Hughes v. United Debt Holding, LLC et al

Filing 30

MEMORANDUM Opinion and Order Signed by the Honorable Maria Valdez on 8/20/2018: Mailed notice (lp, )

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
DANIELLE N. HUGHES,
Plaintiff,
v.
UNITED DEBT HOLDING, LLC;
COHEN & LION CONSULTANTS,
LLC; and PAYMENT
MANAGEMENT SERVICES USA,
LLC,
Defendants.

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No. 18 C 2235
Magistrate Judge
Maria Valdez

MEMORANDUM OPINION AND ORDER
Hon. Maria Valdez, United States Magistrate Judge
Plaintiff Danielle Hughes (“Plaintiff”) filed a complaint alleging that
Defendants United Debt Holding, LLC (“UDH”), Cohen & Lion Consultants, LLC
(“C&L”), and Payment Management Services USA, LLC (“PMS”) violated the Fair
Debt Collection Practices Act, 15 U.S.C. § 1692, et seq. (“FDCPA”). The matter
before the Court is Defendants United Debt Holding, LLC and Payment
Management Services USA, LLC’s Motion to Dismiss [Doc. No. 16]. Plaintiff filed a
response on July 17, 2018, which UDH and PMS (collectively “Defendants”) replied
to on July 31, 2018. For the reasons that follow, the motion to dismiss is denied.

BACKGROUND
Plaintiff obtained a payday loan through online lender, “Check ‘n Go” which
she later defaulted on, thus incurring debt (“the subject debt”). Pl.’s Complaint at
¶¶ 10–11, 13. C&L attempted to collect on the subject debt on behalf of the subject
debt’s eventual owner, UDH. Id. at ¶¶ 12–13. C&L’s collections efforts included
placing phone calls and sending written correspondence to Plaintiff and Plaintiff’s
family members. Id. at ¶ 14. Plaintiff alleges that C&L left pre-recorded voicemails
on both Plaintiff and Plaintiff’s mother’s cellular phones, which included a threat
that default judgment would be entered against Plaintiff. Id. at ¶¶ 15–18. Plaintiff
also alleges that C&L sent her a collection letter, indicating that, at the direction of
UDH, C&L was authorized to settle the subject debt for an amount less than the
purported total debt owed. Id. at ¶¶ 19–21. Plaintiff’s complaint alleges violations
under the FDCPA against Defendants, including that UDH directed C&L to use
harassing collection tactics and that she was coerced into sending payment to PMS.
Plaintiff defines UDH, C&L, and PMS as “debt collectors” under § 1692a(6) of the
FDCPA. Id. at ¶¶ 31–34.

DISCUSSION
I. JUDICIAL STANDARD
The purpose of a motion to dismiss under Rule 12(b)(6) is to test the
sufficiency of a complaint, not to decide the merits of a case. Gibson v. City of Chi.,
910 F.2d 1510, 1520 (7th Cir. 1990). In determining whether to grant a Rule

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12(b)(6) motion to dismiss, the Court accepts all well-pleaded allegations in the
complaint as true and draws all reasonable inferences in the light most favorable to
the plaintiff. Killingsworth v. HSBC Bank, 507 F.3d 614, 618 (7th Cir. 2007). The
complaint must contain “a short and plain statement of the claim showing that the
pleader is entitled to relief.” Fed. R. Civ. P. 8(a)(2). “Specific facts are not necessary;
the statement need only ‘give the defendant fair notice of what the . . . claim is and
the grounds upon which it rests.’” Erickson v. Pardus, 551 U.S. 89, 93 (2007)
(quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007)).
However, “a plaintiff's obligation to provide the grounds for entitlement to
relief requires more than labels and conclusions, and a formulaic recitation of the
elements of a cause of action will not do.” Twombly, 550 U.S. at 555. “Factual
allegations must be enough to raise a right to relief above the speculative level.” Id.
The Seventh Circuit has read the Twombly decision as imposing “two easy-to-clear
hurdles. First, the complaint must describe the claim in sufficient detail to give the
defendant fair notice of what the claim is and the grounds upon which it rests.
Second, its allegations must plausibly suggest that the plaintiff has a right to relief,
raising that possibility above a speculative level; if they do not, the plaintiff pleads
itself out of court.” E.E.O.C. v. Concerta Health Servs., Inc., 496 F.3d 773, 776 (7th
Cir. 2007) (internal citations and quotations omitted). In determining what
“plausibly” means, the Seventh Circuit has explained that “the complaint must
establish a nonnegligible probability that the claim is valid; but the probability need

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not be as great as such terms as ‘preponderance of the evidence’ connote.” In re Text
Messaging Antitrust Litig., 630 F.3d 622, 629 (7th Cir. 2010).
II. “DEBT COLLECTOR” UNDER THE FDCPA
Defendants argue that Plaintiff’s complaint should be dismissed because they
do not meet the FDCPA’s definition of “debt collector.” Under the FDCPA, the term
“debt collector” is defined as two alternatives: “any person who uses any
instrumentality of interstate commerce or the mails in any business the principal
purpose of which is the collection of any debts, or who regularly collects or attempts
to collect, directly or indirectly, debts owed or due or asserted to be owed or due
another.” 15 U.S.C. § 1692a(6) (emphasis added). It is clear that only individuals
who meet the statutory definition of “debt collector” can be held liable under the
FDCPA. Pettit v. Retrieval Masters Creditor Bureau, Inc. 211 F.3d 1057, 1059 (7th
Cir. 2000).
A. UDH
i. Principal Purpose Definition
Plaintiff’s complaint alleges that UDH qualifies as a debt collector under the
“principal purpose” definition because it “uses any instrumentality of interstate
commerce or the mails in any business the principal purpose of which is the
collection of any debts.” Pl.’s Complaint at ¶ 31. UDH opposes Plaintiff’s
classification and, instead, asserts that it falls outside the jurisdiction of the FDCPA
because it is a “debt purchaser”, not a “debt collector.” UDH points out that it
acquired the subject debt, but has never directly contacted Plaintiff in order to

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collect on it. UDH maintains the distinction between debt collector and debt
purchaser is important because some courts have found that “[a]n entity that
acquires a consumer's debt hoping to collect it but that does not have any
interaction with the consumer itself does not necessarily undertake activities that
fall within [the statutory definition of debt collector].” Kaslo v. Trident Asset Mgmt.,
53 F.Supp.3d 1072, 1078–79 (N.D. Ill. 2014); see also McAdory v. M.N.S. Assoc.,
LLC, 2017 WL 5071263, at *2–*3 (D. Or. Nov. 3, 2017). Plaintiff does not reject the
findings in Kaslo or McAdory, but notes that UDH has overlooked conflicting, and
more current, authority. In McMahon v. LVNV Funding, LLC, 301 F.Supp.3d 866,
884 (N.D. Ill. Mar. 14, 2018), the court stated that “[e]ven if the second prong [of the
FDCPA’s definition of debt collector] . . . require[s] interaction with debtors, the
plain language of the first prong does not.” Id. at 884.
UDH attempts to distinguish McMahon, calling the court’s analysis
“mistaken.” In addition, UDH notes that the McMahon court ultimately did not
determine whether an entity can be a debt collector under the primary purpose
definition without interacting with consumers because the plaintiff had adduced
evidence that the defendant had interacted with consumers by filing collection
lawsuits against them. Id. It is not necessary, however, for this Court to determine
the merits of these arguments given the current posture of the case. At the motion
to dismiss stage, a court need only determine the sufficiency of the plaintiff’s
complaint. Gibson, 910 F.2d at 1520. While UDH may disagree with the McMahon
court, it has pointed to no binding authority which states, as a matter of law, that

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an individual must interact with consumers in order to meet the first statutory
definition of “debt collector”. Absent such authority, the fact that UDH alleges it has
had no contact with Plaintiff does not eliminate the possibility that it may be
determined to be a “debt collector” under the FDCPA.
Drawing all reasonable inferences in Plaintiff’s favor, it presently is unclear
whether UDH will be determined a debt collector under the principal purpose
definition. While the answer to this question may revealed after development of the
factual record, it is not appropriate to dismiss UDH at this stage.
UDH also asserts that it cannot meet the first statutory definition of debt
collector because Plaintiff has not plausibly alleged that its “principal purpose” is
debt collection. Specifically, UDH claims that Plaintiff’s complaint is “devoid of any
allegation that UDH took any steps or measures to collect on any debt at any time.”
Defs.’ Resp. at 8. To the contrary, Plaintiff’s complaint alleges that C&L, at the
direction of UDH, sent Plaintiff a collection letter seeking to settle the subject debt.
¶21. Thus, UDH’s argument in this respect is misplaced. Here, Plaintiff’s complaint
has sufficiently alleged facts with respect to UDH’s principal purpose to survive a
motion to dismiss. 1

The parties spend a significant portion of their briefs arguing whether UDH meets the
statutory definition of “debt collector” under the “regularly collects” definition. Because the
Court has determined that UDH should not otherwise be dismissed under the first
statutory definition, the Court need not reach the parties argument on this point.
Furthermore, Plaintiff’s complaint does not allege that UDH is a debt collector under the
“regularly collects” definition.

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B. PMS
Plaintiff’s allegations against PMS center on the second statutory definition
of “debt collector”. In her complaint, Plaintiff alleges that PMS is debt collector
because it “regularly collects or attempts to collect, directly or indirectly, debts owed
or due or asserted to be owed or due another.” Pl.’s Complaint at ¶ 34. Akin to the
argument advanced by UDH, PMS maintains that it is a payment processing
service, a separate entity from a debt collector, which cannot be held liable under
the FDCPA. 2
The complaint with respect to PMS alleges that C&L sent Plaintiff a letter
indicating payments on the subject debt were to be sent to PMS. Pl.’s Complaint at
¶22. PMS contends that it is clear from the letter that it was not the owner or
collector or the debt, but merely the processor of the payment. Id. at Exhibit A.
The collection letter at issue indicates that payment was to be sent to PMS,
and that a service fee may be charged for any payments made by credit or debit
card. Id. While UDH is listed as the current creditor, the letter is unclear on whose
behalf the payment was being collected. Id. (stating “Pursuant to our . . . client’s
approval we are authorized to offer you a settlement. . .” without identifying the
client by name). Without more, Plaintiff may have reasonably believed that PMS
was collecting the outstanding debt, not simply processing it. Construing all
reasonable inferences in Plaintiff’s favor, the letter does not completely foreclose the

The Court does not find, and PMS does not point to, any authority in the Seventh Circuit
supporting this proposition.

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possibility that PMS could satisfy the definition of “debt collector” under the
FDCPA. Accordingly, PMS’s motion to dismiss is denied.

CONCLUSION
For the reasons stated above, United Debt Holding, LLC’s and Payment
Management Services USA, LLC’s Motion to Dismiss [Doc. No. 16] is denied.

SO ORDERED.

ENTERED:

DATE:

___________________________
HON. MARIA VALDEZ
United States Magistrate Judge

August 20, 2018

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