7th Cir. Says Parking Lot Penalties Were Subject to FDCPA Due to “Contract” Formed by the City and Parkers’

In Franklin v. Parking Revenue Recovery Services, Inc., 2016 WL 4248035 (7th Cir. 2016), the Court of Appeals for the Seventh Circuit held that a contract was formed between the City parking lot operators and parkers, resulting in a “transaction” that formed a debt under the FDCPA.

Two parts of the definition need further explanation. First, although the statute does not define “transaction,” we have held that the term is “a broad reference to many different types of business dealings between parties.” Bass v. Stolper, Koritzinsky, Brewster & Neider, S.C., 111 F.3d 1322, 1325 (7th Cir. 1997). Next, the “arising out of” language limits the FDCPA’s reach to only those obligations that are created by the contracts the parties used to give legal force to their transaction. Id. at 1326. This means that, in general, efforts to collect on obligations that are created by other kinds of legal authorities, like tort law or traffic regulations, are not covered by the FDCPA. The parties rightly agree that if Franklin’s and Chism’s obligations arise out of contract law, they are debts covered by the FDCPA. And it’s clear that contract law is the source of the obligations at issue here. Indeed, at oral argument Parking Revenue’s attorney was unable to explain what source of law other than contract could have created the obligations that its letters attempted to collect. By parking in the lot, Franklin and Chism accepted CPS’s offer to park at the stated cost. At that moment a contract was formed obligating them to pay the stated price or pay a higher price if they left the parking lot without paying.