9th Circuit Says Debt Collector Violated FDCPA By Seeking Items in Debt Collection Letters that Were Not Permitted by State Law

In Cruz v. International Collection Corp., — F.3d —-, 2012 WL 742337 (9th Cir. 2012), the Court of Appeals for the Ninth Circuit found that a debt collector violated the FDCPA by seeking costs and interest that were not allowed under state law.  The Court of Appeals explained:

Under Nevada law, a debt collector may not collect any interest or fees unless the interest or fees have been added to the principal by the creditor before the debt collector received the item of collection. Nev.Rev.Stat. § 649.375(2)(a) (2011). Here, there is no evidence that Harrah’s Casino added any interest or fees to its claim for $500 before it assigned the claim for collection to the debt collectors. For aught that appears, ICC added those items to the claim. It was ICC who sent Cruz numerous letters stating that Cruz owed varying amounts for interest and fees in addition to $500 in principal. As Nevada law does not permit ICC to add nor to collect such interest and fees, the communications were false and misleading (by suggesting that ICC was entitled to collect such fees) and violated the FDCPA. Nevada law also permits a creditor to collect a maximum of $500 in treble damages for each check written without sufficient funds on deposit. Nev.Rev.Stat. 41.620(1) (2011). The fifth, sixth, seventh, and eighth letters sent by ICC to Cruz stated that Cruz owed $1,500 in treble damages, when the maximum ICC could have collected would be $500 for each check, for a total of $1000.FN3  [FN3. Even if we held that California law governed this debt, some of the letters sent by ICC also included statements false under California law. California law permits a debt collector to recover either a service charge and treble damages or pre-judgment interest, but not all three. Imperial Merch. Servs. v. Hunt, 47 Cal.4th 381, 384 (2009) (applied by this court in Imperial Merch. Servs. v. Hunt, 580 F.3d 893, 894 (9th Cir.2009)). ICC sent letters to Cruz attempting to collect both interest and “return check fee(s),” and also sent letters attempting to collect both treble damages and interest.] . . . Because ICC sent letters to Cruz representing it was entitled to collect interest and fees when governing Nevada law did not permit ICC to collect interest and fees, ICC violated the FDCPA and the district court properly granted summary judgment in favor of Cruz. The grant of summary judgment against ICC is therefore affirmed.  Further, because Hendrickson qualifies as a debt collector and signed one of the false letters, he is personally liable for violating the FDCPA. The district court’s grant of summary judgment against him is therefore affirmed.

In a separate unpublished decision, Kruse v. Experian Information Solutions, Inc., 2012 WL 822826 (9^th Cir. 2012), the Court of Appeals for the Ninth Circuit held that just because a Release in a consumer case releases the obligation, it does not mean consumer reporting agencies are bound by it as far accuracy goes.

Kruse’s suit alleged that Experian violated the Fair Credit Reporting Act (“FCRA”), 15 U.S.C. § 1681 et seq. Liability under the FCRA is based on a prima facie showing of inaccurate reporting. See Carvalho v. Equifax Info. Servs., LLC, 629 F.3d 876, 890 (9th Cir.2010). The Settlement Agreement and Mutual Release executed by Kruse and by Citibank releases each of them from any “rights, claims, and actions, contracts, suits, and/or liabilities.” So neither Kruse nor Citibank can make further claims against each other on the subject of the release. But that release does not contain a confidentiality agreement or limit Citibank’s ability to report on the history of the account. Nor does the mutual release between Kruse and Citibank purport to impose any obligations on third parties such as Experian. Kruse’s self-serving assertion that he never owed money to Citibank is not sufficient to create a disputed material fact. See FTC v. Neovi, Inc., 604 F.3d 1150, 1159 (9th Cir.2010) ( “[A court] need not find a genuine issue of fact if, in its determination, the particular declaration was uncorroborated and self-serving.”). Summary judgment was properly granted in favor of Experian because Kruse has not shown any inaccuracies in his credit report, as is required to maintain an FCRA claim.