District Court (Cal.) Holds that Credit Card Company’s Collection Tactics that Steered Debtor to Third Party Debt Collector Did Not Violate the Rosenthal Act

In Munekiyo v. Capital One Bank, N.A., 2011 WL 6057830 (C.D.Cal. 2011), Judge Snyder addressed Capital One’s use of a debt collection agency to service defaulted accounts, and potential deception in correspondence from Capital One that resulted in the consumer dealing with the third party debt collector.  Plaintiff filed a class action alleging that Plaintiff maintained a credit card account with Capital One Bank, and had defaulted.  Capital One Services sent plaintiff a letter informing him that his account was eligible for a 0% Annual Percentage Rate (“APR”) if he agreed to enter a repayment plan.  The Letter, printed on “Capital One” letterhead, displayed in prominent bold text “Pay Over Time” with “0% APR” directly underneath in the upper right hand corner, along with a toll-free telephone number for consumers to call.  Plaintiff alleged that when he (and other similarly situated consumers) called the toll-free number, he was connected not with a Capital One representative, but with a representative from NCO, a separate debt collection entity. Plaintiff alleged that consumers were “trapped” into speaking with specially-trained collectors rather than customer service representatives of the Capital One Defendants, and that the 0% APR “pay over time” offer was illusory because defendants only stop the accrual of interest if the consumer makes a “lump sum” payment.

Judge Snyder found that Capital One was not subject to the FDCPA because it was collecting its own debt.  As to the Rosenthal Act, Judge Snyder found no violation either, dismissing the class action complain on a Rule 12(b)(6) motion.   

Cal. Civ.Code § 1788.13(a) prohibits communication with a debtor using a false name and § 1788.13(i) prohibits misrepresentation of services being rendered by a debt collector. Plaintiff argues that Capital One Defendants violated these provisions in two ways: first, by failing specifically to disclose NCO in the letter, and second, by offering an “illusory” promise of 0% APR financing.  ¶  Plaintiff argues that the Capital One Defendants violated the RFDCPA by not defining “external agencies” in the Letter or otherwise indicating that NCO may be involved in debt collection. The Second Circuit recently rejected this exact argument. See Rogers v. Capital One Servs., LLC, 2011 WL 5829688 (2d Cir., Nov.21, 2011). Rogers involved claims against Capital One Defendants under the FDCPA and a parallel Connecticut debt collection statute arising out of a letter plaintiff had received from Capital One Services that is nearly identical to the letter at issue here. Id. In affirming the district court’s dismissal of plaintiff’s claims against Capital One Defendants, the court held that the plaintiff could not “plausibly allege deception from the mere fact that [the third party debt collector URS] is not identified by name as the particular external agency that Capital One Services will use for servicing [plaintiff’s] debt.” Id. at *2. The court noted:  [Plaintiff] does not allege that Capital One Services or URS ever failed to use their true name in dealing with [plaintiff.] At most, it complains of a failure to identify URS as the external agency that Capital One Services would use on [plaintiff’s] account. Because the letter sent by Capital One Services informed [plaintiff] of the possible involvement of such an external agency, if not the exact identity of such agency, he cannot plausibly state a claim for a violation of § 1692e(14).  Id. (emphasis added).   Here, as in Rogers, the Letter discloses that an external agency may be servicing plaintiff’s account.FN4 FAC ¶ 19, Exh. A (noting that an outside servicer may be “separately disclosed” to the consumer). The Capital One Defendants were not obligated to specifically disclose NCO, and there are no allegations in the FAC that NCO failed to abide by its own disclosure requirements. 

 

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Cal. Civ.Code § 1788.13(l) prohibits a collection agency from “demanding money [from a debtor] unless the claim is actually assigned to the collection agency.” Plaintiff argues that the Capital One Defendants violated this section by sending him the Letter when his account had been transferred to NCO. Opp’n at 17. There are two problems with plaintiff’s argument: first, the Letter does not “demand[ ] money” from plaintiff. Second, the FAC alleges that plaintiff’s debt was assigned to both NCO and Capital One Services. See FAC ¶ 61 (alleging that the debt “was transferred to Capital One Collections and NCO Collections, i.e. debt collectors, for handling”). Capital One Services could not have run afoul of § 1788.13(l)’s prohibitions if, as the FAC alleges, the debt had been assigned to Capital One Services.  Accordingly, the Capital One Defendants’ motion is GRANTED as to plaintiff’s claim insofar as it arises under Cal. Civ.Code § 1788.13(l). 

 

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Plaintiff alleges that the Capital One Defendants violated Cal. Civ.Code § 1788.17 via 15 U.S.C. § 1692f because their alleged practices are an “unfair and unconscionable means to collect or attempt to collect a debt.” FAC ¶ 81. Plaintiff asserts no new bases for this claim other than to incorporate by reference his previous allegations. Because the Court finds that the Letter is neither misleading nor de-ceptive, plaintiff’s “unfair or unconscionable” claim must also fail. See Moya v. Chase Cardmember Serv., 661 F.Supp.2d 1129, 1133 (N.D.Cal.2009) (“Having found that plaintiff has failed to state a claim that the accused language is false and deceptive … he has also failed to state a claim that it is unfair or unconscionable.”).