District Court (Cal.) Denies Auto Finance Company’s MSJ Because Factual Question Existed as to Whether its “SpeedPay” Program Violated the Rosenthal Act

Defendant does not contend that the Speedpay fee is written or otherwise expressly authorized in the Contract. Rather, Defendant concedes that Contract is silent with respect to the Speedpay fee. Thus, the Speedpay fee violates the FDCPA unless the fee is authorized under a valid oral modification under California law. Defendant argues that each time April Lindblom paid the Speedpay fee, she and Santander orally modified the underlying contract to allow that fee. Defendant argues that its collection of Speedpay fees does not violate the statute because, under California contract law, the collection of Speedpay fees was “expressly authorized” by Plaintiffs’ fully executed consent to pay those fees. See Cal. Civ. Code § 1698(b). Defendant explains that each and every time Plaintiffs used Western Union to pay their loan obligation, Plaintiffs were informed of the $10.95 Speedpay fee. Plaintiffs testified that they knew about the Speedpay fee and agreed to pay the fee in order to receive the benefit of a faster and more convenient payment option. Defendant contends that this evidence establishes that the written Contract was orally modified by Plaintiffs’ “fully executed” conduct in paying the Speedpay fee.  Plaintiffs reject the idea that their payment of the Speedpay fee constitutes an oral modification to the underlying Contract. Plaintiff argues that an oral modification is inconsistent with the statutory language which requires an “expressly authorized” fee in the Contract. But even assuming that the parties entered into an oral agreement, Plaintiffs argue that Defendant must still demonstrate that the parties mutually intended to waive the Contract’s “no oral modification clause.” Because waiver requires “full knowledge of facts,” Plaintiffs argue that they could not waive the no oral modification clause to permit the profit-sharing of the Speedpay fees because Plaintiffs were unaware that Defendant retained a portion of that fee. . . .Having reviewed Defendant’s arguments and the cited authority, the Court is not persuaded that Defendant’s oral modification theory precludes an RFDCPA violation here. . . .Here, however, as acknowledged by Defendant, the parties’ Contract is silent with respect to Speedpay fees. An “oral modification” presupposes an existing term or provision in writing. . . . Payment of the Speedpay fee does not alter the terms of the Contract because there is no provision addressing the fee in the underlying Contract. There is no term in the Contract to modify. Plaintiffs’ oral agreement to pay Western Union thus did not alter or modify any part of the written Contract with Santander. If at all, the Speedpay fee is a new oral agreement. It was an oral agreement to pay Western Union, not Santander. Santander is not party to that new, hypothetical, contract. Santander would, at best, be a third-party beneficiary. As a third-party beneficiary, however, Santander would have no standing to enforce the Speedpay fee agreement because a third party’s right to enforce performance “is predicated on whether the contracting parties intended to confer a benefit on the third party.” Murphy v. Allstate Ins. Co., 17 Cal.3d 937, 944, 132 Cal.Rptr. 424, 553 P.2d 584 (1976). Plaintiffs’ evidence is that they were unaware that Defendants retained a portion of the Speedpay fee, and thus, precludes a finding that the Speedpay fee agreement was intended to confer a benefit on Santander.  Second, an oral modification is only valid if there is a showing that the modification was fully executed by both parties; a fact that Defendant has not demonstrated. Cal. Civ. Code § 1698(b). A party cannot fully perform on an agreement of which they do not have complete knowledge. In her deposition, Plaintiff April Lindblom testified that when she complained to Santander representatives about the excessive Speedpay fee, Defendant explained that the entirety of the Speedpay fee was a cost imposed by Western Union in order to process payments made online or by phone. SAUF ¶ 7. Plaintiffs were thus under the impression that the $10.95 fee was justifiable based on the costly nature of processing the transaction. Plaintiffs, however, now present undisputed evidence that Defendant, misrepresented that fact, and retained a portion of the fee—over and above the cost of that transaction—as compensation. . . Denying Defendant’s oral modification theory under these facts is entirely consistent with the broad remedial purpose underlying California’s version of the FDCPA. . . .The language of Section 1692f(1) prohibits a debt collector from imposing a service charge unless (i) the customer expressly agrees to the charge in the contract creating the debt or (ii) the charge is permitted by law. The majority of cases examining this provision agree that this section seeks to preclude debt collectors from implementing a method of obtaining increased compensation through the collection of service charges in addition to the underlying debt. See Longo v. Law Office of Gerald E. Moore & Assocs., P.C., No 04 C 5759, 2005 U.S. Dist. LEXIS 48493 (N.D. Ill. Feb. 3, 2005); Quinteros v. MBI Assocs., Inc., 999 F. Supp. 2d 434 (E.D.N.Y. 2014). To allow a debtor to contract around that protection simply by agreeing to pay an otherwise unlawful fee is wholly contrary to the statute and its purpose to protect consumers.  For all of these reasons, Defendant’s argument that Plaintiffs modified their Contract to lawfully permit Defendant’s collection of a Speedpay fee is rejected.