Haney v. Portfolio Recovery Associates, L.L.C., et al

Filing 33

MEMORANDUM AND ORDER: IT IS HEREBY ORDERED that Defendants joint motion for judgment on the pleadings is GRANTED. (ECF No. 20.) A separate judgment shall accompany this Memorandum and Order. Signed by Magistrate Judge Terry I. Adelman on 3/30/2015. (KMS)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MISSOURI
EASTERN DIVISION

DANIEL HANEY,
Plaintiff,
v.
PORTFOLIO RECOVERY
ASSOCIATES, L.L.C. et al.,
Defendant.

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No. 4:14CV0720 TIA

MEMORANDUM AND ORDER
Plaintiff Daniel Haney brings this action against Defendant Portfolio
Recovery Associates, LLC (“PRA”) and Defendant Gamache & Myers, P.C.
(“Gamache”) alleging four counts under the Fair Debt Collection Practices Act
(“FDCPA”), 15 U.S.C. § 1692e et seq. Plaintiff’s claims arise out of three
collection letters and two lawsuits that were part of Defendants’ efforts to collect
on consumer debts owed by Plaintiff. See (ECF Nos. 9-3, 9-4, 9-5, 9-6, 9-7, and 98). Now before the Court is Defendants’ joint motion for judgment on the
pleadings with respect to the First Amended Complaint. The motion is fully
briefed and for the reasons set forth below, the Court grants Defendants’ joint
motion.

I. BACKGROUND
Plaintiff, an individual consumer, acquired two credit cards for personal,
family and household use; “the Wal-Mart card” issued by GE Money Bank,
F.S.B./Wal-Mart and “the HSBC card” issued by HSBC Bank Nevada,
N.A./Orchard Bank. The Wal-Mart card had an annual interest rate of 29.90% and
the HSBC card had an annual interest rate of 26.99% which was subject to an
increase to 29.99%, if the minimum payment on the HSBC credit card was not
received by a as specified in the credit agreement.
Plaintiff defaulted on the Wal-Mart card, and on or about July 20, 2010, the
issuing bank charged off the debt on the card. The charge-off amount was $1,
2248.88, representing a principal balance of $807.95 and finance charges of
$416.93. At some point, Plaintiff also defaulted on the HSBC card and on or about
June 30, 2010, the delinquent balance on that card was $740.16. Thereafter the
issuing bank charged off the debt on the HSBC card.1 After July 20, 2010,
Plaintiff made no payment on either credit card account to the issuing banks or to
PRA.
On April 19, 2011, approximately nine months after the charge-off of the
Wal-Mart debt, Defendant PRA, an entity engaged in the purchase of debt for

1

Plaintiff does not allege and the record does not indicate what portion of
the charged-off debt on the HSBC card was attributable to principal and what
portion was attributable to finance charges.
2

collection, acquired the Wal-Mart debt. Similarly, at some point after June 30,
2010, the HSBC debt was assigned to PRA for collection. Following these
purchases and assignments, PRA retained Defendant Gamache, a law firm, to
assist it in collection efforts.
Almost two years later on April 11, 2013, Gamache sent a letter to Plaintiff
indicating that, as of the date of the letter, Plaintiff owed $925.59 on an otherwise
unidentified debt that had been purchased by PRA. The letter explained that
Plaintiff could obtain additional information about the debt by making a written
request within the next thirty days and referencing the specified internal account
number included in the letter.
On April 23, 2013, PRA filed suit against Plaintiff on the Wal-Mart credit
card debt (the “Wal-Mart suit”) in the Associate Circuit Court for St. Louis
County, Missouri, Case Number 13SL-AC13719.2 (ECF No. 9-4.) In the petition,
PRA alleged that Plaintiff owed $1,224.88 plus “prejudgment interest, as allowed
by law, at the statutory rate from and after July 20, 2010 . . . .” The affidavit
attached to the petition, signed and dated March 12, 2013, also indicated that the
amount due from Plaintiff to PRA was $1,224.88. The charge-off identified above
also was attached to the petition, but the original credit agreement was not
included.
2

PRA’s in-house counsel filed the Wal-Mart suit and a law firm other than
Gamache initially handled the suit for PRA.
3

On May 16, 2013, Gamache sent Plaintiff a second letter indicating that, as
of the date of the letter, Plaintiff owed $931.98 on a debt bearing the same internal
account number it had referenced in the April 11 letter. On May 31, 2013,
Gamache sent Plaintiff a third letter, indicating that, as of the date of the letter,
Plaintiff owed $934.72 on a debt bearing the previously referenced internal
account number. None of the aforementioned letters identified the source of the
debt, or indicated whether interest was continuing to accrue on the account.

3

On November 7, 2013, Gamache filed a lawsuit on behalf of PRA in the
Circuit Court for St. Louis County, Missouri, Case Number 13SL-AC35735
(hereinafter the “HSBC suit”) seeking to collect the HSBC credit card debt. (ECF
No. 9-7). PRA alleged that “[PRA] is the assignee of HSBC BANK NEVADA,
N.A./ORCHARD BANK to be repaid by [Haney] on the account, and it is entitled
to recover from [Haney] the sum of $740.16, that being the balance due through
June 30, 2010.” (ECF No. 9 -7 at 4.) The suit did not allege that Plaintiff owed
interest on this $740.16 amount. The original credit agreement was not attached to
the petition.

3

Although the collection letters do not explicitly identify the funds owed as
the HSBC credit card debt, Plaintiff acknowledges that it is plausible that they may
well refer to the HSBC debt, because the amounts referenced are less than the
charged-off amount of the GE credit card debt, but do not exceed the charged-off
amount of the HSBC card debt.
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II. APPLICABLE LAW
A. Standard of Review: Motion for Judgment on the Pleadings
Federal Rule of Civil Procedure 12(c) allows a party to move for judgment
on the pleadings. In reviewing a motion for judgment on the pleadings courts
apply “the same standard used to address a motion to dismiss for failure to state a
claim under [Federal Rule of Civil Procedure] 12(b)(6).” Williams v. Employers
Mut. Cas. Co., No. 4:13–CV–2393 RLW, 2015 WL 892556, at * 2 (E.D. Mo. Mar.
02, 2015) (quoting Clemons v. Crawford, 585 F.3d 1119, 1124 (8th Cir. 2009)
(citation omitted)). Therefore, ‘“[a] grant of judgment on the pleadings is
appropriate where no material issue of fact remains to be resolved and the movant
is entitled to judgment as a matter of law.’” Williams, 2015 WL 892556, at * 2
(quoting Clemons, 585 F.3d at 1124 (citation omitted)). The reviewing court must
accept the factual allegations of the complaint as true and draw all reasonable
inferences in favor of the nonmoving party. See Ashley Cty, Ark. v. Pfizer, Inc.,
552 F.3d 659, 665 (8th Cir. 2009); Eckert v. Titan Tire Corp., 514 F.3d 801, 806
(8th Cir. 2008) (citation omitted)).
B. The FDCPA
Section 1692e of the FDCPA states that a “debt collector may not use any
false, deceptive, or misleading representation or means in connection with the
collection of any debt.” The sixteen subparts of § 1692e prohibit specified
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conduct, including false representation of “the character, amount, or legal status of
the debt.” 15 U.S.C. § 1692e(2)(A). In addition, §1692f generally prohibits a debt
collector from employing “unfair or unconscionable means to collect” a debt and
“allows the court to sanction improper conduct that the FDCPA fails to address
specifically.” See Foti v. NCO Fin. Sys., Inc., 424 F. Supp. 2d 643, 667 (S.D.N.Y.
2006) (internal quotation omitted). Section 1692f(1) of the FDCPA explicitly
prohibits debt collectors from collecting “any amount (including interest, fee,
charge, or expense incidental to the principal obligation) unless such amount is
expressly authorized by the agreement creating the debt or permitted by law.” 15
U.S.C. § 1692f(1).
Under Eighth Circuit law, for purposes of the FDCPA, communications with
debtors are measured against the “unsophisticated consumer” standard. The
“standard is designed to protect consumers of below average sophistication or
intelligence,” Strand v. Divers. Collec. Serv., Inc., 380 F.3d 316, 317 (8th Cir.
2004) (internal quotations omitted), [but] it also involves an element of
reasonableness that prevents bizarre interpretations of debt collection notices.”
Volden v. Innovative Fin. Sys., Inc., 440 F.3d 947, 955 (8th Cir. 2006).
III. DISCUSSSION
A. Choice of Law
As a preliminary matter, Plaintiff argues that Defendants cannot prevail on
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their joint motion for judgment on the pleadings due to certain unresolved choice
of law issues. Positing that the underlying credit agreements contain governing
law provisions, Plaintiff argues that his allegations concerning PRA’s allegedly
improper efforts to collect pre- and post-judgment interest cannot be considered
until the original credit agreements are obtained through discovery or the Court
makes its own choice of law determination on the basis of a more fully developed
record.
The Court does not agree. The underlying credit agreements are not
necessary for the resolution of this motion because Defendants seek to recover the
statutory pre-judgment interest rate, allowable when no other rate is agreed upon,
rather than the higher contractual interest rate. See Mo. Rev. Stat. § 408.040.
Similarly, the post-judgment interest they seek is determined by Missouri statute.
See Mo. Rev. Stat. § 408.020.
To the extent that any reference to state law is necessary here, it pertains to
the pre- and post- judgment interest rates applicable in the state court suits.
Regardless of which state’s substantive law applies here those interest rates are
procedural matters dictated by the statutes of Missouri, the forum state. See
Farmers Exch. Bank v. Metro Contracting Servs., Inc., 107 S.W.3d 381, 391 (Mo.
Ct. App. 2003) (stating that courts must determine whether the issue presented is
one of substance or procedure and that if it is a matter of procedure, there is no
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dispute that the law of the forum state would apply); see also FCS Advisors, Inc. v.
Fair Finance Co., Inc., 605 F.3d 144, 147-148 (2d Cir. 2010) (recognizing that
post-judgment interest rates are better characterized as procedural). For these
reasons, the Court concludes that there are no unresolved choice-of-law issues to
preclude its consideration of Defendants’ motion for judgment on the pleadings.
B. Count I
In Count I, Plaintiff alleges, that the petitions PRA filed in the state court
collection suits misrepresented the character of the debt in violation of 15 U.S.C. §
1692e. (ECF No. 9-4.) Specifically, Plaintiff asserts that PRA: (1) in the WalMart suit, mischaracterized as “principal” an amount actually comprised of a
principal plus interest; (2) stated in the HSBC suit that it was seeking damages of
$740.16, without indicating whether the charge-off portion of this amount included
any interest; (3) improperly sought, in the Wal-Mart suit, pre-judgment interest on
an amount that already included accrued interest; (4) improperly represented in
each suit that it sought 9.00% simple interest as post-judgment interest, when it
effectively sought a greater compounded interest rate; and (5) failed to provide
proof in the HSBC suit of valid assignment of the HSBC credit card debt.
With respect to the allegations in (1) and (2) above that PRA
mischaracterized the amount of debt in each of the collection suits, the Court first
notes that the challenged statements are found in the “wherefore” clauses of the
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respective petitions. Courts generally hold that such statements are not subject to
scrutiny under the FDCPA, characterizing them as requests to the presiding court
and not demands directed to the debtor. See, e.g., Stratton v. Portfolio Recovery
Assocs., LLC, No. 13-147, 2013 WL 6191804, at*7-8 (E.D. Ky. Nov. 26, 2013)
(refusing to find a FDCPA violation based upon a request for relief in a law suit,
because such requests are directed to the court and do not constitute assertions that
a specific amount is authorized by a credit agreement); Argentieri v. Fisher
Landscapes, Inc., 15 F. Supp. 2d 55, 61 (D. Mass. 1998) (holding that a general
prayer for attorney’s fees in a collection complaint did not violate the FDCPA even
where the credit agreement did not specifically authorize attorney’s fees). In
addition, even if the FDCPA applied to such statements, in each petition at issue
here PRA referred to the sum of principal and interest as either the “balance due”
or “the outstanding sum.” (ECF Nos. 9-4 at ¶¶ 7, 11 and 9-7 at Count I, ¶ 9.)
PRA did not label the amounts sought as “principal” and the Court cannot say that
the aforementioned phrases would have been misleading to even an
“unsophisticated consumer.” Moreover, the Seventh Circuit Court of Appeals has
held that there is no basis for a finding of “misrepresentation” under the FDCPA
where the debt collector describes a sum of money that contains interest as a
“principal balance.” Wahl v. Midland Credit Mgmt., Inc., 556 F.3d 643, 646 (7th
Cir. 2009) (holding that “[t]he unsophisticated consumer, with a reasonable
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knowledge of her account’s history, would have little trouble concluding that the
‘principal balance’ included interest charged by the [original creditor], and
observing that “[the debt collector could have elected to go a step further,
disclosing the components of the debt it acquired-such as what [the debtor]
charged on the card versus the interest and late fees levied by the [original
creditor]-but it wasn’t a matter of compulsion”).
Finally, the FDCPA “does not require itemization of the debt in every
communication, but rather a clear and accurate statement of the total amount due.”
Goodrick v. Cavalry Portfolio Serv., LLC, No. 12-1822, 2013 WL 4419321, *4 (D.
Ariz. Aug. 19, 2013) (concluding that a dunning letter did not violate Section
1692e where it included the total amount due on the date the letter was sent, and
observing that : “[w]hile Defendant’s letters could have included additional
clarifying language to itemize the principal and the interest portions of the debt or
to reiterate the interest rate, the Court does not believe that the lack of those details
can be considered false, deceptive, or misleading”); see also Leffler v. Miller and
Steeno, P.C., No. 13-1764, 2014 WL 1613946, *4 (E.D. Mo. Apr. 22, 2014)
(holding that there was no FDCPA violation where the amount stated in the
collection letter was the entire debt that the defendant was hired to collect although
it did not specify the amount attributable to principal or interest ).

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With respect to the third allegation in Count I regarding PRA’s prayer for
pre-judgment interest in the Wal-Mart suit, the Court notes that prayer cannot be
deemed misleading inasmuch as it is consistent with the requirements of Missouri
law. See Mo. Rev. Stat § 408.020. In addition, the Court concludes that the
petition in the Wal-Mart suit does not, despite Plaintiff’s allegation, misrepresent
the amount of the debt by praying for pre-judgment interest on a sum that includes
contractual interest. Here, PRA explicitly seeks pre-judgment interest “from and
after” the date the suit was filed. (ECF No. 9-4) (emphasis supplied). Thus there
is no support for the contention that PRA is seeking to collect both the contractual
interest rate and the pre-judgment rate for the period after the suit was filed.
Plaintiff’s fourth allegation in Count I is that the prayers for post-judgment
interest in each suit are deceptive because they amount to requests for “interest on
interest,” violating the general prohibition on the compounding of interest on
judgments. Upon review of the petitions and the parties’ arguments, the Court
concludes that these allegations cannot support a claim for relief. In both cases
PRA prays for the amount of post-judgment interest permitted by law.4 The Court
finds nothing deceptive about such requests and without adopting the sort of

4

In the Wal-Mart suit, PRA prayed for post- judgment interest at the Missouri
statutory rate. See Mo. Rev. Stat § 408.020. In the HSBC suit, PRA did not
specifically state that it was seeking nine percent interest, but rather that it sought
judgment in the sum of $740.16, “together with interest as provided by law . . . .”
(Doc. 9-7.)
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“bizarre interpretation[ ]” rejected by the Eighth Circuit under the “unsophisticated
consumer standard,” cannot conclude that these allegations state a claim for
violation of the FDCPA. Volden, 440 F.3d at 955.
In addition, seeking statutory post-judgment interest on a sum that already
includes contractual interest does not violate common law or statutory prohibitions
on the collection of compound interest. See Boatmen’s First Nat. Bank of Kansas
City v. Bogina Petrol. Eng’rs, 794 S.W.2d 703, 705-706 (Mo. Ct. App. 1990)
(holding that post judgment interest was properly assessed on a judgment that
already included other interest because prohibitions on the allowance of compound
interest, “are intended merely as regulations of interest on contracts and not interest
on judgments”); Big Bear Prop., Inc. v. Gherman, 157 Cal. Rptr. 443, 447 (1979)
(holding that the rule against the compounding of interest does not prevent the
collection of post- judgment interest on a judgment which includes an award of
interest); In Rochester Carting Co. v. Levitt, 326 N.E.2d 808, 811 (1975)
(explaining that post-judgment interest, or interest on the judgment, is awarded on
the theory that it is a penalty for delayed payment of the judgment).
Finally, in Count I Plaintiff also alleges that PRA misrepresented the
character or amount of the debt sought in the HSBC lawsuit by pleading, without
supporting documentation, that there had been a valid assignment of the consumer
debt by HSBC to PRA. Plaintiff’s allegation in this regard also fails because it is
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settled law that the filing of a collection suit in the absence of immediate means to
prove the validity and ownership of the debt does not constitute a false or
deceptive practice in violation of 15 U.S.C. § 1692e. See Harvey v. Great Seneca
Fin. Corp., 453 F.3d 324, 331 (6th Cir. 2006); Hickman v. Alpine Asset Mgmt.,
Grp., LLC, No. 11-1236, 2012 WL 406 2694, at*5 (W.D. Mo. Sept. 14, 2012)
(citing cases).
C. Count II
In Count II, Plaintiff alleges that Gamache violated 15 U.S.C. § 1692e by
misrepresenting, in the collection letters sent to Plaintiff, the “character or amount”
of the debt. Specifically, Plaintiff alleges that the letters violated § 1692e because
they failed to identify the source of the debt, thus making it impossible for Plaintiff
to verify its validity. The Court first notes that Plaintiff offers no case law
indicating that the failure to explicitly identify the source of the debt constitutes a
violation of the FDCPA. In addition, the first letter informed Plaintiff that he
could obtain the name and address of the original creditor by making a written
request for that information. There is no indication in the record that Plaintiff ever
made such a request. (Doc. 9-3).
Moreover, even if the Court were to assume a misrepresentation resulting
from the failure to identify the particular credit account at issue, there would be no
FDCPA violation here because the alleged misrepresentation did not result in harm
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to Plaintiff. There was no harm because the amounts sought in each letter were
less than the amounts PRA could have legally recovered on either of Plaintiff’s
outstanding accounts.5 See Hahn v. Triumph Partnerships LLC, 557 F.3d 755, 757
(7th Cir. 2009) (reiterating that a false statement that causes no harm fails to satisfy
the materiality requirement of a federal claim based on a false or misleading
statement).
D. Count III
In Count III Plaintiff alleges that in the Wal-Mart suit PRA used an “unfair
and unconscionable” means to collect a debt in violation of § 1692f(1) by: (1)
seeking interest, fees and other amounts not permitted by law or in the written
instrument creating the debt; and (2) seeking interest on amounts previously
charged as interest, when such compound interest was not expressly permitted by
the written instrument. (ECF No. 9 ¶ 36(a).)

5

For example, the statement attached to the petition in the HSBC suit
indicates that on June 30, 2010, the balance on the HSBC card was $740.16,
$731.47 of which was subject to interest. (ECF No. 9-8.) Plaintiff alleges that he
did not make any payments on the HSBC card after July 20, 2010, (ECF No. 9 ¶
22), and that the applicable interest rates on the credit accounts at issue were
26.99%, with HSBC card being subject to an increase up to 29.99%. The amounts
sought in the three letters were $925.59, $931.98 and $934.72. (ECF Nos. 9-3, 9-5
and 9-6.) Thus, if Gamache had applied an interest rate of 26.99%, the total
amount owed on April 11, 2013, the date of the first letter, would have been
$1,283.17,( a principal balance of $731.47 and $551.70 in accrued interest), a
larger sum than the $925.59 requested in that letter.
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Plaintiff specifically asserts that PRA violated the FDCPA because it sought
“prejudgment interest, as allowed by law, at the statutory rate from and after July
20, 2010, plus interest on any judgment rendered by this Court at the rate of 9%
per annum,” which was not permitted by the written agreement or by law. (ECF
No. 9 ¶ 36.) As noted above, it is doubtful that this request for relief found in the
“wherefore” clauses of PRA’s petition falls within the scope of the FDCPA. See
Stratton, 2013 WL 6191804, at *7-8. (finding no §1692f(1)) violation based upon
a request for relief in a law suit).
In addition, as further discussed in more detail above, PRA sought recovery
of the balance due on the Wal-Mart account, $1,224.88, and pre-judgment and
post-judgment interest. The affidavit and statement of account attached to the
petition demonstrates that the amount due was, in fact, $1,224.88. Therefore,
even if the prayer for relief were deemed a demand to the debtor, rather than a
request to the court, see Argentieri,15 F. Supp. 2d at 61, this prayer would not
violate the FDCPA because there is nothing unfair or unconscionable about
seeking pre-judgment interest “as allowed by law” or post-judgment interest,
which is permitted in accordance with state law.
Plaintiff also alleges the petition in the Wal-Mart suit was unfair or
unconscionable because it effectively sought prohibited compound interest by
seeking post-judgment interest on an amount that already included contractual
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interest. (ECF No. 9 ¶ 36(b)). As discussed above, the allegation that PRA
effectively sought “compound interest” when it prayed for post- judgment interest
lacks merit. See Boatmen’s First Nat. Bank of Kansas City, 794 S.W.2d at 703,
Thus, the Court cannot say that there was anything unfair or unconscionable about
this request.
Plaintiff next contends that PRA’s attempt to collect interest on the debts
after they were charged-off by the issuing banks is a recognized cause of action
under the FDCPA. This argument lacks merit because the case on which Plaintiff
relies concerns the collection of contractual interest, not statutorily imposed postjudgment interest. See McDonald v. Richard J. Boudreau & Assoc., LLC, No. 13259-ML, 2013 WL 3479273, *4 (D.R.I. July 10, 2013) (holding that amounts
sought in a prayer for relief did not violate the FDCPA, despite the plaintiff’s
argument that the amounts sought were not authorized by the credit card agreement
or applicable state law);Winn v. Unifund CCR Partners, No. 06-447, 2007 WL
974099 (D. Ariz. Mar. 30, 2007) (same). In addition, the assertion that seeking
pre-judgment interest “as allowed by law” could be false or unconscionable defies
logic.
E. Count IV
In Count IV Plaintiff alleges that Gamache violated § 1692f(1) by: (1)
failing to identify which credit card debts it was attempting to collect and making it
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impossible for Plaintiff to ascertain the validity of either of the foregoing debts;
and (2) unlawfully attempting to collect compound interest or interest inconsistent
with the amount of the original charged-off debt. These allegations also form the
basis of the §1692e claim against Gamache set forth in Count II and are therefore
subject to dismissal as duplicative. (Compare ECF No.9 ¶¶ 34(a)-(b) with ECF
No.9 ¶¶ 38(a)-(b)) Section 1692f “allows the court to sanction improper conduct
that the FDCPA fails to address specifically.” Foti, 424 F. Supp. 2d at 667
(internal quotation omitted). In this case “Plaintiff[‘s] complaint is deficient in that
it does not identify any misconduct beyond that which Plaintiff[ ] assert[s] violate
other provisions of the FDCPA.” Id. at 667 (citation omitted). Finally, even if
Count IV was not subject to dismissal as duplicative, it would fail as a matter of
law for the reasons set forth above with respect to 15 U.S.C. § 1692e.
Accordingly,
IT IS HEREBY ORDERED that Defendants’ joint motion for judgment on
the pleadings is GRANTED. (ECF No. 20.)
A separate judgment shall accompany this Memorandum and Order.

Terry I. Adelman
UNITED STATES MAGISTRATE JUDGE
Dated this 30th day of March, 2015.
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