff's Synchrony Bank debt to the credit bureaus, including the balance, account number, and date first reported—but it did not communicate that the debt was disputed. (Defs.' LR 56.1 Resp. ¶¶ 18-19.) Either plaintiff or his counsel pulled plaintiff's Equifax credit report on September 11, 2017, and, because the Equifax report was based on the data MCM had furnished on August 25, the report did not show that plaintiff had disputed the Synchrony Bank debt. (Defs.' LR 56.1 Resp. ¶¶ 17-18.)
On September 13, 2017, plaintiff filed this suit, alleging that defendants violated 15 U.S.C. § 1692e(8) when they reported information about plaintiff's debt to credit bureaus without communicating that plaintiff had disputed the debt.
"The Court shall grant summary judgment if 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); Wackett v. City of Beaver Dam, 642 F.3d 578, 581 (7th Cir. 2011). A genuine dispute of material fact exists if "the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). The Court may not weigh conflicting evidence or make credibility determinations, but the party opposing summary judgment must point to competent evidence that would be admissible at trial to demonstrate a genuine dispute of material fact. Omnicare, Inc. v. UnitedHealth Grp., Inc., 629 F.3d 697, 705 (7th Cir. 2011); Gunville v. Walker, 583 F.3d 979, 985 (7th Cir. 2009); see Modrowski v. Pigatto, 712 F.3d 1166, 1167 (7th Cir. 2013) () (quoting Waldridge v. American Hoechst Corp., 24 F.3d 918, 920 (7th Cir. 1994)). All facts and reasonable inferences are construed in the light most favorable to the nonmoving party. Chaib v. Geo Grp., Inc., 819 F.3d 337, 341 (7th Cir. 2016).
The FDCPA was enacted "to eliminate abusive debt collection practices, to ensure that debt collectors who abstain from such practices are not competitively disadvantaged, and to promote consistent state action to protect consumers." Jerman v. Carlisle, McNellie, Rini, Kramer & Ulrich LPA, 559 U.S. 573, 577 (2010) (citing 15 U.S.C. § 1692(e)). The statute "regulates interactions between consumer debtors and debt collectors," id. (internal quotation marks omitted), for the "purpose" of "protect[ing] consumers," Muha v. Encore Receivable Mgmt., Inc., 558 F.3d 623, 628 (7th Cir. 2009). Among numerous other protections, the FDCPA provides that "[a] debt collector may not use any false, deceptive, or misleading representation or means in connectionwith the collection of any debt," including "[c]ommunicating . . . credit information which is known or which should be known to be false, including the failure to communicate that a disputed debt is disputed." 15 U.S.C. § 1692e(8).
Plaintiff argues that he is entitled to summary judgment because the undisputed facts show that defendants violated 15 U.S.C. § 1692e(8) and the violation was not excusable as a bona fide error under 15 U.S.C. § 1692k(c). MCM cross-moves for summary judgment, arguing that the undisputed facts do not establish a violation of § 1692e(8) and, even if they do, they also establish that the violation was due to a bona fide error and plaintiff has not suffered any actual damages. Additionally, MCM argues, even if the Court denies MCM's motion, it must also deny plaintiff's because there is a genuine factual dispute on the issue of whether plaintiff incurred the Synchrony Bank debt primarily for personal, as opposed to business, purposes. Further, MCM argues, even if it is not entitled to summary judgment on its bona fide error defense, there is at least a genuine factual dispute on the issue. MF argues that it is entitled to summary judgment for the additional reason that it is not a debt collector.
The FDCPA applies to "debt collectors," a term that the statute defines generally as "any person [1] . . . in any business the principal purpose of which is the collection of any debts, or [2] who regularly collects or attempts to collect, directly or indirectly, debts owed or due or asserted to be owed or due another." 15 U.S.C. § 1692a(6). MF argues that it is not a "debt collector" because it does not engage in any collection activity itself; it merely purchases debt, which it assigns to MCM for collection.
Plaintiff argues that MF is a debt collector under the "principal purpose" prong of § 1692a(6) because its sole purpose and revenue source is the collection of debt, and alternatively, it engages in collection activity by filing collection lawsuits against debtors.
The Court agrees with plaintiff. MF asserts that its "sole business purpose is to purchase debt," which it "assigns . . . to MCM for servicing and collection." (Defs.' LR 56.1 Stmt. of Add'l Facts ¶¶ 11, 15.) The Court sees no way to construe this assertion other than as an admission that MF is a "debt collector" under the "principal purpose" prong of § 1692a(6). As this Court has recently explained, "[i]f the collection of debts is precisely what sustains the business, unaided by any other significant sources of revenue, then the 'collection of . . . debts' must be the business's 'primary purpose.'" McMahon v. LVNV Funding, LLC, 301 F. Supp. 3d 866, 884 (N.D. Ill. 2018). MF has left no doubt that debt collection is its lifeblood, so the Court can only conclude that it is a "debt collector" under the FDCPA.
MF argues that, even under the "principal purpose" prong of § 1692a(6), no person or entity can be a "debt collector" unless it interacts with consumers. The Court does not agree. Section 1692a(6) has two distinct prongs, and "[e]ven if the second prong may require interaction with debtors, the plain language of the first prong does not." McMahon, 301 F. Supp. 3d at 884 (citing Tepper v. Amos Fin., LLC, No. 15-CV-5834, 2017 WL 3446886, at *8 (E.D. Pa. Aug. 11, 2017), aff'd, 898 F.3d 364 (3d Cir. 2018)).
Additionally, even if a person or entity must engage in some collections activity in order to qualify as a "debt collector" even under the "principal purpose" prong (and, as the Court has explained, it finds no support for any such reading in the text of the statute), plaintiff has adduced evidence of collections activity in the form of the collections lawsuits MF has filed. See McMahon, 301 F. Supp. 3d at 884.
As defendants recognize, a debt collector must monitor other debt collectors it enlists to perform collection services on its behalf, or it is vicariously liable for any FDCPA violations they commit. See Janetos v. Fulton Friedman & Gullace, LLP, 825 F.3d 317, 325-26 (7th Cir. 2016). The Court agrees with plaintiff that MF is a "debt collector" under the FDCPA because the "principal purpose" of its business is the collection of debts, and it can be held vicariously liable for any violations of the FDCPA that MCM may have committed.
Under 15 U.S.C. § 1692a, the FDCPA applies to "debts" incurred "primarily for personal, family, or household purposes." Defendants argue that there is a genuine...
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