District Court (Wash.) Addresses Effect of “Charge-off” on Debt Collector’s Right to Collect Contractual Interest Rate and State Pre-Judgment Interest Rate

In Grochowski v. Daniel N. Gordon, P.C., 2014 WL 1516586 (W.D.Wash. 2014), Judge Zilly addressed the impact of a “charge-off” on a creditor and debt collector’s right to collect the contractual rate and the state pre-judgment interest rate.

Plaintiff contends that, in “charging off” plaintiff’s debt, Capital One waived its right to collect interest at the contractual rate and, as a result, Midland is not entitled to interest at the state statutory rate. The Court is persuaded that the “charge off” itself did not operate to waive interest at the state statutory rate,FN2 but the Court remains uncertain whether Midland effectively waived interest at the state statutory rate when MCM, acting as Midland’s servicer, sent two different notices to plaintiff indicating that the accrued interest was $0.00 and the interest rate is 0%.FN3 See Exs. B & C to Complaint (docket nos. 1–2 & 1–3). Moreover, even assuming that Midland was entitled to charge interest at the state statutory rate, the Court is not satisfied that such interest would legally have run from July 30, 2010, the date of Capital One’s “charge off,” see Aylworth Dep. at 101:5–11 (docket no. 52), rather than from May 14, 2012, the date when Midland acquired plaintiff’s debt. The parties have not addressed either of these issues, and the Court therefore DEFERS ruling on the Gordon Firm’s motion for summary judgment. The parties are DIRECTED to file supplemental briefs, not to exceed ten (10) pages in length, regarding these two subjects, on or before May 16, 2014.  [FN2. As successor assignee, Midland ac-quired only the rights Capital One had when it sold plaintiff’s debt to Equable Ascent Fi-nancial. See, e.g., Morse Electro Prods. Corp. v. Beneficial Indus. Loan Co., 90 Wn.2d 195, 198, 579 P.2d 1341 (1978) (an assignee “stands in [the assignor’s] shoes, but acquires no right in excess of what the [assignor] had to transfer”). In Washington, a party is entitled to prejudgment interest when the amount due is “liquidated.” Weyerhaeuser Co. v. Commercial Union Ins. Co., 142 Wn.2d 654, 685, 15 P.3d 115 (2000). An amount due is “liquidated” when it may be computed “with exactness, without reliance on opinion or discretion.” Id. When the parties have not agreed in writing to a different rate, the rate of prejudgment interest is statutorily set at twelve percent (12%) per annum. Wright v. Dave Johnson Ins. Inc., 167 Wn.App. 758, 775–76, 275 P.3d 339 (2012); see RCW 19.52.010(1). Contrary to plaintiff’s assertion, Capital One’s decision to forego the contractual rate of interest did not relinquish its right to seek prejudgment interest at the statutory rate. See Stratton v. Portfolio Recovery Assocs., LLC, 2013 WL 6191804 at *2–*4 (E.D.Ky. Nov. 26, 2013); see also Puget Sound Nat’l Bank v. St. Paul Fire & Marine Ins. Co., 32 Wn.App. 32, 46–47, 645 P.2d 1122 (1982) (holding that a bank, which “charged off” uncollectible loans, and sought to recover from fidelity bonds issued to cover losses resulting from dishonest or fraudulent acts of its employees, was entitled to prejudgment interest running from the date of “charge off” with regard to the balance outstanding as of such date); compare Cavalry SPVI, LLC v. Desrosiers, 2010 WL 4227033 (Conn.Sup.Ct. Sep. 20, 2010) (awarding to the assignee of the company issuing the credit card at issue, which had “charged off” and sold the account, prejudgment interest at the statutory rate from the date of the charge-off to the date of the bench trial).]