FUENTES v. AR RESOURCES, INC. et al

Filing 19

OPINION filed. Signed by Judge Freda L. Wolfson on 3/31/2017. (mps)

**NOT FOR PUBLICATION**
UNITED STATES DISTRICT COURT
DISTRICT OF NEW JERSEY
___________________________________
:
Civil Action No. 15-7988 (FLW)(LHG)
LISA FUENTES, on behalf of herself and :
all others similarly situated,
:
OPINION
:
Plaintiff,
:
:
v.
:
:
AR Resources, Inc., et al.,
:
:
Defendants.
:
___________________________________ :
WOLFSON, United States District Judge:
Before the Court are the cross motions of Plaintiff Lisa Fuentes (“Plaintiff”) and
Defendant AR Resources, Inc. (“Defendant”), for summary judgment, pursuant to Fed. R. Civ. P.
56, on Plaintiff’s Complaint under the Fair Debt Collection Practices Act (“FDCPA”). Plaintiff
contends that Defendant violated the FDCPA, 15 U.S.C. §§ 1692e(2), 1692e(10), and 1692f(1),
by sending Plaintiff a debt collection letter offering a $5.00 convenience fee for transactions
completed by credit card. Defendant contends that the offered $5.00 convenience fee is either
exempted from the FDCPA as a fee not “incidental” to Plaintiff’s underlying debt, or,
alternatively, falls within an exception to the FDCPA for collection agency fees expressly
authorized by the agreement governing Plaintiff’s underlying debt. For the reasons set forth
below, the Court concludes that (i) Plaintiff retains Article III standing to bring her FDCPA
claims after the Supreme Court’s decision in Spokeo, Inc., v. Thomas Robins, 136 S. Ct. 1540
(2016); (ii) the $5.00 credit card convenience fee is a fee “incidental” to Plaintiff’s debt, subject
to the FDCPA; and (iii) the $5.00 credit card convenience fee is not expressly authorized by the
agreement governing Plaintiff’s underlying debt, and, therefore, violates the FDCPA.
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Accordingly, Plaintiff’s motion for summary judgment is granted and Defendant’s cross motion
for summary judgment is denied.
I. FACTUAL BACKGROUND & PROCEDURAL HISTORY
Defendant is a debt collector and was retained by the Center for Orthopedic Sports
Medicine, P.A. (“COSM”), to collect a $1,405.50 medical debt from Plaintiff. Defendant’s
Statement of Material Facts (“DSMF”), ¶¶ 3-4. Plaintiff incurred the debt as a result of receiving
medical services from COSM. Plaintiff’s transaction with COSM was governed by a Financial
Agreement and Authorization for Treatment (“Agreement”) executed by the parties. Id. at ¶ 5. In
the Agreement, Plaintiff agreed to the following:
In the event that COSM has to use collection techniques in the form of legal action or an
agency, I agree to pay collection agency fees of 2% per month of the balance due, in
addition to attorney and court costs.
DSMF, ¶ 6. As part of Defendant’s effort to collect the debt, Defendant sent Plaintiff a letter,
dated July 1, 2015 (the “Letter”), which included the following language:
If you wish to pay by credit card, complete the credit card information below, tear off and
return in the enclosed envelope. A $5.00 convenience fee should be added to all
transactions. No fees applied to mailed checks or money orders.
Id. at ¶ 2.
On November 10, 2015, Plaintiff filed the present suit against Defendant, alleging that
Defendant’s Letter violated the Fair Debt Collection Practices Act. Specifically, in a two-count
Complaint, Plaintiff alleges that Defendant falsely represented the character, amount, or legal
status of Plaintiff’s debt and falsely represented that a convenience fee could lawfully be
received by Defendant in violation of 15 U.S.C. §§ 1692e(2)(A) and 1692e(2)(B), as well as
used a false representation or deceptive means in an attempt to collect Plaintiff’s debt in
violation of § 1692e(10) [Count I]; and used unfair or unconscionable means to collect or

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attempt to collect a debt by charging or attempting to charge an unauthorized convenience fee in
violation of 15 U.S.C. § 1692f(1) [Count 2]. Defendant and Plaintiff cross-moved for summary
judgment on both counts of the Complaint, on August 15, 2016.
II. STANDARD OF REVIEW
Summary judgment is appropriate where the Court is satisfied that “there is no genuine
issue as to any material fact and that the movant is entitled to a judgment as a matter of law.”
Fed. R. Civ. P. 56(c); Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). A factual dispute is
genuine only if there is “a sufficient evidentiary basis on which a reasonable jury could find for
the non-moving party,” and it is material only if it has the ability to “affect the outcome of the
suit under governing law.” Kaucher v. County of Bucks, 455 F.3d 418, 423 (3d Cir. 2006); see
also Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). Disputes over irrelevant or
unnecessary facts will not preclude a grant of summary judgment. Anderson, 477 U.S. at 248. “In
considering a motion for summary judgment, a district court may not make credibility
determinations or engage in any weighing of the evidence; instead, the non-moving party's
evidence ‘is to be believed and all justifiable inferences are to be drawn in his favor .’” Marino v.
Indus. Crating Co., 358 F.3d 241, 247 (3d Cir. 2004) (quoting Anderson, 447 U.S. at 255)); see
also Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986); Curley v.
Klem, 298 F.3d 271, 276–77 (3d Cir. 2002). In deciding the merits of a party’s motion for
summary judgment, the court’s role is not to evaluate the evidence and decide the truth of the
matter, but to determine whether there is a genuine issue for trial. Anderson, 477 U.S. at 249.
The burden of establishing that no “genuine issue” exists is on the party moving for
summary judgment. Celotex, 477 U.S. at 330. “A nonmoving party has created a genuine issue of
material fact if it has provided sufficient evidence to allow a jury to find in its favor at trial.”

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Gleason v. Norwest Mortg., Inc., 243 F.3d 130, 138 (3d Cir. 2001). The non-moving party must
present “more than a scintilla of evidence showing that there is a genuine issue for trial.”
Woloszyn v. County of Lawrence, 396 F.3d 314, 319 (3d Cir. 2005) (quotations omitted). Under
Anderson, plaintiffs’ proffered evidence must be sufficient to meet the substantive evidentiary
standard the jury would have to use at trial. 477 U.S. at 255. To do so, the non-moving party
must “go beyond the pleadings and by her own affidavits, or by the depositions, answers to
interrogatories, and admissions on file, designate specific facts showing that there is a genuine
issue for trial.” Celotex, 477 U.S. at 324 (quotations omitted); see also Matsushita, 475 U.S. at
586; Ridgewood Bd. of Ed. v. Stokley, 172 F.3d 238, 252 (3d Cir. 1999). There can be “no
genuine issue as to any material fact,” however, if a party fails “to make a showing sufficient to
establish the existence of an element essential to that party's case, and on which that party will
bear the burden of proof at trial.” Celotex, 477 U.S. at 322–23. “[A] complete failure of proof
concerning an essential element of the nonmoving party's case necessarily renders all other facts
immaterial.” Id. at 323; Katz v. Aetna Cas. & Sur. Co., 972 F.2d 53, 55 (3d Cir.1992).
“In a contract interpretation action, summary judgment is appropriate only where the
contractual language is unambiguous—i.e., ‘subject to only one reasonable interpretation.’”
Mylan Inc. v. SmithKline Beecham Corp., 723 F.3d 413, 418 (3d Cir. 2013) (quoting Arnold M.
Diamond, Inc. v. Gulf Coast Trailing Co., 180 F.3d 518, 521 (3d Cir. 1999) (citations omitted)).
“If the nonmoving party presents a reasonable alternative reading of the contract, then a question
of fact as to the meaning of the contract exists which can only be resolved at trial.” Id. (quoting
Newport Assocs. Dev. Co. v. Travelers Indem. Co., 162 F.3d 789, 792 (3d Cir. 1998)). “Whether
a contract is ambiguous is an issue of law.” Id. at 419 (quoting Sumitomo Mach. Corp. v.
AlliedSignal, Inc., 81 F.3d 328, 332 (3d Cir. 1996)).

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III. ARTICLE III STANDING
Although Defendant does not challenge Plaintiff’s constitutional standing to sue, this
Court has an independent obligation to confirm the existence of standing before proceeding to an
adjudication of Plaintiff’s claims. Ballentine v. United States, 486 F.3d 806, 810 (3d Cir. 2007)
(Article III standing is a jurisdictional matter). Article III of the United States Constitution limits
the jurisdiction of the federal courts to “Cases” and “Controversies.” Lance v. Coffman, 549 U.S.
437, 439 (2007). See Spokeo, 136 S. Ct. at 1547 (“Standing to sue is a doctrine rooted in the
traditional understanding of a case or controversy.”). “The standing inquiry . . . focuse[s] on
whether the party invoking jurisdiction had the requisite stake in the outcome when the suit was
filed.” Constitution Party of Pa. v. Aichele, 757 F.3d 347, 360 (3d Cir. 2014) (quoting Davis v.
FEC, 554 U.S. 724, 734 (2008)) (alterations original).
To demonstrate standing, a plaintiff must establish: “(1) an injury-in-fact, (2) a sufficient
causal connection between the injury and the conduct complained of, and (3) a likelihood that the
injury will be redressed by a favorable decision.” In re Nickelodeon Consumer Privacy Litig.,
827 F.3d 262, 272 (3d Cir. 2016) (quoting Finkelman v. Nat'l Football League, 810 F.3d 187,
193 (3d Cir. 2016)) (internal quotations and citations omitted). “The plaintiff, as the party
invoking federal jurisdiction, bears the burden of establishing these elements.” Spokeo, 136 S.
Ct. at 1547 (citing FW/PBS, Inc. v. Dallas, 493 U.S. 215, 231 (1990)).
To allege injury-in-fact, “a plaintiff must claim the invasion of a concrete and
particularized legally protected interest resulting in harm that is actual or imminent, not
conjectural or hypothetical.” Nickelodeon, 827 F.3d at 272 (quoting Finkelman, 810 F.3d at 193)
(internal quotations omitted). “For an injury to be particularized, it must affect the plaintiff in a
personal and individual way.” Spokeo, 136 S. Ct. at 1548. A harm is “concrete” only “if it is ‘de

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facto’; that is, it must actually exist”—it cannot be merely “abstract.” Id. (quoting Spokeo, 136 S.
Ct. at 1548). Moreover, a harm need not be tangible, to be “concrete.” To determine whether an
“intangible” harm constitutes an injury-in-fact sufficient for standing purposes, consideration
should focus on whether the purported injury “has a close relationship to a harm that has
traditionally been regarded as providing a basis for a lawsuit in English or American courts.”
Spokeo, 136 S. Ct. at 1549 (citation omitted). However, “Congress may ‘elevat[e] to the status of
legally cognizable injuries concrete, de facto injuries that were previously inadequate in law.’”
Spokeo, 136 S. Ct. at 1549 (quoting Lujan v. Defs. of Wildlife, 504 U.S. 555, 578 (1992))
(alteration original).
Importantly, in the context of statutory violations, like those alleged in this case,
allegations of a “bare procedural violation [under a statute], divorced from any concrete [or
substantive] harm” cannot satisfy the injury-in-fact requirement. Spokeo, 136 S. Ct. at 1549
(citing Summers v. Earth Island Inst., 555 U.S. 488, 496 (2009) (“[D]eprivation of a procedural
right without some concrete interest that is affected by the deprivation . . . is insufficient to create
Article III standing”)). Stated differently, not every “bare” violation of a right granted by a
statute is inherently injurious. Rather, such a violation must result in a “concrete” harm. That
requirement remains in circumstances where a statute “purports to authorize [a] person to sue to
vindicate [a statutory procedural] right.” Id.; Raines v. Byrd, 521 U.S. 811, 820 n.3 (1997) (“It is
settled that Congress cannot erase Article III's standing requirements by statutorily granting the
right to sue to a plaintiff who would not otherwise have standing”).
Thus, standing based on a violation of a statutorily created right turns on whether such a
right is substantive or merely procedural. A “procedural right” is defined as “[a] right that
derives from legal or administrative procedure; a right that helps in the protection or enforcement

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of a substantive right.” In re Michaels Stores, Inc., No. 14–7563, 2017 U.S. Dist. LEXIS 9310, at
*17 n. 12 (D.N.J. Jan. 24, 2017) (quoting Landrum v. Blackbird Enters., LLC, No.16–0374, 2016
U.S. Dist. LEXIS 143044, at *3 (S.D. Tex. Oct. 3, 2016)) (internal citations omitted) (alteration
original). On the other hand, a “substantive right” is “[a] right that can be protected or enforced
by law; a right of substance rather than form.” Id. (citing Landrum, 2016 U.S. Dist. LEXIS
143044, at *3) (internal citations omitted) (alteration original). “To the extent that a violation of
the procedural right has no effect on the substantive right, the bare procedural violation does not
cause an injury of the sort that, alone, would support standing.” Id. (citing Landrum, 2016 U.S.
Dist. LEXIS 143044, at *3).
While the Third Circuit has not addressed whether a violation of the FDCPA can give
rise to a concrete injury, post-Spokeo, courts in this district have considered that question. See,
e.g., Thomas v. Youderian, No. 16–1408, 2017 U.S. Dist. LEXIS 16585, at *20–21 (D.N.J. Feb.
3, 2017) (finding concrete injury where the plaintiff allegedly received a collection letter
notifying him that a small convenience fee would be charged for payments made by credit card);
Carney v. Goldman, No. 15–260, 2016 U.S. Dist. LEXIS 177087, at *14 (D.N.J. Dec. 22, 2016)
(holding that the plaintiffs satisfied the concreteness requirement of standing, when they alleged
that the debt collector misstated the amount of debt owed in their collection letters); Blaha v.
First Nat'l Collection Bureau, Inc., No. 16–2791, 2016 U.S. Dist. LEXIS 157575, at *19 (D.N.J.
Nov. 10, 2016) (concluding that the allegation that the debt collector misrepresented the legal
status of the debt in the collection letter is sufficiently concrete to confer Article III standing); cf.
Benali v. AFNI, Inc., No. 15–3605, 2017 U.S. Dist. LEXIS 783, at *16 (D.N.J. Jan. 4, 2017)
(holding, on a motion for summary judgment, that the plaintiff did not establish a concrete injury
because, based on his testimony that he knew the debt was not actually his, there was no risk that

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plaintiff would have paid the convenience fee). Those courts in this district, following Spokeo,
have found constitutional standing in two different FDCPA contexts, both of which are at issue
in this case: (i) violations of § 1692e for false, deceptive and misleading statements; and (ii)
violations of § 1692f for the use of unfair and unconscionable means in collecting a debt.
With respect to violations of § 1692e, courts “trend in favor of finding concrete injury
under the FDCPA where the amount or validity of the debt has been misstated.” Thomas, 2017
U.S. Dist. LEXIS 16585, at *16. For example, shortly after the Supreme Court decided Spokeo,
the court in Blaha concluded that the plaintiff had established a concrete injury-in-fact, where
she alleged that the defendant sent a collection letter to the plaintiff with a settlement offer on a
time barred debt, but the defendant failed to disclose the legal status of that debt. See Blaha,
2016 U.S. Dist. LEXIS 157575, at *22–24. The court reasoned that Congress enacted the
FDCPA “to eliminate abusive debt collection practices and to promote further action to protect
consumers against debt collection abuses,” and that the allegation that the defendant made false
and misleading statements to plaintiff about the status of the debt “is precisely [the harm] that ...
the statute was intended to guard against.” Id. at *22–23. Similarly, in Carney, the plaintiff
alleged that the defendant violated the FDCPA when it sent collection letters to the plaintiff
containing false and misleading statements about the amount of debt owed. 2016 U.S. Dist.
LEXIS 177087, at *13–16. The court held that, because “[t]he FDCPA unambiguously grants
recipients of debt-collection letters ... a right to be free from abusive collection practices,”
including the use of false and misleading representations, the plaintiff sufficiently alleged the
concreteness requirement under Article III. Id. at *15–16.
In connection with violations of § 1692f, which prohibits the use of unfair and
unconscionable debt collection practices, courts in this district have addressed the issue whether

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a collection letter that notifies the debtor that he or she will be assessed a convenience charge for
paying the debt with a credit card, like the Letter at issue in this case, constitutes a concrete
injury. See Benali, 2017 U.S. Dist. LEXIS 783, at *16–17; Thomas, 2017 U.S. Dist. LEXIS
16585, at *17–21. In that regard, the Thomas court has found that, based on the alleged deceptive
language in a collection letter, the plaintiff was “at risk of being misled into paying the ...
[c]onvenience [f]ee” or, in the alternative, “at risk of forgoing the convenience of paying the bill
on credit (or, I suppose, at risk of giving up on paying for it for lack of ready money).” 2017 U.S.
Dist. LEXIS 16585, at *19–20. Although the risk of harm was slight, the court found that it was
still present, since the “[d]eprivation of the right to be free of false or deceptive collection
information, with the attendant risk of economic injury, is an interest recognized by the
[FDCPA], and one reasonably rooted in the traditions of the common law.” Id. at * 20.
Turning to the facts of the case at bar, it is clear that Plaintiff alleges a particularized
injury, namely that the debt collection letter containing the allegedly unconscionable or
deceptive language in violation of the FDCPA was directed at and sent to Plaintiff. Moreover,
for the same reasons that the court in Thomas observed, Plaintiff has established that “the
particular procedural violations alleged in this case entail a degree of risk sufficient to meet the
concreteness requirement.” Spokeo, 136 S. Ct. at 1550. Plaintiff has a substantive, statutory right
under the FDCPA to be free from false or deceptive information in connection with the
collection of a debt, which is alleged to have been infringed by Defendant’s representation that it
was entitled to charge a fee that is alleged to be neither authorized by law nor permitted by the
contractual terms of Plaintiff’s underlying debt instrument. Plaintiff was thus placed at risk of
economic injury by potentially being deceived into paying a fee that was legally barred.

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Accordingly, this Court joins the “overwhelming majority of courts” that have
determined that FDCPA violations under §§ 1692e and 1692f give rise to concrete, substantive
injuries sufficient to establish Article III standing. Pisarz v. GC Servs. Ltd. P'ship, No. CV 164552 (FLW), 2017 WL 1102636, at *5 (D.N.J. Mar. 24, 2017) (quotation omitted) (collecting
cases). See also Bernal v. NRA Grp., LLC, No. 16 C 1904, 2016 WL 4530321, at *4–5 (N.D. Ill.
Aug. 30, 2016) (finding alleged violations of section 1692e, which prohibits “any false,
deceptive, or misleading representation or means in connection with the collection of any debt,”
and section 1692f, which prohibits “unfair or unconscionable means to collect or attempt to
collect any debt,” constitute a concrete injury sufficient for Article III standing (quoting 15
U.S.C. §§ 1692e, 1692f)).
This result is consistent with the pre-Spokeo precedents in this Circuit and District
specifically addressing alleged violations of Sections 1692f. In considering the impact of Spokeo
on its prior decisions, the Third Circuit observed:
Although it is possible to read the Supreme Court’s decision in Spokeo as creating a
requirement that a plaintiff show a statutory violation has caused a “material risk of
harm” before he can bring suit, id. at 1550, we do not believe that the Court so intended
to change the traditional standard for the establishment of standing. As we noted in
Nickelodeon, “[t]he Supreme Court's recent decision in Spokeo . . . does not alter our
prior analysis in Google.” Nickelodeon, 827 F.3d at 273 (citation omitted).
We reaffirm that conclusion today. Spokeo itself does not state that it is redefining the
injury-in-fact requirement. Instead, it reemphasizes that Congress “has the power to
define injuries,” 136 S.Ct. at 1549 (citation and internal quotation marks omitted), “that
were previously inadequate in law.” Id. (citation and internal quotation marks omitted).
In the absence of any indication to the contrary, we understand that the Spokeo Court
meant to reiterate traditional notions of standing, rather than erect any new barriers that
might prevent Congress from identifying new causes of action though they may be based
on intangible harms.

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In re Horizon Healthcare Servs. Inc. Data Breach Litig., 846 F.3d 625, 637–38 (3d Cir. 2017). In
Google, the decision that the Third Circuit confirmed remains the governing law, the Circuit
Court held:
Though the injury must affect the plaintiff in a personal and individual way, this standard
does not demand that a plaintiff suffer any particular type of harm to have standing.
Consequently, . . . a plaintiff need not show actual monetary loss for purposes of injury in
fact. Rather, the actual or threatened injury required by Art. III may exist solely by virtue
of statutes creating legal rights, the invasion of which creates standing.
In re Google Inc. Cookie Placement Consumer Privacy Litig., 806 F.3d 125, 134 (3d Cir. 2015),
cert. denied sub nom. Gourley v. Google, Inc., 137 S. Ct. 36, 196 L. Ed. 2d 26 (2016) (internal
quotations omitted).
Consistent with its holding in Google, the Third Circuit had earlier held in the context of
the FDCPA that although § 1692f(1) specifically prohibits only the “collection” of any
unauthorized amount or fee, because § 1692f more broadly prohibits improper means “to collect
or attempt to collect” any debt, and its list of violative conduct in § 1692f is not exhaustive,
“‘collection’ in § 1692f(1) includes attempted collection as well as actual collection.” Allen ex
rel. Martin v. LaSalle Bank, N.A., 629 F.3d 364, 367 n.4 (3d Cir. 2011). Accordingly, in order to
have standing to sue under § 1692f(1), a plaintiff need not allege that he or she actually paid the
unauthorized fee, only that the defendant attempted to collect it. The Third Circuit later made as
much explicitly clear in its unreported decision in Salvati v. Deutsche Bank Nat. Trust Co., 575
F. App'x 49 (3d Cir. 2014), where it held that the district court below erred in dismissing the
plaintiff’s claims under 15 U.S.C. §§ 1692e(2) and 1692f(1) because the plaintiff “paid none of
the alleged illegal fees and costs and, thus, has not suffered any actual damages.” Id. at 56. The
Court observed that “under the FDCPA, a plaintiff may collect statutory damages even if he has
suffered no actual damages,” and cited the Second Circuit’s opinion in Miller v. Wolpoff &

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Abramson, L.L.P., 321 F.3d 292, 307 (2d Cir. 2003), for the proposition that “[C]ourts have held
that actual damages are not required for standing under the FDCPA.” Ibid. See also Robey v.
Shapiro, Marianos & Cejda, L.L.C., 434 F.3d 1208, 1212 (10th Cir. 2006) (“[plaintiff] has
suffered an injury in fact under the FDCPA and therefore has standing to pursue his challenge
against defendants' request for an award of attorney's fees in the foreclosure action” because
under § 1692f “[a] debt collector may not use unfair or unconscionable means to collect
or attempt to collect any debt.”) (emphasis in original); Miller v. Wolpoff & Abramson,
L.L.P., 321 F.3d 292, 307 (2d Cir. 2003) (“the fact that plaintiff did not ever pay any attorneys'
fees to [defendant] does not necessarily suggest that he was not injured for purposes of his
FDCPA claim, if he can show that [defendant] attempted to collect money in violation of the
FDCPA”); Barows v. Chase Manhattan Mortg. Corp., 465 F. Supp. 2d 347, 354 (D.N.J. 2006)
(“Despite the fact that Plaintiff never paid the attorneys’ fees and costs requested by Defendants,
Plaintiff has suffered an injury in fact for the purposes of standing. The FDCPA prohibits unfair
or unconscionable means to collect or attempt to collect any debt not permitted by law. Thus, a
debt collector can violate the FDCPA even if he does not actually receive the illegal debt he tried
to collect. Additionally, a plaintiff may be entitled to statutory damages for a debt collector's
violation even if she has not suffered any actual damages.”) (internal quotations omitted).
Accordingly, even after Spokeo, because Congress has defined statutory injuries under the
FDCPA that do not require actual, pecuniary injury, where, as in the case of the receipt of a
collection letter charging unauthorized fees, the plaintiff’s claimed injury is sufficiently
particularized and concrete, the requirements of Article III standing are met. The Court finds that
the Plaintiff in this case has introduced sufficient facts on the present motions for summary
judgment to establish Article III standing.

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IV. ANALYSIS
Section 1692f is a catchall provision providing that a “debt collector may not use unfair
or unconscionable means to collect or attempt to collect any debt.” 15 U.S.C. § 1692f. Section
1692f’s subsections then itemize nonexclusive examples of conduct that constitute a violation of
the catchall provision. “The collection of any amount (including any 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” is a violation of § 1692f(1). 15 U.S.C. §
1692f(1); Pollice v. Nat'l Tax Funding, L.P., 225 F.3d 379, 407–08 (3d Cir. 2000) (adopting the
reasoning in Tuttle v. Equifax Check, 190 F.3d 9 (2d Cir. 1999), that a fee does not violate the
FDCPA (1) where it is expressly permitted under state law; or (2) if state law does not expressly
authorize or prohibit the charge, where the customer expressly agreed to the fee in the contract
creating the debt).
Defendant moves for summary judgment on Count I, Plaintiff’s § 1692f claim, on two
distinct bases. First, Defendant argues that the $5.00 convenience fee (the “Fee”) on credit card
transactions it offered to Plaintiff in the Letter is not a fee “incidental” to the principal debt
obligation within the meaning of the FDCPA, and therefore falls outside the ambit of the statute.
Defendant contends that the Fee is not incidental to the debt because it was optional, applicable
only if Plaintiff voluntarily elected to pay by credit card rather than by alternative, available
methods which were offered without fees, and because it was not unfair or unconscionable under
the circumstances. Second, Defendant argues that the Fee was expressly authorized by the
unambiguous language of the Agreement between Plaintiff and COSM underlying the debt, and
therefore does not violate the FDCPA. Defendant moves for summary judgment on Count II,
Plaintiff’s § 1692e claims, on the grounds that Plaintiff’s § 1692e claims are based on the same

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factual predicate as Plaintiff’s § 1692f claim and therefore also fail because there has been no
underlying § 1692f violation or other use of deceptive means.
In addition to opposing Defendant’s motion, Plaintiff cross-moves for summary judgment
on the grounds that the Fee is not expressly authorized by the unambiguous language of the
Agreement, and therefore violates the FDCPA. Plaintiff and Defendant agree as to all material
facts. Accordingly, questions remaining before the Court on the parties’ cross-motions are purely
legal in nature, namely whether the convenience fee in the Letter is “incidental” to Plaintiff’s
underlying debt, and whether the convenience fee is expressly authorized by the Agreement
between Plaintiff and COSM.
A. The Fee is Incidental to Plaintiff’s Debt
Defendant contends that the Fee does not violate § 1692f because it is optional and
because it is not unfair or unconscionable under the statute. In support of its position, Defendant
relies exclusively on the unreported decision of the Central District of California in Flores v.
Collection Consultants of California, No. 14-CV-0771, 2015 WL 4254032 (C.D. Cal. Mar. 20,
2015). The court in Flores was faced with a closely analogous fact pattern to the one at bar. The
plaintiff in Flores challenged, under § 1692f, a $5.00 service fee levied on credit card
transactions presented as one of several optional modes of payment by the defendant in a debt
collection letter. The Flores court, observing the absence of guidance from the appellate courts
on the question, reviewed the available out-of-circuit district court decisions and concluded that
the cases “supported the proposition that the transaction fee at issue was permissible where there
were other payment options and the charge did not inure benefits to the collector.” Id. at *9.
Applying that standard to the facts before it, the court concluded
that the charge was not “incidental” to the principal obligation. 15 U.S.C. § 1692f(1). It is
undisputed that this charge would be imposed only if the debtor elected to pay via credit
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card. While this payment method was offered in the letter, the letter also provided for
payment without additional charge if the debtor elected to pay by check. Nothing in the
letter steered the consumer to payment by credit card, and the letter provided clear notice
that the fee was imposed only upon those who sought to pay via credit card. A consumer
must choose to affirmatively and separately opt-in to this alternative method.
Id. at *10. The Flores court found this result in line with the intentions of the FDCPA to prevent
unfair or unconscionable practices, because Plaintiff made no argument that offering a voluntary
convenience fee was inherently unfair or unconscionable when other feeless methods of payment
were available, and “it would seem unfair or inconvenient to many debtors to be deprived of the
opportunity to pay by credit card as a result of ban on an opt-in fee to cover costs.” Ibid.
In opposition, Plaintiff convincingly argues that subsequent courts have recognized that
Flores “takes a minority position in regard to transaction fees.” Wittman v. CB1, Inc., No. 15CV-105, 2016 WL 1411348, at *4–5 (D. Mont. Apr. 8, 2016), report and recommendation
adopted, No. 15-CV-105, 2016 WL 3093427 (D. Mont. June 1, 2016). The Courts to have
considered Flores have found fault with at least three aspects of its reasoning. Firstly, courts
have observed that “offering a payment option that does not violate the statute does not save
offering a payment option that would violate the statute, as the latter is still an attempt to collect
a fee which is prohibited by the FDCPA.” Weast v. Rockport Fin., LLC, 115 F. Supp. 3d 1018,
1023 (E.D. Mo. July 17, 2015). The Court finds this point well-taken. § 1692f prohibits even the
attempt to collect an unauthorized fee. The mere fact that an unauthorized fee is offered as an
alternative to authorized fees does not mitigate the fact that the fee itself is still prohibited.
Secondly, courts have criticized Flores for observing the significance of whether the
charged convenience fee inures to the benefit of the collector, but failing to inquire into the facts
that would establish that the benefit had “passed through” to a third party other than the debt
collector, and thereby rendered the fee non-incidental to the underlying debt. Courts have found

15

that credit card convenience fees do not violate “the FDCPA if the debt collector did not receive
any additional compensation from the fee because it was passed on to the third party that had
imposed the fee,” but have found this fact-intensive inquiry more appropriate for resolution on
summary judgment, not on a motion to dismiss as the Flores court ruled. Wittman, 2016 WL
1411348, at *4; Johnson-Morris v. Santander Consumer USA, Inc., 194 F. Supp. 3d 757, 764–65
(N.D. Ill. 2016) (credit card convenience fees were incidental to the underlying debt where they
exceeded any actual pass-through, profiting defendant). Courts have referred to this issue as the
“pass-through defense.” “A pass-through fee is where, for example, a credit card company such
as Visa charges the debt collector $14.95 to process credit card payments and, in turn, the debt
collector charges debtors the same amount if they pay by credit card.” Acosta v. Credit Bureau of
Napa Cty., supra, at *2. However, the parties here agree that this action does not involve a passthrough defense. Defendant expressly waived any potential defense that the $5.00 convenience
fee offered in the Letter was paid to a third party processor. See, Plaintiff’s Moving Brief,
Exhibit F, p. 3, ¶ 15. Accordingly, unlike in Flores, which did not directly address the issue, in
this case Defendant has admitted the receipt of a direct benefit from the challenged Fee,
militating in favor of a finding that the Fee is incidental to Plaintiff’s underlying debt.
Third and finally, courts have observed that, contrary to the Flores court’s suggestion, it
is not for the courts to independently assess whether a particular convenience fee is “unfair” or
“unconscionable” “because Congress has already made that determination.” Lindblom v.
Santander Consumer USA, Inc., 2016 WL 2841495, at *6–7 (E.D. Cal. May 9, 2016).
“Regardless of the exact meaning of ‘unfair or unconscionable,’ the FDCPA explicitly prohibits
‘[t]he collection of any amount (including any interest, fee, charge, or expense incidental to the
principal obligation) unless such amount is expressly authorized by the agreement creating the

16

debt or permitted by law.’. . . . What matters is § 1692f(1)’s plain instruction that the collection
of any amount incidental to the principal obligation, unless otherwise authorized by agreement
between the parties or permitted by law, violates the FDCPA. Courts have interpreted the
FDCPA broadly, and it would be anomalous to conclude ‘any amount’ does not encompass . . .
[credit card] processing fees” because of a separate unfairness or unconscionability analysis.”
Quinteros v. MBI Assocs., Inc., 999 F. Supp. 2d 434, 438 (E.D.N.Y. 2014) (quoting15 U.S.C §
1692f(1) (emphasis added)). This is consistent with the Third Circuit’s directive that “the only
inquiry under § 1692f(1) is whether the amount collected was expressly authorized by the
agreement creating the debt or permitted by law.” Allen ex rel. Martin v. LaSalle Bank, N.A., 629
F.3d 364, 368 (3d Cir. 2011) (emphasis added).
The Court finds these criticisms of Flores persuasive, and, in the absence of controlling
precedent from the Third Circuit, finds that, for the purposes of determining whether a given fee
violates § 1692f, “[i]t is immaterial that the fee was optional and fully disclosed if the fee is
impermissible altogether.” Acosta v. Credit Bureau of Napa County, 2015 WL 1943244, at *3–4
(N.D.Ill. Apr. 29, 2015); Johnson-Morris, 194 F. Supp. 3d at 765 (same). I therefore join with
the majority of district courts to have considered the question in holding that the optional credit
card convenience fee offered in Defendant’s Letter to Plaintiff in this case is “incidental” to
Plaintiff’s underlying debt. See Wittman, 2016 WL 1411348, at *5 (“the Court is persuaded by
the majority of courts that have found a transaction fee imposed for using a certain payment
method can be considered incidental to the principal obligation”); Johnson-Morris, 2016 WL
3671468, at *5 (“the majority of courts that have found a transaction fee imposed for using a
certain payment method can be considered incidental to the principal obligation”); Shami v. Nat'l
Enter. Sys., No. 09–CV–722, 2010 WL 3824151, at *3–4 (E.D.N.Y. Sept. 23, 2010) (holding

17

that the defendant’s charging of transaction fees for payments by phone or internet were still fees
“incidental to Plaintiff's purported actual debt” prohibited by § 1692f(1), even though they were
conditioned on the chosen method of payment; collecting cases). Defendant’s motion for
summary judgment on the basis of the convenience Fee’s exemption from the coverage of §
1692f(1) is therefore denied. 1

1

I feel the need to reiterate that Defendant chose not to avail itself of the well-established
pass-through defense to liability available in FDCPA fee cases. Since at least Lee v. Main
Accounts, Inc., 125 F.3d 855, 855 (6th Cir. 1997), courts have recognized that the type of
transaction fees at issue in this case fall “outside the scope of 15 U.S.C. § 1692e(2)(B)” and do
not “amount to an ‘attempt’ to collect an extra fee under 15 U.S.C. § 1692f(1)” where the fee
does not accrue to the benefit of the debt collector, but instead is a “third party charge triggered
when the debtor chose the option of paying by credit card.” Ibid. The key inquiry in such a case
is whether the defendant “would not have received any additional compensation from the credit
card fee.” Ibid. At least some evidence potentially relevant to the defense was elicited in this
case. For example, in his deposition, Defendant’s corporate representative appeared to suggest
that at least some credit card transaction fees are collected by Defendant merely to pass on to a
third party service provider.
Q: Mr. Alford, where on the profit loss statement do you see the convenience fee
reflected?
A: Credit card transaction fee.
...
Q: Next to the entry credit card transaction fee I see an amount $459,133.66?
A: Correct.
...
Q: Now, is that amount the amount that AR Resources collected or the amount it was
charged in convenience fees?
A: those are the amounts that we are charged in convenience fees or we are charged for
using credit cards.
Q: I understand. So my question is not how much you were charged for using credit
cards. But you stated that you collected $5 from debtors from November 2014 to the
2015 owing debt to Center for Orthopedics and Sports Medicine. And only one those
debtors actually paid the $5 fee. But where would you locate that $5 fee on that profit and
loss statement? What category would it be included in?
A: I will repeat that again. Credit card transaction fee
Q: The credit card transaction fee is the amount of money that AR Resources has to pay a
third party for using credit cards, correct?
A: Correct.
Q: I’m asking what about the amounts of money that AR Resources received from
debtors for using credit cards? Where is that?
18

B. The Fee is Not Expressly Authorized by Plaintiff’s Agreement with COSM
Defendant next argues that the FDCPA has not been violated because the Fee is expressly
authorized in the Agreement. The relevant language in the Agreement reads:
In the event that COSM has to use collection techniques in the form of legal action or an
agency, I agree to pay collection agency fees of 2% per month of the balance due, in
addition to attorney and court costs.
DSMF, ¶ 6. The pertinent section of the Letter reads:
If you wish to pay by credit card, complete the credit card information below, tear off and
return in the enclosed envelope. A $5.00 convenience fee should be added to all
transactions. No fees applied to mailed checks or money orders.
DSMF, ¶ 2. Defendant reasons that Plaintiff was bound in the Agreement to pay collection
agency fees of two percent of the balance due per month if COSM used a collection agency to
collect the outstanding balance. Plaintiff’s outstanding balance due to COSM was $1,405.50 at
the time the letter was sent. Two percent per month of Plaintiff’s balance due was thus $28.11 at
the time the letter was received. Therefore, Defendant argues, under the Agreement, Defendant
was authorized to collect up to $28.11 per month as collection agency fees at the time Plaintiff
received the letter; the single $5.00 credit card convenience fee offered in the Letter was thus
significantly less than the $28.11 in collection agency fees expressly authorized by the

A: Credit card transactions fees. So in other words - - let me just help you out here. If this
person did not pay that $5 fee, the dollar amount on this page 1 would be $459,138.66.
Alford Tr. 45:17-47:11. It thus appears from the corporate representative’s testimony that the
convenience fee charged to debtors may have been used directly to offset the fees paid to thirdparty credit card service providers. Elsewhere in the deposition transcript, Plaintiff’s counsel
clearly attempted to elicit more testimony relevant to pass-through, but this was strenuously
opposed by Defense counsel. Alford Tr. 42:9- 42:14 (“Q: Who does AR Resources use for its
credit card processing? Mr. Fisher: Why is that relevant? We have not asserted a pass-through
defense. So why is that relevant?”). There is no guarantee that such a defense would have been
successful, and indeed, at least one court has limited Lee to fees not merely passed-through, but
actually collected by third-parties. Quinteros, 999 F. Supp. 2d at 440. The Court need not decide
this question, however, as Defendant’s decision not to pursue a pass-through defense has
significantly narrowed the Court’s area of consideration in its threshold § 1692f inquiry.
19

Agreement creating the debt. In other words, Defendant argues that the Fee falls within the total
of collection agency fees expressly authorized in the Agreement. Defendant does not contend
that the convenience fee is authorized by New Jersey state law, narrowing the question before the
Court solely to that of express authorization in the Agreement.
In opposition and in her cross-motion, Plaintiff argues that the language of the Agreement
cannot be read to expressly authorize the challenged Fee. Plaintiff contends that the language in
the underlying Agreement between Plaintiff and COSM does not mention or otherwise
contemplate a flat $5.00 credit card convenience fee; rather, it expressly only authorizes (1)
collection agency fees of 2% per month of the balance due, (2) attorneys’ fees and (3) court
costs. Accordingly, Plaintiff concludes that “[t]his credit card convenience fee is not a collection
agency fee of 2% per month.” Plaintiff’s Moving Brief, 9 (emphasis added). In further support of
her position, Plaintiff cites to the deposition testimony of Defendant’s corporate representative in
which the representative stated that Defenfdant was not “charging” the Plaintiff a collection
agency of 2% per month. See Telephonic Deposition of Robert Alford, July 26, 2016, Tr. 34:612. Nor, Plaintiff contends, can the Fee possibly be considered attorneys’ fees or court costs.
The parties have not briefed what law applies to this Court’s interpretation of the plain
language of the Agreement, but as a contract made in New Jersey between New Jersey residents,
the Court presumes New Jersey law to apply. See Financial Agreement and Authorization for
Treatment, December 5, 2013, Dkt. No. 11-5, 1. “[U]nder New Jersey law, ‘discerning
contractual intent is a question of fact unless the provisions of a contract are wholly
unambiguous.’” Avaya Inc., RP v. Telecom Labs, Inc., 838 F.3d 354, 378–79 (3d Cir. 2016)
(quoting Jaasma v. Shell Oil Co., 412 F.3d 501, 507 (3d Cir. 2005)). “An ambiguity in a contract
exists if the terms of the contract are susceptible to at least two reasonable alternative

20

interpretations.” Id. at 379 (quoting M.J. Paquet, Inc. v. N.J. Dep't of Transp., 171 N.J. 378, 794
A.2d 141, 152 (2002)). “When that is so, it is permissible to look to evidence outside the contract
‘as an aid to interpretation.’” Id. (quoting Chubb Custom Ins. Co. v. Prudential Ins. Co. of Am.,
195 N.J. 231, 948 A.2d 1285, 1289 (2008)).
That said, it is well-established under New Jersey law that “courts must always ‘consider
all of the relevant evidence that will assist in determining the intent and meaning of the contract’
when making ambiguity determinations.” Mylan Inc. v. SmithKline Beecham Corp., 723 F.3d
413, 419 (3d Cir. 2013) (quoting Conway v. 287 Corp. Ctr. Assocs., 187 N.J. 259, 901 A.2d 341,
346 (2006)). “Evidence of the circumstances is always admissible in aid of the interpretation of
an integrated agreement. This is so even when the contract on its face is free from ambiguity.”
Sumitomo Mach. Corp., 81 F.3d at 332 (quoting Atl. N. Airlines, Inc. v. Schwimmer, 12 N.J. 293,
96 A.2d 652, 656 (1953)). “In aid of interpretation, courts should consider, for example, ‘the
particular contractual provision, an overview of all the terms, the circumstances leading up to the
formation of the contract, custom, usage, and the interpretation placed on the disputed provision
by the parties’ conduct.’” Mylan, 723 F.3d at 419 (quoting Kearny PBA Local No. 21 v. Town of
Kearny, 81 N.J. 208, 405 A.2d 393, 400 (1979)). “Thus, courts must consider all relevant
evidence to determine if any ambiguity exists and, if the contested provisions fall in that gray
area, summary judgment is improper.”
In any event, the Third Circuit has observed that federal law is consistent with the New
Jersey approach. Mylan, 723 F.3d at 419 n. 8 (citing Int'l Union, UAW v. Mack Trucks, Inc., 917
F.2d 107, 111 (3d Cir.1990) ( “‘In making the ambiguity determination, a court must consider
the words of the agreement, alternative meanings suggested by counsel, and extrinsic evidence
offered in support of those meanings.’” (quoting Kroblin Refrigerated Xpress, Inc. v. Pitterich,

21

805 F.2d 96, 101 (3d Cir.1986))); Teamsters Indus. Emps., 989 F.2d at 135 (instructing that a
court construing contract language is not permitted “simply [to] determine whether, from [its]
point of view, the language is clear[, but instead must] ‘hear the proffer of the parties and
determine if there [are] objective indicia that, from the linguistic reference point of the parties,
the terms of the contract are susceptible of different meanings' ” (last alteration in original)
(quoting Sheet Metal Workers, Local 19 v. 2300 Grp., Inc., 949 F.2d 1274, 1284 (3d
Cir.1991)))).
1. Express Authorization
As the Court observed, supra, under the FDCPA, “[t]he collection of any amount
(including any 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” is a
violation of § 1692f(1). 15 U.S.C. § 1692f(1). See also Pollice, 225 F.3d at 407–08 (adopting the
reasoning in Tuttle, 190 F.3d at 13 (a fee does not violate the FDCPA (1) where it is expressly
permitted under state law; or (2) if state law does not expressly authorize or prohibit the charge,
where the customer expressly agreed to the fee in the contract creating the debt)). The Third
Circuit in Pollice, has provided the most significant discussion of the meaning of “express
authorization” in the FDCPA context. Asked to consider whether interest charged by the
defendant debt collector was expressly authorized by the underlying agreements for the provision
of water and sewer services between plaintiff homeowners and government entity service
providers, the Third Circuit held that the defendant’s argument that the interest and penalty rates
were “implicitly” incorporated into the service agreements by municipal ordinances and
resolutions was insufficient to establish “express” authorization. The Court of Appeals contrasted
defendants’ argument for implicit inclusion with interest and penalty rates being “‘expressly set

22

forth in the[] agreements” themselves. Pollice, 225 F.3d at 408. Thus, although the Third Circuit
did not explicitly adopt a definition of express authorization in the FDCPA context, Pollice
strongly suggests that “express” means plain on the face of the document itself, as opposed to
implied by other sources external to the agreement.
This conclusion is consistent with the Third Circuit’s general definition of “express” as a
common legal term of art. Where, “there is no caselaw discussing how [courts] should interpret
this language in this context[,] . . . [courts] turn for guidance to the common definition of
‘express’ as ‘explicit,’ in contrast to implicit or inferred.” Johnson v. Ashcroft, 286 F.3d 696, 702
(3d Cir. 2002). See also id. (citing Black's Law Dictionary 580 (6th ed. 1990) (Black's Law
Dictionary, for instance, defines “express” as “[c]lear; definite; explicit; plain.... Made known
distinctly and explicitly, and not left to inference.”); id. (“Other dictionaries give substantially
similar definitions. See, e.g., Webster's Third New International Dictionary 803 (1993) (defining
‘express’ as “directly and distinctly stated or expressed rather than implied or left to inference ...
definite, clear, explicit, unmistakable’”)). General principles of interpretation thus also support
that “express” authorization means authorization that is plain on the face of the document itself,
not merely implied by other sources external to the agreement
2. Interpretation of the Agreement With Respect to 1692f
Applying that definition, the Court first observes that Defendant, unlike the Pollice
defendants, has identified the specific provision in the Agreement underlying Plaintiff’s debt that
is alleged to authorize the challenged Fee: “I agree to pay collection agency fees of 2% per
month of the balance due.” Defendant argues that the phrase “collection agency fees” describes a
category of fees that may be charged by Defendant and the phrase “of 2% per month of the
balance due” sets the limit of the sum of the fees in that category. In other words, Defendant

23

reads that provision as expressly authorizing collection agency fees up to 2% per month of the
balance due. Although Defendant does not provide a thorough explanation of this last point,
another critical element of Defendant’s contract interpretation is the implicit assumption that the
Fee in question, a credit card convenience fee, falls within the category of “collection agency
fees” expressly dealt with in the Agreement.
Plaintiff reads the provision differently, and directs the Court’s attention to the recent,
and factually similar matter of Thomas v. Youderian, 2017 U.S. Dist. LEXIS 16585, *26-28
(D.N.J. Feb. 3, 2017), in which the court allowed a similarly situated plaintiff’s claims to
proceed past the stage of the motion to dismiss. Specifically, Plaintiff makes two contentions.
Firstly, she reads “collection agency fees” as a distinct category of fees, excluding credit card
convenience fees and other fees not explicitly enumerated in the Agreement, and, secondly, she
reads “of 2% per month of the balance due” to mean “equal to 2% per month of the balance
due.” Accordingly, Plaintiff contends that the only collection agency fee expressly authorized by
the Agreement is a single, monthly collection agency fee equal to 2% of Plaintiff’s balance due.
Plaintiff’s Moving Br., 9.
The Court finds the holding of the district court in Thomas, instructive, but not
dispositive of which interpretation of the Agreement should prevail here.
The agreement underlying the plaintiff’s debt in Thomas read in relevant part:
If my account is referred to a collection agency and/or attorney for collection, I agree to
be responsible for the payment of an additional collection fee in an amount equal to 30%
of my outstanding balance, inclusive of accrued interest. I also understand there is a
$15.00 returned check fee should, a check be returned for any reason.
Thomas, 2017 U.S. Dist. LEXIS 16585 at *27 (emphasis added). Judge McNulty, thus held that
the Agreement does not “expressly authorize” a $3.00 convenience fee for credit card
charges, as Section 1692f(1) requires. True, it authorizes a 30% “collection fee,” and
30% of this $327.80 debt comes out to $98.34, a sum far in excess of $3.00. But I cannot
indulge some “no harm, no foul” rule that the debt collector could have charged some
24

other fee, calculated in a different manner, that would have been even larger than the one
it did charge. Viewing the Letter through the eyes of the least sophisticated debtor and
taking the alleged facts in the light most favorable to Thomas, the amended complaint
adequately alleges that this particular Convenience Fee for use of a credit card was not
explicitly authorized. And having so alleged, the amended complaint states a claim under
the FDCPA.
Id. at *27-28. In short, the court found that, in the absence of some indication in the text of the
agreement itself, it could not read “collection fee” as encompassing the clearly distinct credit
card “convenience fee.” To be sure, the text of the agreement in Thomas is more explicit than
that of the Agreement in this case. Indeed, if the Agreement here explicitly stated that Plaintiff
agreed to pay “an additional collection agency fee equal to 2% per month of the balance due,”
this Court’s inquiry would be over before it began because, as the court observed in Thomas, the
agreement at issue would clearly set forth only a single type of fee of a specific amount that
could not be read to encompass a different type of fee for a different amount not expressly
authorized. The wording of the provision at issue here, however, is different enough than that in
Thomas, to require additional analysis. The persuasive authority that this Court gleans from that
case merely reinforces the principle that express authorization requires clear, plain support in the
agreement itself for a party’s proposed fee or charge.
Returning to the agreement in this case, Plaintiff agreed to pay “collection agency fees of
2% per month of the balance due.” As a threshold matter, then, the presence of the word “fees,”
plural, makes this case more nuanced than the single fee plainly set forth in the agreement in
Thomas. Still, without drawing inferences from any other source, the Court’s first conclusion is
the Agreement on its face supports the contention that Plaintiff agreed to pay some category of
fees called “collection agency fees.” This interpretation is consistent with the holding of the
Third Circuit in Kaymark v. Bank of Am., N.A., 783 F.3d 168, 175 (3d Cir. 2015), cert. denied
sub nom. Udren Law Offices, P.C. v. Kaymark, 136 S. Ct. 794, 193 L. Ed. 2d 710 (2016), where
25

the Court of Appeals found that the defendant “expressly agreed to the collection of certain fee
categories, such as ‘attorneys’ fees, property inspection and valuation fees.’” (emphasis added).
The Kaymark case, however, was resolved on grounds other than the inclusion of the explicitly
identified fee categories in the underlying agreement. For the purposes of this case, the Court
relies upon Kaymark only to show that Defendant’s argument that “collection agency fees” is a
category of fees, rather than a single type of fee, is nonfrivolous.
Having determined that “collection agency fees” means a category of collection agency
fees, the next question before the Court is whether the $5.00 credit card convenience fee in this
case falls within that category and therefore is a collection agency fee for the purpose of the
Agreement. At the outset, I note that the parties have provided scant briefing on this all important
question. Plaintiff’s position is that, unless the words “convenience fee” appeared in the
Agreement, there can be no express authorization of the fee in this case. Defendant’s position
assumes that convenience fees are collection agency fees, and therefore Defendant focuses only
on the question of whether Defendant is entitled to charge a lesser included amount to the 2% set
forth in the Agreement. Unfortunately, the text of the Agreement itself does not provide the
Court with much guidance. “Collection agency fees” is not a defined term, and nothing else in
the Agreement sheds light on its meaning. Looking at the factors extrinsic to the contract, the
Court finds at least some support for the positions of both parties.
Firstly, as the Court noted above in its discussion of whether the Fee charged was
“incidental” to Plaintiff’s debt, Defendant has conceded, and Plaintiff has agreed, that there is no
pass-through defense in this case, and, accordingly, that the Fee accrued to the benefit of
Defendant, COSM’s collection agent, not to some third-party service provider. Plaintiff’s
Moving Brief, Exhibit F, p. 3, ¶ 15. In that sense, therefore, one could read a “collection agency

26

fee” as any fee charged by and for the benefit of the collection agent, Defendant. I have
concerns with finding such a broad definition to be “expressly” set forth in the Agreement,
before looking to the only other extrinsic evidence in the case offered by the parties; that
evidence, however, only further complicates the overall picture.
Plaintiff relies on the deposition testimony of Defendant’s corporate agent, Robert
Alford, as establishing that Defendant disavowed the “charging” of any collection agency fee to
Plaintiff in this case. Specifically, Plaintiff cites the following passage:
Q: Mr. Alford, I’m looking again at this statement that says, I agree to pay collection
agency fees of 2 percent per month of the balance due. Was AR Resources charging Mrs.
Fuentes a collection fee of 2 percent per month of the balance due?
A: No, we were not.
Q: Were you charging Mrs. Fuentes any collection fees at all?
A: No, we were not.
Q: The collection letter does state that a $5 convenience fee should be added for credit
card payments. And is it your testimony that the authority from that fee comes from the
words, “I agree to pay collection agency fees of 2 percent per month of the balance due”
A: Yes.
Alford Tr. 34:6-22. Plaintiff reads this exchange as an admission that the only authority
identified for the convenience fee in this case is a provision that, generally mentions only
collection agency fees, and that, although Defendant attempted to charge a convenience fee in
this case, Defendant explicitly stated that no collection agency fees were ever charged.
Therefore, the Plaintiff concludes, Defendant has tacitly admitted that the convenience fee is not
a collection agency fee.
Defendant reads this exchange differently, noting that Defendant’s representative testified
that “the authority” to charge the $5 convenience fee originates from the provision of the
Agreement authorizing collection agency fees. As it has always been Defendant’s position, and

27

indeed the contrary has never been alleged by Plaintiff, that Defendant never charged Plaintiff
any fees in this case, Defendant contends that there is no inconsistency in Defendant’s
admissions. Defendant argues that the complete deposition testimony of Defendant’s
representative is that, although there was never a time when Defendant actually was charging
Plaintiff collection fees, the Agreement expressly authorized Defendant to attempt to charge such
fees by offering Plaintiff the opportunity to pay the convenience fee. Because Plaintiff has never
alleged or introduced evidence that fees were charged, this has always been an attempt case
under § 1692f(1). See Allen, N.A., 629 F.3d at 367 n. 4 (“‘collection’ in § 1692f(1) includes
attempted collection as well as actual collection.”).
The Court finds both parties’ interpretations of Defendant’s representative’s testimony to
be plausible, and, due to the extremely succinct responses in the exchange, cannot discern
definitively what was meant. The Court does not view the testimony, as Plaintiff does, as a
smoking gun dooming Defendant’s case, nor does the Court view it as offering significant
support to Defendant’s interpretation of the Agreement. Defendant’s representative, did not, for
example, simply state directly that a convenience fee is a collection agency fee, which is why
Defendant possesses authority to charge under the Agreement. Furthermore, the parties have not
given this Court any other extrinsic evidence regarding the meaning of the of the term
“collection agency fee,” either in the industry, or in common usage between the parties. This
paucity of evidence, however, ultimately accrues to the benefit of the Plaintiff in this case. If the
Agreement itself and the testimony of Defendant’s own representative do not clarify or provide
support for the fact that credit card convenience fees are “collection agency fees” as that term
was intended in the Agreement, the Court cannot find that that the phrase “collection agency
fees” expressly authorizes the charging of “a convenience fee.”

28

Ultimately, a final question of interpretation before the Court most strongly dictates the
outcome in this case. The parties disagree about the meaning of the phrase “of two percent per
month.” Plaintiff contends it means “equal to two percent per month,” and Defendant contends it
means “up to two percent per month.” Firstly, the Court observes that the common meaning of
the word “of,” supports Plaintiff’s reading of the Agreement. One of the most common usages of
“of” is as “a function word to indicate the component material, parts, or elements, or the
contents.” Webster’s Ninth New Collegiate Dictionary 819 (1985). This comports with the
Court’s understanding of the phrase in common usage. For example, when the average
consumer, not to mention the least sophisticated debtor, agrees to pay automobile insurance
payments of $200 per month, or is promised by her bank that her savings account will receive
interest payments of 1% per year, it is perfectly clear that the consumer’s expectation is that the
insurance company will be demanding payments equal to and no less than $200 each month and
that the consumer will be entitled to interest equal to and no less than 1% of the value of their
account balance each year.
Secondly, the Court is persuaded that it too cannot endorse the “no harm, no foul” rule
the district court rejected in Thomas. In that case, the court reasoned that because the FDCPA
requires additional fees to be expressly authorized by state statute or within the agreement
underlying the debt, courts cannot find that other fees, designated by different names and
calculated by other methods, are allowable merely because they are smaller in their absolute
magnitude than the fees admittedly expressly authorized in the agreement. Thomas, 2017 U.S.
Dist. LEXIS 16585 at *27-28. Here, Defendant was expressly authorized under the Agreement to
charge Plaintiff agency fees of 2% of the outstanding balance, or $28.11, per month, calculated
as a percentage of the outstanding balance, at the time the collection Letter was received by

29

Plaintiff. Defendant’s $5.00 credit card convenience fee is a flat fee, not expressly included
within the authorized amount by the plain language of the Agreement. Even were it ultimately
possible, on the basis of facts not before the Court, to infer that, as Defendant assumes, a
convenience fee falls within the category of agency fees, the Court would nevertheless be faced
with the fact that the convenience fee would be for a different amount, calculated in a different
manner, than the fee authorized in the Agreement. Accordingly, to read “of 2% per month” in the
Agreement to mean “up to 2% per month” is not a reasonable interpretation of the Agreement,
giving proper effect to the provisions expressly set forth therein. Avaya, 838 F.3d at 379
(ambiguity in a contract only exists if the terms are susceptible to at least two reasonable
alternative interpretations). As express authorization is the only rationale by which Defendant
contends its conduct in offering Plaintiff the $5.00 credit card convenience fee — an amount
charged incidental to a debt under the FDCPA — avoids violating § 1692f(1), the Court finds
that in its clear absence, Plaintiff is entitled to summary judgment. 2

2

In reaching my conclusion that a grant of summary judgment in Plaintiff’s favor is
compelled by the absence of express authorization for the fee set forth in the Letter in this case, I
do not rely on the precedents offered by Plaintiff, all of which arise in the context of motions to
dismiss. The opinion of this Court, therefore, does not conflate a plaintiff’s entitlement to
proceed on his or her claims with an entitlement to judgment as a matter of law. Plaintiff most
heavily relies on a decision out of the Eastern District of New York, contending that “[t]his
identical issue was decided by the district court in Shami v. National Enterprise Systems, Inc.
No. 09-CV-722, 2010 WL 3824151 (E.D.N.Y. Sept. 23, 2010).” Plaintiff’s Moving Br., 7. In
Shami, however, “Defendant d[id] not assert that the transaction fees described in the Collection
Letter were expressly authorized by the underlying agreement creating the debt . . . . Defendant
contend[ed] instead [only] that § 1692f(1) itself is inapplicable because the phone and online
methods of payment are optional.” Shami v. Nat'l Enter. Sys., No. 09-CV-722 RRM VVP, 2010
WL 3824151, at *2 (E.D.N.Y. Sept. 23, 2010). This Court has already ruled that the optional
nature of the convenience fee does not render it not incidental to the debt as Defendant argued.
Shami, therefore, has no further relevance to the Court’s express authorization inquiry. Two
other of the cases offered by Plaintiff as persuasive authority are similarly irrelevant to the
express authorization inquiry. Weast v. Rockport Fin., LLC, 115 F. Supp. 3d 1018, 1022 (E.D.
Mo. 2015) (“Here, Defendant does not suggest that the agreement creating the debt authorized
the collection of a convenience fee when the debt was paid by credit or debit card.”); Quinteros
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3. Claims Under § 1692e
Section § 1692e prohibits debt collectors from employing “any false, deceptive, or
misleading representation or means in connection with the collection of any debt.” Section

v. MBI Assocs., Inc., 999 F. Supp. 2d 434, 437 (E.D.N.Y. 2014) (“Defendant does not contend
that the processing fee described in the Processing Fee Statement is either expressly authorized
by the contract underlying the debt or otherwise permitted by New York law.”)
The next most heavily relied upon of Plaintiff’s authorities is one of only two in-Circuit
opinions on the express authorization issue. Plaintiff contends that “[a]s in the Pollice matter,
the FDCPA was violated in this action, where the Plaintiff never agreed with the original creditor
that she could be charged or assessed a $5.00 ‘convenience fee’ for paying her debt via credit
card.” Plaintiff Moving Br., 8. The issue in Pollice, however, was totally distinct from that in this
case. Here, the parties disagree as to whether a specific provision, undeniably included within the
agreement underlying the debt, expressly authorizes the defendant to collect a certain fee. In
Pollice, by contrast, the Court ruled that the defendants were unable to even identify a provision,
attempting instead to find such authorization implicit in the agreements underlying the debt by
action of municipal ordinances and resolutions, or payment plans separate and apart from the
debt instrument. Pollice, 225 F.3d at 408 (“Defendants do not contend that the interest and
penalty rates were ‘expressly’ set forth in these agreements or transactions, nor do they contend
that homeowners actually consented to or were aware of the rates when they subscribed to the
services. The most defendants can say is that the rates were made an implicit part of such
transactions because they are set forth in municipal ordinances and resolutions. We do not
believe this suffices. Nor can defendants rely on the payment plans, as the plans are not the
‘agreement creating the debt.’”). The Court draws upon Pollice for its general principle that
express authorization cannot be implied from extrinsic sources, not for its specific facts.
Plaintiff’s reliance on Kaymark is similarly misplaced. The agreement underlying the
debt in that case specified that the defendant could only charge for services “performed” and
expenses “incurred” in pursuing the authorized debt collection remedies. The Third Circuit thus
held that defendant “was not authorized to collect fees for not-yet-performed legal services and
expenses, forming a basis for a violation of § 1692f(1).” Kaymark, 783 F.3d at 175–76. See also
Bradley v. Franklin Collection Serv., Inc., 739 F.3d 606, 610 (11th Cir. 2014) (“Under the
contract at issue here, Bradley agreed to pay the actual costs of collection; he did not agree to
pay a percentage above the amount of his outstanding debt that was unrelated to the actual costs
to collect that debt.”); Fonseca v. Focus Fin. Servs., No. 15-80410-CIV, 2016 WL 4146663, at
*5 (S.D. Fla. Aug. 1, 2016) (the agreement stated “I hereby guarantee payment of all attorney's
fees, court costs and collection charges incurred in the event collection action is initiated” by
defendant) (emphasis added). The Agreement in this case clearly authorizes Plaintiff to collect
some fees prospectively and proactively, not just retrospective costs and expenses.
Finally, the case of Wittman, is also distinguishable from the case at bar. There, the
defendant failed to produce any agreement in the record from which to even argue express
authorization. Accordingly, the district court, at the stage of a motion to dismiss, took Plaintiff’s
well-pleaded allegations as true, and denied dismissal without reviewing any agreement
underlying the debt at all. Wittman v. CB1, Inc., 2016 WL 1411348, at *5.
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1692e(2) prohibits: “[t]he false representation of (A) the character, amount, or legal status of any
debt; or (B) any services rendered or compensation which may be lawfully received by any debt
collector for the collection of a debt.” Section 1692e(10) further prohibits: “[t]he use of any false
representation or deceptive means to collect or attempt to collect any debt[.]” Plaintiff brings
claims under both provisions, arguing that Defendant’s false representation of Defendant’s
entitlement to charge a fee unauthorized by and prohibited under § 1692f, provides the factual
predicate for each § 1692e violation. Congress enacted the FDCPA in 1977 “to eliminate abusive
debt collection practices by debt collectors.” 15 U.S.C. § 1692e. The Court has repeatedly held
that “[a]s remedial legislation, the FDCPA must be broadly construed in order to give full effect
to these purposes,” Caprio v. Healthcare Revenue Recovery Grp., LLC, 709 F.3d 142, 148 (3d
Cir. 2013), and, as such, we analyze the communication giving rise to the FDCPA claim “from
the perspective of the least sophisticated debtor,” Rosenau v. Unifund Corp., 539 F.3d 218, 221
(3d Cir. 2008) (internal quotation marks omitted).
At the outset the Court finds that an alleged misrepresentation concerning Defendant’s
entitlement to a convenience fee cannot serve as the basis for a violation of § 1692e(2)(A), as it
does not amount to a false representation about the character, amount or legal status of any debt.
15 U.S.C. § 1692e(2)(A). This Court agrees with the analysis of the district court in Weast that
“[t]he statement about the collection fee was separate from the statement of Plaintiff's total
balance due, which was stated . . . in the letter. A reasonable unsophisticated consumer would
understand that the convenience fee was not a part of her principal debt. Thus, Plaintiff fails to
state a claim under § 1693e(2)[(A)]”. Weast, 115 F. Supp. 3d at 1023. Here, as there, there is no
risk that even the least sophisticated debtor would confuse the clearly optional convenience fee
with the underlying debt owed, which was itself set forth clearly and separately in the Letter.

32

Courts, however, have long recognized that a violation of § 1692f(1) can serve as the
basis of a violation of § 1692e(2)(B) for mischaracterization of compensation defendant could
lawfully receive under the FDCPA. Shami., 2010 WL 3824151, at *4 (“Because the Court has
concluded that Plaintiff has stated a claim under § 1692f(1) of the FDCPA, Plaintiff has also
stated a claim under § 1692e(2). Specifically, if it is determined that the Collection Letter
violates § 1692f(1) by representing that the transaction fees are permissible. Defendant also
would be in violation of § 1692e(2)[(B)].”); Acosta v. Credit Bureau of Napa Cty., No. 14 C
8198, 2015 WL 1943244, at *4 (N.D. Ill. Apr. 29, 2015) (“Plaintiff contends that Defendant
violated Section 1692e by falsely representing in the debt collection letter that it could lawfully
charge a processing fee for credit card payments. Because this Court has concluded that Plaintiff
has stated a claim under Section 1692f, Plaintiff has also stated a claim under Section 1692e. If
the debt collection letter violates Section 1692f(1) by representing that the processing fee is
permissible, then Defendant also would be in violation of Section 1692e.”); Weast, 115 F. Supp.
At 1023 n.2 (same); Quinteros, 999 F. Supp. 2d at 439–40 (same). This Court agrees, and finds
that Defendant’s violation of § 1692f(1), by including in the Letter a fee not authorized by state
law or the Agreement, also supports a violation of § 1692e(2)(B) by falsely claiming entitlement
to compensation which may be received by a debt collector for the collection of a debt. The least
sophisticated debtor reviewing the letter could conclude, and almost certainly would conclude,
that Defendant was legally entitled to charge the $5.00 credit card convenience fee.
Finally, “[c]ourts have long held that after finding a valid claim under a more specific
subsection of § 1692e . . . further analysis under § 1692e(10) is somewhat duplicative.”Chulsky
v. Hudson Law Offices, P.C., 777 F. Supp. 2d 823, 831-32 (D.N.J. 2011) (internal quotations
omitted). The Court finds that, having found that Plaintiff is entitled to judgment against

33

Defendant under § 1692e(2)(B) for claiming entitlement to compensation not legally owed,
Plaintiff is also entitled to judgment against Defendant under § 1692e(10) for making a false
representation as part of an attempt to collect any debt. Accordingly, in addition to summary
judgment on her claim under 15 U.S.C. § 1692f(1), the Court also grants summary judgment in
Plaintiff’s favor under §§ 1692e(2)(B) and 1692e(10).
V. CONCLUSION
For the foregoing reasons, Defendant’s motion for summary judgment is denied, and
Plaintiff’s motion for summary judgment is granted. The Court notes that Plaintiff has moved for
judgment on liability on her individual claims before moving for class certification. 3 Thus, this
Court’s opinion and order close the case.

Dated: _____3/31/2017_____________

/s/ Freda L. Wolfson
The Honorable Freda L. Wolfson
United States District Judge

3

Based upon the scheduling orders entered in this case, fact discovery is closed, and, indeed,
there does not appear to have been any discovery taken with regard to the putative class, nor has
any notice been given to putative class members. Thus, the Court has serious questions about
Plaintiff’s ability to raise claims, post-judgment, on behalf of the putative class in this case, in
light of the rule against one-way intervention. See Fed. R. Civ. P. 23(c) and Notes of the
Advisory Committee.
34