Kielty et al v. Midland Credit Management, Inc., No. 3:2014cv00541 - Document 16 (S.D. Cal. 2015)
Court Description: ORDER granting Defendant's 11 Motion to Dismiss. Dft's motion to dismiss is granted as to all claims, with leave to amend. If Plaintiffs choose to file an amended complaint, they must do so by 3/2/2015. Signed by Judge Cynthia Bashant on 1/28/2015. (jah)
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Kielty et al v. Midland Credit Management, Inc. Doc. 16 1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 SOUTHERN DISTRICT OF CALIFORNIA 10 11 12 PATRICIA KIELTY AND SUSAN PATHMAN, on behalf of themselves and all others similarly situated, Plaintiffs, 13 14 15 Case No. 14-cv-0541-BAS(BGS) ORDER GRANTING DEFENDANT’S MOTION TO DISMISS v. (ECF No. 11) MIDLAND CREDIT MANAGEMENT, INC., 16 Defendant. 17 18 19 Plaintiffs Patricia Kielty and Susan Pathman (collectively “Plaintiffs”) 20 commenced this putative class action on March 10, 2014 by filing a complaint 21 alleging Defendant Midland Credit Management, Inc. (“Midland”) violated the 22 Credit Repair Organizations Act (“CROA”), 15 U.S.C. §§ 1679–1679j; Fair Debt 23 Collection Practices Act (“FDCPA”), 15 U.S.C. §§ 1692–1692p; and California’s 24 Rosenthal Fair Debt Collection Practices Act (“Rosenthal Act”), Cal. Civ. Code §§ 25 1788–1788.3. 26 pursuant to Federal Rule of Procedure 12(b)(6). Midland now moves to dismiss the Complaint in its entirety 27 The Court finds this motion suitable for determination on the papers 28 submitted and without oral argument. See Civ. L.R. 7.1(d)(1). For the reasons set –1– 14cv0541 Dockets.Justia.com 1 forth below, this Court GRANTS Midland’s motion to dismiss. 2 I. BACKGROUND 3 Plaintiffs are California residents who claim they each received letters and 4 brochures from Midland between April 13, 2012 and January 22, 2014. (ECF No. 5 1 (“Compl.”), at ¶¶ 4–5, 12–19.) According to Plaintiffs, the letters and brochures 6 contained statements representing that Midland could perform credit repair 7 services for them. These statements included the following: 8 9 10 11 12 13 14 15 16 17 18 19 20 Your past due balance . . . with FIRST CREDIT BANK OF DELAWARE is being reported to the credit reporting bureaus and remains a negative item on your credit report. . . . We can help you get back on track. . . . Once you make a payment, interest will stop being applied to your account[,] [y]our credit report will be updated with the payments you make[,] [and] [t]he account will appear on your credit report as Paid in Full after you’ve completed your payments[.] (Id. at ¶ 12 (quoting an April 13, 2012 letter to Kielty).) Special offers are now available to help you resolve your unpaid Cit Bank account . . . [w]e can help you get back on track. . . . [W]e will not sue you for repayment of this obligation. This account may still be reported on your credit report as unpaid, and repaying the obligation may help toward improving your credit. (Id. at ¶ 17 (quoting a February 13, 2013 letter to Pathman).)1 Call 800-282-2644 and find out how we can help you. 21 22 (Id. at ¶ 13 (quoting Why Paying Your Bills Is So Important to Your Credit Report 23 brochure [“Brochure”] sent to Kielty and Pathman).)2 24 25 26 27 28 1 The Complaint alleges that Midland sent letters materially identical to the February 2013 letter to Ms. Pathman on March 28, 2013 and July 12, 2013. (Compl. at ¶ 19.) 2 According to Plaintiffs, Midland mailed the Brochure to Ms. Pathman with the February 2013 letter and Ms. Kielty with the April 2012 letter. (Id. at ¶ 13, 18.) The Brochure explains the importance of having a good credit report, explains how a credit score is calculated and how payment history impacts the –2– 14cv0541 1 2 [O]nce you’ve completed your agreed-upon payments to settle this account, your credit report will be updated as “Paid in Full”! 3 4 5 6 7 8 9 10 (Id. at ¶ 15 (quoting March 28, 2013 and July 12, 2013 letters to Kielty).3) Ms. Kielty also alleges Midland sent her a letter on January 22, 2014, thanking her for a previous payment on her account and stating the following: Your [payment] has proven you are interested in resolving this debt. . . . [W]e would like to offer you the opportunity to resolve your account. To re-establish a positive payment history with us, the following options are available[.] (Id. at ¶ 16.) 11 Plaintiffs commenced this suit against Midland on behalf of themselves and 12 “[a]ll consumers to whom Defendant mailed, within five years preceding the date 13 of the complaint, [the Brochure] and/or a letter that includes a picture of [the 14 Brochure].” (Id. at ¶ 21.) Plaintiffs claim Midland’s Brochure violated the CROA, 15 as Midland is allegedly a credit repair organization, by failing to provide a 16 mandated consumer-rights notice and contract, by making false and misleading 17 representations, and by advising Plaintiffs to make untrue and misleading 18 statements. (Id. at ¶¶ 50, 60–62, 65.) Ms. Kielty further alleges Midland received 19 a monetary amount from her before performing credit repair services, in violation 20 of the CROA. (Id. at ¶ 58.) Finally, Plaintiffs claim Midland, acting as a debt 21 collector, violated the FDCPA and consequently, California’s Rosenthal Act by 22 making false and deceptive representations. (Id. at ¶¶ 68–70, 73.) 23 Plaintiffs seek actual damages for CROA violations, statutory damages 24 under the FDCPA and Rosenthal Act, punitive damages at the Court’s discretion, 25 26 27 28 calculation, and repeats the letter’s statement that “[Midland] can help you get your finances back on track.” (Id. at ¶ 13.) 3 Plaintiffs allege Midland again mailed Ms. Kielty letters and brochures with this additional statement, as well as “nearly identical” statements to the April 13 letter on March 28, 2013 and July 12, 2013. (Id. at ¶ 14.) –3– 14cv0541 1 as well as return of amounts paid, injunctive relief, fees, and interest. (Id. at ¶ 74.) 2 Midland now moves to dismiss the action. (ECF No. 11 (“Mot.”).) 3 II. STATEMENT OF LAW 4 A motion to dismiss pursuant to Rule 12(b)(6) of the Federal Rules of Civil 5 Procedure tests the legal sufficiency of the claims asserted in the complaint. Fed. 6 R. Civ. P. 12(b)(6); Navarro v. Block, 250 F.3d 729, 732 (9th Cir. 2001). The 7 court must accept all allegations of material fact pleaded in the complaint as true 8 and must construe them and draw all reasonable inferences from them in favor of 9 the nonmoving party. Cahill v. Liberty Mut. Ins. Co., 80 F.3d 336, 337–38 (9th 10 Cir. 1996). To avoid a Rule 12(b)(6) dismissal, a complaint need not contain 11 detailed factual allegations; rather, it must plead “enough facts to state a claim to 12 relief that is plausible on its face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 13 (2007). “A claim has facial plausibility when the plaintiff pleads factual content 14 that allows the court to draw the reasonable inference that the defendant is liable 15 for the misconduct alleged.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (citing 16 Twombly, 550 U.S. at 556). “Where a complaint pleads facts that are merely 17 consistent with a defendant’s liability, it stops short of the line between possibility 18 and plausibility of entitlement to relief.” Id. at 678 (quoting Twombly, 550 U.S. at 19 557) (internal quotations omitted). 20 “[A] plaintiff’s obligation to provide the ‘grounds’ of his ‘entitle[ment] to 21 relief’ requires more than labels and conclusions, and a formulaic recitation of the 22 elements of a cause of action will not do.” Twombly, 550 U.S. at 555 (quoting 23 Papasan v. Allain, 478 U.S. 265, 286 (1986)). A court need not accept “legal 24 conclusions” as true. Iqbal, 556 U.S. at 678. Despite the deference the court must 25 pay to the plaintiff’s allegations, it is not proper for the court to assume that “the 26 [plaintiff] can prove facts that [he or she] has not alleged or that defendants have 27 violated the . . . laws in ways that have not been alleged.” Associated Gen. 28 Contractors of Cal. v. Cal. State Council of Carpenters, 459 U.S. 519, 526 (1983). –4– 14cv0541 1 Generally, courts may not consider material outside the complaint when 2 ruling on a motion to dismiss. Hal Roach Studios, Inc. v. Richard Feiner & Co., 3 Inc., 896 F.2d 1542, 1555 n.19 (9th Cir. 1990); Branch v. Tunnell, 14 F.3d 449, 4 453 (9th Cir. 1994) (overruled on other grounds by Galbraith v. Cnty. of Santa 5 Clara, 307 F.3d 1119, 1121 (9th Cir. 2002)). 6 properly submitted as part of the complaint may be considered.” Hal Roach 7 Studios, Inc., 896 F.2d at 1542 n.19. The court may also consider documents 8 specifically identified in the complaint whose authenticity is not questioned by the 9 parties. Fecht v. Price Co., 70 F.3d 1078, 1080 n.1 (9th Cir. 1995) (superseded by 10 statute on other grounds); see also Branch, 14 F.3d at 453–54. The court may 11 consider such documents so long as they are referenced in the complaint, even if 12 they are not physically attached to the pleading. Branch, 14 F.3d at 453–54; see 13 also Parrino v. FHP, Inc., 146 F.3d 699, 706 (9th Cir. 1998) (extending rule to 14 documents upon which the plaintiff’s complaint “necessarily relies” but which are 15 not explicitly incorporated in the complaint). Moreover, the court may consider 16 the full text of those documents even when the complaint quotes only selected 17 portions. Fecht, 70 F.3d at 1080 n.1. The court also considers materials of which 18 it takes judicial notice. Barron v. Reich, 13 F.3d 1370, 1377 (9th Cir. 1994). “However, material which is 19 As a general rule, a court freely grants leave to amend a complaint it 20 dismisses. Fed. R. Civ. P. 15(a); Schreiber Distrib. Co. v. Serv-Well Furniture 21 Co., 806 F.2d 1393, 1401 (9th Cir. 1986). The court may deny leave to amend, 22 however, when “[it] determines that the allegation of other facts consistent with the 23 challenged pleading could not possibly cure the deficiency.” Schreiber Distrib. 24 Co., 806 F.2d at 1401 (citing Bonanno v. Thomas, 309 F.2d 320, 322 (9th Cir. 25 1962)). 26 /// 27 /// 28 /// –5– 14cv0541 1 III. DISCUSSION 2 A. 3 In Counts I through V, Plaintiffs allege Midland violated Sections 1679b, 4 1679c, and 1679d of the CROA. (Compl. at ¶ 74(e).) Midland moves to dismiss 5 these counts on the ground that it is not a credit repair organization and thus does 6 not fall within the mandates of the CROA. (See Mot.) Section 1679b of the 7 CROA prescribes certain practices by any “person” or “credit repair organization”; 8 similarly, Sections 1679c and 1679d mandate disclosures and regulate contracts 9 made by “credit repair organizations.”4 See 15 U.S.C. §§ 1679a–1679d. Thus, to 10 survive the present motion, Plaintiffs must plead facts sufficient to plausibly show 11 Midland is such an organization. See Stout v. FreeScore, LLC, 743 F.3d 680 (9th 12 Cir. 2014) (determining whether a company is a credit repair organization at the 13 motion to dismiss stage). 14 CROA Claims The CROA defines a “credit repair organization” as follows: 15 16 17 18 19 20 [A]ny person who uses . . . the mails to sell, provide, or perform (or represent that such person can or will sell, provide, or perform) any service, in return for the payment of money or other valuable consideration, for the express or implied purpose of-(i) improving any consumer’s credit record, credit history, or credit rating; or (ii) providing advice or assistance to any consumer with regard to any activity or service described in clause (i) . . . .5 21 22 23 24 25 26 27 28 4 Plaintiffs do not contest that Section 1679b’s prohibitions against certain actions by any “person” apply to one qualifying as, or affiliated with, a credit repair organization. See, e.g., Enriquez v. Countrywide Home Loans, FSB, 814 F. Supp. 2d 1042, 1062–63 (D. Haw. 2011) (dismissing Section 1679b(a)(1) claim against defendant since it was not “a credit-repair organization”); Slack v. Fair Isaac Corp., 390 F. Supp. 2d 906, 910 (N.D. Cal. 2005) (considering CROA claims against defendants, as defendants conceded they were credit repair organizations, which are liable under 15 U.S.C. 1679b(a)’s prohibitions against certain practices by any “person”). 5 This definition excludes nonprofits, depository institutions, or “any creditor (as defined in section 1602 of this title) . . . to the extent the creditor is –6– 14cv0541 1 15 U.S.C. § 1679a(3)(A). To fall within the definition, a person need not actually 2 provide credit repair services; it “need only represent that it can or will sell, 3 provide, or perform a service for the purpose of providing advice or assistance to a 4 consumer with regard to improving a consumer’s credit record, credit history, or 5 credit rating.” Stout, 743 F.3d at 685 (emphasis in original). In interpreting a 6 person’s advertisements, the Court looks to the “‘overall net impression’ of the 7 subject advertisement to determine what message a viewer may reasonably ascribe 8 to it.” Id. (quoting FTC v. Gill, 265 F.3d 944, 956 (9th Cir. 2001)). 9 The Ninth Circuit’s recent decision in Stout, in which it found an online 10 provider of credit scores, reports, and consumer credit information to be a “credit 11 repair organization,” is instructive. 12 FreeScore, went beyond warning consumers about the harm caused by a poor 13 credit report, to charging them initial and monthly fees in return for providing 14 merged credit reports and alerting them to changes to their reports. Id. at 685-86. 15 In reversing the district court, the Ninth Circuit reasoned that FreeScore’s online 16 and television advertisements went “beyond merely providing information about 17 one’s credit” to recommending “a course of action to consumers.” Id. at 686. In 18 other words, “FreeScore represents both explicitly and implicitly that its services 19 can improve or assist in improving a consumer’s credit record, history, or rating.” 20 Id. Thus, the Ninth Circuit found that the “overall net impression” communicated 21 by FreeScore was that its services would improve consumers credit. Id. at 686-87 22 (“The overall net impression communicated by FreeScore is that in order to ‘repair 23 a damaged credit score,’ the ‘best solution’ is to ‘utilize[e] services like credit 24 monitoring,’ which ‘can have an immediate effect on your credit score.’”). See 743 F.3d at 681. In Stout, the provider, 25 Unlike FreeScore, Midland does not offer any service for the purpose of 26 providing assistance or advice to improve consumers’ credit record in return for 27 28 assisting the consumer to restructure any debt owed by the consumer to the creditor.” 15 U.S.C. § 1679a(3)(B). –7– 14cv0541 1 payment. Midland does not represent that its services can improve or assist in 2 improving a consumer’s credit record, history, or rating. 3 collector, is simply seeking the repayment of debts owed and in doing so 4 encourages the repayment of debts owed to it and acknowledges the benefits of 5 repayment. Seeking the repayment of a debt and utilizing “the potential of a lower 6 credit score as motivation to encourage [a person] to pay the debt” does not make a 7 person a credit repair organization. See Spencer v. Ariz. Premium Fin. Co., Inc., 8 No. 06-cv-160S, 2011 WL 4473178, at *4 (W.D. N.Y. Sept. 26, 2011); see also 9 Dauval v. Preferred Collection & Mgmt. Servs., Inc., No. 11cv2269, 2012 WL 10 5928622, at *4-5 (M.D. Fla. Nov. 26, 2012) (holding that a debt collector seeking 11 to collect a debt and offering to restore the debtor’s credit in exchange for payment 12 on the debt was not a credit repair organization).6 Rather, any benefit to Plaintiffs’ 13 credit score “would simply be an indirect, collateral effect to the settlement of 14 [their] debt.” Id. Midland, as a debt 15 Plaintiffs recount Midland’s statements, including its so-called solicitation to 16 “Call 800-282-2644” and its representation that it “can help you get back on 17 track,” as evidence that Midland implicitly represented it could improve or provide 18 advice on improving Plaintiffs’ credit records in return for payment. (ECF No. 14 19 (“Opp.”), 7:7–8:20.) These statements fall short, however, of plausibly implying 20 or leaving the net overall impression that Midland was selling credit-improvement 21 services or advice. 22 indirectly attempting to collect a debt from Plaintiffs.” 23 “Collection agencies, insofar as they do not seek compensation for credit repair 24 services, do not engage in the type of conduct which Congress sought to regulate in 25 enacting the CROA.” Oslan v. Collection Bur. of Hudson Valley, No. Civ.A. 01- As the Complaint itself states, Midland was “directly or (Compl. at ¶ 10.) 26 27 28 6 In light of Iqbal and Twombly, the Court does not find Bigalke v. Creditrust Corp., 162 F.Supp.2d 996 (N.D. Ill. 2001) to be persuasive. The mere allegation that a “person” is a credit repair organization is insufficient. –8– 14cv0541 1 2173, 2001 WL 34355648, at *1 (E.D. Penn. Dec. 13, 2001) (collection letters 2 exhorting debtors to “TAKE ADVANTAGE OF THIS GREAT OPPORTUNITY 3 TO HELP RESTORE YOUR CREDIT” did not make a debt collection agency a 4 credit repair organization). 5 There is no allegation in the Complaint that Midland offered services or 6 advice for any additional fee. Cf. Reynolds v. Credit Solutions, Inc., 541 F.Supp.2d 7 1248, 1249 (N.D. Ala. 2008) (finding a debt settlement company which charges a 8 fee of 15% of the total amount of debt to be reduced to be a credit repair 9 organization), vacated by Picard v. Credit Solutions, Inc., 564 F.3d 1249 (11th Cir. 10 2009) (holding the question of whether defendant is a credit repair organization is a 11 question for the arbitrator); Kennedy v. CompuCredit Holdings Corp., 9 F.Supp.3d 12 1314, 1315, 1321 (M.D. Fla. 2014) (finding the plaintiff plausibly alleged the 13 defendant was a credit repair organization where the defendant offered debtor 14 plaintiff an opportunity to pay down a debt while at the same time qualifying for a 15 new credit card through its Fresh Start Solution Program, thus giving plaintiff the 16 “net overall impression” that “participation in the Program will provide a ‘Fresh 17 Start’ to improve any consumer’s credit record, credit history, or credit rating”). 18 Rather, the Complaint alleges Midland was merely seeking repayment of debts 19 owed to it, or a potentially lesser amount, if it could work out a plan with Plaintiffs. 20 (See Compl. at ¶17.) Given the foregoing, the Court finds that Plaintiffs have 21 failed to plausibly allege that Midland is a credit repair organization. 22 23 For these reasons, the Court GRANTS Midland’s motion to dismiss Plaintiff’s Section 1679 claims with leave to amend. 24 B. FDCPA and Rosenthal Act Claims 25 Midland also moves to dismiss Count VI of the Complaint, which alleges 26 Midland violated the FDCPA. To state a claim under the FDCPA, a plaintiff must 27 allege “1) that he [or she] is a consumer; 2) that the debt arises out of a transaction 28 entered into for personal purposes; 3) that the defendant is a debt collector; and 4) –9– 14cv0541 1 that the defendant violated one of the provisions of the FDCPA.” Freeman v. ABC 2 Legal Servs., 827 F. Supp. 2d 1065, 1071 (N.D. Cal. 2011). The purpose of the 3 FDCPA is to prevent debt collectors from resorting to duplicitous or abusive 4 collection tactics. See 15 U.S.C. § 1696(e). Given its remedial nature, courts must 5 construe the FDCPA broadly in order to effect its purposes. Clark v. Capital 6 Credit & Collection Serv., Inc., 460 F.3d 1162, 1176 (9th Cir. 2006). 7 The FDCPA bars debt collectors from using “false representation[s] or 8 deceptive means to collect or attempt to collect any debt.”7 15 U.S.C. § 1692e(10). 9 “[I]t is well established that ‘[a] debt collection letter is deceptive where it can be 10 reasonably read to have two or more different meanings, one of which is 11 inaccurate.’” Gonzales v. Arrow Fin. Servs., 660 F.3d 1055, 1061 (9th Cir. 2011) 12 (quoting Brown v. Card Serv. Ctr., 464 F.3d 450, 455 (3d. Cir. 2006)). Plaintiffs 13 allege Midland made the following three false or deceptive representations: 14 “[F]alsely and misleadingly represent[ing] that [Midland] could 15 or would legally report Plaintiff’s obligations as ‘Paid in Full’”; 16 reports could be permanently removed when it cannot”; and 17 “falsely and deceptively represent[ing] that ‘interest will stop 18 being added to your account.’” 19 20 “imply[ing] . . . negative information of Plaintiff’s credit (Compl. at ¶¶ 68–70.)8 21 In evaluating claims of deception, courts take the perspective of the “least 22 sophisticated” debtor. See Clark, 460 F.3d at 1171 (“[W]e seek to ensure that even 23 the least sophisticated debtor is able to understand, make informed decisions about, 24 25 26 27 28 7 The FDCPA defines a “debt collector” as one using “the mails in any business the principal purpose of which is the collection of any debts, or [one] who regularly . . . attempts to collect . . . debts owed or due . . . another.” 15 U.S.C. § 1692a(6). Neither party disputes that Midland is a debt collector within the meaning of the statute. (See Opp. at 20 n.2.) 8 A Section 1692e violation also creates liability under the Rosenthal Act. Cal. Civ. Code § 1788.17. – 10 – 14cv0541 1 and participate fully and meaningfully in the debt collection process.”); see also 2 Caudillo v. Portfolio Recovery Assocs., No. 12cv200(IEG), 2013 WL 4102155, at 3 *2 (S.D. Cal. Aug. 13, 2013) (“‘In this circuit, a debt collector’s liability under § 4 1692e of the FDCPA is an issue of law,’ ‘requir[ing] an objective analysis that 5 takes into account whether the least sophisticated debtor would likely be misled by 6 a communication.’” (quoting Gonzales, 660 F.3d at 1061)). 1. 7 “Paid in Full” Representations 8 Midland’s letters to Plaintiffs state that once all agreed-upon payments have 9 been received, their accounts will be considered “Paid in Full” and “the three 10 major credit reporting agencies will be updated accordingly.”9 (Compl. at ¶ 68, 11 Exs. D-F.) Plaintiffs allege these statements, offering to report the accounts as 12 “Paid in Full,” rather than “Settled,” are “false, deceptive, and misleading,” since 13 the Fair Credit Reporting Act (“FCRA”) forbids furnishing inaccurate information 14 to a consumer reporting agency. (Opp. at 22:6–14 (quoting FCRA, 15 U.S.C. 15 § 1681s–2(a)(1)(A).) 16 Midland contends it could report the debt as “Paid in Full,” regardless of 17 whether the consumers paid a lesser amount by agreement. Midland further 18 contends that Plaintiffs fail to provide any support for their assertion that “a 19 furnisher may not report a settled debt as ‘Paid in Full’” under the FDCPA. (Opp. 20 at 22:16–18.) The Court agrees that neither the FDCPA nor the FCRA explicitly 21 bar a debt collector from reporting a “settled” debt as having been fully satisfied. 22 Plaintiffs cite two unpublished cases to show that “major financial 23 institutions have interpreted this provision to mean . . . a furnisher may not report a 24 settled debt as ‘Paid in Full.’” (See id. at 22:15–23:11.) Neither case, however, 25 26 27 28 9 Additional letters state that Plaintiffs “credit report will be updated as ‘Paid in Full’” or “[t]he account will appear on your credit report as Paid in Full after you’ve completed your payments.” (Compl. at Exs. A, C, H-J.) At least two of the letters received, however, include a disclaimer that “[t]his account may still be reported on your credit report as unpaid.” (Compl. at Exs. E, F.) – 11 – 14cv0541 1 supports the broader proposition that the substantive law bars Midland from 2 reporting debts it settled with consumers as “Paid in Full.” See Schiano v. MBNA, 3 No. 05–1771(JLL), 2013 WL 2452681, at *5 (D.N.J. Feb. 11, 2013) (noting in 4 dicta that the bank and consumers agreed the bank could not report that the debt 5 was paid in full because it was settled for less than the amount owed), 6 reconsideration denied, No. 2013 WL 2452682 (D.N.J. Apr. 12, 2013), and aff’d, 7 2013 WL 2455933 (D.N.J. June 3, 2013); Grossman v. Barclays Bank Del., No. 8 12-6238(PGS), 2014 WL 647970, at *3 (Feb. 19, 2014) (reciting bank’s 9 representation that reporting debts as settled followed the Credit Resource 10 Reporting Guide (“CRRG”)); see also In re Jones, No. 09–14499(BFK), 2011 WL 11 5025329, at *3 (Bankr. E.D. Va. Oct. 21, 2011) (finding the CRRG consists of 12 “guidelines only” and is not “a national, legally enforceable standard for the 13 reporting of debts”). Thus, the Court finds the Complaint fails to make a plausible 14 allegation that Midland’s representations that Plaintiffs’ accounts will be 15 considered “Paid in Full” and reported as such to the three major credit reporting 16 agencies violates the FDCPA. 2. 17 Removal of Negative Information 18 Plaintiffs further allege Midland falsely implied negative information could 19 be removed from their credit reports.10 Where a claim of deception rests entirely 20 on the text of the communication, it may be resolved at the motion to dismiss stage 21 “if there was nothing deceptive-seeming about the communication.” Evory v. RJM 22 Acquisitions Funding, LLC, 505 F.3d 769, 776–77 (7th Cir. 2007). “Although 23 established to ease the lot of the naive, the [least sophisticated debtor] standard 24 does not go so far as to provide solace to the willfully blind or non-observant. 25 Even the least sophisticated debtor is bound to read collection notices in their 26 27 28 10 Plaintiffs fail to defend either this claim or the subsequent claim regarding interest accrual in their opposition to the motion to dismiss. (See Opp. at 19:3–24:21.) – 12 – 14cv0541 1 entirety.” Campuzano-Burgos v. Midland Credit Mgmt., Inc., 550 F.3d 294, 299 2 (3d Cir. 2008). 3 Here, having considered both the excerpts cited in the Complaint and the 4 letters and Brochure attached to it,11 the Court finds that the least sophisticated 5 debtor would not interpret the letters, which state that each past due balance 6 “remains a negative item on your credit report” and settling your debts can “get 7 your finances back on track”; and the Brochure, which informs consumers of the 8 negative impact to their credit score of carrying large amounts of debt, to be offers 9 to erase existing negative history. Midland promises nothing more than reporting 10 any settled debt as fully paid. Accordingly, the Court finds the Complaint does not 11 plausibly allege Midland falsely implied negative information could be 12 permanently removed from Plaintiffs’ credit reports. 3. 13 Halting Interest Accrual 14 Finally, Plaintiffs allege that the representation that interest would stop being 15 added to their accounts once payments have been made is false or deceptive. 16 (Compl. at ¶ 70.) Midland argues there is no basis for this allegation. (Mot. at 17 18:15–18.) The Court agrees. Even if all allegations of material fact are taken as 18 true, Plaintiff’s Complaint falls short of asserting any facts regarding Midland’s 19 ability to collect interest as the holder of the debt. While Plaintiffs allege that the 20 original creditors waived their rights to collect interest, there is no allegation that 21 Midland could not collect interest on the accounts. 22 Plaintiffs’ failure to plead facts beyond the allegation that “interest could [not] 23 have been legally added to [the accounts]” merits dismissal. Thus, the Court finds 24 For the above-stated reasons, Midland’s motion is GRANTED with respect 25 to Count VI of the Complaint. Plaintiffs predicate their Rosenthal Act claims in 26 27 28 11 The Court may consider the full text of documents attached to the Complaint, even when the Complaint quotes only selected portions. See Branch, 14 F.3d at 453–54. – 13 – 14cv0541 1 Count VII on Plaintiffs’ FDCPA claims, as, for the purposes of this case, violations 2 of the FDCPA constitute violations of the Rosenthal Act. See Riggs v. Prober & 3 Raphael, 681 F.3d 1097, 1100 (9th Cir. 2012). 4 GRANTS Midland’s motion with respect to Count VII. 5 IV. Accordingly, the Court also CONCLUSION 6 For the foregoing reasons, Defendant’s Motion to Dismiss (ECF No. 11) is 7 GRANTED as to all claims, with leave to amend. If Plaintiffs choose to file an 8 amended complaint, they must do so no later than March 2, 2015. 9 IT IS SO ORDERED. 10 11 DATED: January 28, 2015 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 – 14 – 14cv0541
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