Blatt v. Capital One Auto Finance, Inc.
MEMORANDUM signed by Chief Judge Kevin H. Sharp on 2/17/2017. (DOCKET TEXT SUMMARY ONLY-ATTORNEYS MUST OPEN THE PDF AND READ THE ORDER.)(hb)
IN THE UNITED STATES DISTRICT COURT
FOR THE MIDDLE DISTRICT OF TENNESSEE
WAYNE BLATT, on behalf of himself
and all others similarly situated,
CAPITAL ONE AUTO FINANCE, INC.,
Case No. 2:15-cv-00015
Pending before the Court are cross motions for summary judgment. Defendant Capital
One Auto Finance, Inc. (“COAF”) filed a Motion for Summary Judgment on Plaintiff Wayne
Blatt’s (“Blatt”) claims under the Electronic Fund Transfer Act. (Docket No. 30). Plaintiff
Wayne Blatt (“Blatt”) filed a Response in Opposition and Cross-Motion for Partial Summary
Judgment. (Docket No. 38). COAF then filed a Reply. (Docket No. 39). For the reasons stated
below, the Court will grant COAF’s Motion for Summary Judgment and will deny Blatt’s Partial
for Summary Judgment.
On or about March 18, 2014, Blatt purchased a vehicle from Ford Lincoln of Cookeville.
(Docket No. 32 at 1). Blatt financed this vehicle through the execution of a Retail Installment
Sale Contract (“RISC”). The RISC was then assigned to COAF. Id. After Blatt failed to make
his first payment on time, he called COAF on May 6, 2014. During that May 6, 2014 phone call,
Blatt (1) authorized COAF to make a one-time withdrawal from his checking account to cover
his missed payment; and (2) requested that he be enrolled in DirectPay—COAF’s monthly
automatic payment system. Id. To complete Blatt’s second request, he was transferred to the
Interactive Voice Response (IVR) system, where Blatt input his loan account number as well as
the last four digits of his Social Security Number. Id. at 2. After Blatt did this, the following
Please listen to the entire DirectPay Authorization message before giving your
enrollment authorization. If you hang up, DirectPay will not be authorized for
your account. For your loan number , you authorize Capital One
to electronically debit a payment of from your <(checking/savings)>
account with routing number and account number .
Payments will be monthly on the of each month. The first payment will
debit on or after . Your payments will continue until the total amount due
is paid or you ask us to stop or change your enrollment. If you wish to change or
cancel DirectPay, call us at 800-946-0332. Once you are enrolled in DirectPay,
we will no longer send you a monthly statement. If we do not receive the
payment for any reason, including insufficient funds, you are responsible for
sending a payment and we may charge a returned payment fee. If you are
delinquent, or become delinquent, DirectPay may not bring your account current,
and collection calls, late fees and credit bureau impact may result.
To authorize the enrollment of your account in DirectPay, press 1. To hear this
information again, press 2. If you wish to make changes or speak with a customer
service agent, press 0. To cancel, press *.
After hearing this message, Blatt pressed “1” on his phone. On May 7, 2014, COAF
mailed Blatt a letter confirming the one-time debit from his checking account to make his missed
payment. On May 8, 2014, COAF mailed Blatt a letter confirming his enrollment in DirectPay.
Id. The May 8, 2014 letter contained the following information: the amount of the payments to
COAF, the recurring schedule of the payments, the date on which the first withdrawal would
take place, the date on which Blatt agreed to the terms via the IVR system, and information on
how to cancel or change his DirectPay enrollment. (Docket No. 32, Ex. C).
Blatt now claims that COAF violated the Electronic Funds Transfer Act (EFTA), 15
U.S.C. § 1693 et seq, in the course of enrolling Blatt in DirectPay. The EFTA governs proper
authorization of electronic fund transfers. 15 U.S.C. § 1693. Blatt claims that COAF violated
the EFTA in two specific ways: (1) COAF did not obtain his authorization to the recurring
payments in writing, as the EFTA requires; and (2) the May 8, 2014 letter COAF mailed to Blatt
was insufficient to meet the EFTA’s requirement that COAF mail a copy of the authorization to
him. (Docket No. 1 at 7-8).
Summary judgment is proper if “there is no genuine issue as to any material fact [such
that] the movant is entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(c). But
“summary judgment will not lie if the . . . evidence is such that a reasonable jury could return a
verdict for the non-moving party.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986).
In considering a motion for summary judgment, the court must construe the evidence in the light
most favorable to the non-moving party. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475
U.S. 574, 587 (1986). The movant therefore has the burden of establishing that there is no
genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 322–23 (1986); Barnhart
v. Pickrel, Schaeffer & Ebeling Co., 12 F.3d 1382, 1388–89 (6th Cir.1993). But the non-moving
party “may not rely merely on allegations or denials in its own pleading.” Fed. R. Civ. P.
56(e)(2). See Celotex, 477 U.S. at 324; Searcy v. City of Dayton, 38 F.3d 282, 286 (6th Cir.
1994). The non-moving party must present “significant probative evidence” to show that there is
more than “some metaphysical doubt as to the material facts.” Moore v. Philip Morris Co., 8
F.3d 335, 339–40 (6th Cir.1993).
The standard of review for cross-motions of summary judgment does not differ from the
standard applied when a motion is filed by only one party to the litigation. Taft Broad. Co. v.
U.S., 929 F.2d 240, 248 (6th Cir.1991).
The fact that both parties have moved for summary judgment does not mean that
the court must grant judgment as a matter of law for one side or the other;
summary judgment in favor of either party is not proper if disputes remain as to
material facts . . . [.] Rather, the court must evaluate each party's motion on its
own merits, taking care in each instance to draw all reasonable inferences against
the party whose motion is under consideration.
Id. (citations omitted).
The Court first notes that the parties have stipulated to all the relevant facts.
Consequently, the only issues that remain are issues of statutory interpretation, and “statutory
interpretation is a question of law[.]” Boegh v. EnergySolutions, Inc., 772 F.3d 1056, 1059 (6th
Cir. 2014). “[T]he starting point for interpretation is the language of the statute itself.” Id.
Preauthorized electronic fund transfers, such as the ones Blatt agreed to by enrolling in
DirectPay, are governed by the Electronic Funds Transfer Act (EFTA), 15 U.S.C. § 1693 et seq.
(Docket No. 1 at 7). For purposes of this case, the relevant portion of the EFTA is the following
sentence: “A preauthorized electronic fund transfer from a consumer’s account may be
authorized by the consumer only in writing, and a copy of such authorization shall be provided to
the consumer when made.” 15 U.S.C § 1693e(a).
The EFTA is implemented by Regulation E, 12 C.F.R. 1005 et seq, which also contains
official interpretations. Regulation E, 12 C.F.R. Pt. 1005, Supp. I ¶ 5 (2016). Regulation E
allows for the consumer’s written authorization to be provided electronically, as long as the
electronic authorization complies with the Electronic Signatures in Global and National
Commerce Act (“E-SIGN Act”). Id. The E-SIGN Act was enacted in 2000, in recognition of the
developing world of electronics, and it mandates that a signature “may not be denied legal effect
. . . solely because it is in electronic form[.]” 15 U.S.C. § 7001(a)(1). Furthermore, it mandates
that a “contract relating to such transaction may not be denied legal effect . . . solely because an
electronic signature or electronic record was used in its formation.” 15 U.S.C. § 7001(a)(2). The
parties have already stipulated that Blatt’s May 6, 2014 phone call was conducted by “electronic
means” through an “electronic agent” (the IVR system) and that the call generated an “electronic
record” and “electronic signature” as all terms are defined in the E-SIGN Act. (Docket No. 32 at
Nevertheless, Blatt claims that COAF violated two portions of the EFTA: (1) the
requirement that his authorization be in writing; and (2) the requirement that COAF provide him
with a copy of the authorization “when made.” (Docket No. 1 at 7-8).
Blatt’s Claim Regarding Written Authorization
First, Blatt claims that his authorization over the phone does not equate to written
authorization as contemplated in the EFTA. (Docket No. 38 at 4). Blatt acknowledges that the
EFTA and the E-SIGN Act in conjunction allow written signatures to be obtained electronically.
(Docket No. 38 at 5). Blatt has also stipulated to facts establishing that his May 6, 2014 phone
call created an “electronic signature” under the E-SIGN Act. (Docket No. 32 at 2). Furthermore,
a 2015 Compliance Bulletin issued by the Consumer Financial Protection Bureau (“CFPB”), the
government agency in charge of implementing the EFTA, states that the EFTA “does not
prohibit companies from obtaining signed, written authorizations from consumers over the phone
if the E-Sign Act requirements for electronic records and signatures are met.” Requirements for
Consumer Authorizations for Preauthorized Electronic Fund Transfers, CFPB Compliance
Bulletin 2015-06, 11232015, 2015 WL 10372389. Corresponding to this agency interpretation
of the EFTA, the legislative history of the E-SIGN Act shows that it was enacted with phone
systems in mind: “Today, a system that creates a digital file by means of the use of voice, as
opposed to a keyboard, mouse or similar device, is capable of creating an electronic record,
despite the fact that it began its existence as an oral communication.” Regulation E Electronic
Signatures in Global and National Commerce Act-Conference Report-Resumed, 146 Cong. Rec.
S. 5281, 5284. Nonetheless, Blatt argues that COAF failed to comply with a different portion of
the E-SIGN Act, § 7001(c), concerning consumer disclosures. Blatt believes that because COAF
did not comply with the entire E-SIGN Act, then his electronic signature is invalid for purposes
of the EFTA. (Docket No. 38 at 4-5).
Under a plain reading of § 7001(c), the E-SIGN Act section in question, COAF is not
required to make the consumer disclosures as Blatt argues. Section 7001(c) states that “if a
statute . . . requires that information relating to a transaction. . . be provided or made available to
a consumer in writing, the use of an electronic record to provide or make available . . . such
information satisfies the requirement that such information be in writing” if COAF provides the
consumer with certain disclosures. 15 U.S.C. § 7001(c)(1). This section does not apply to
Blatt’s situation, however, because COAF did not provide any information in electronic form.
COAF obtained Blatt’s signature electronically and then provided a copy of that authorization to
Blatt in paper form. If COAF had chosen to provide Blatt with a copy of his authorization in the
form of an electronic record, it may have been required to comply with this section’s consumer
disclosure requirements, but that is not the situation in front of the Court.
Blatt attempts to explain around this reading with a number of conclusory statements.
For example, Blatt claims that “§ 7001(c) is the only subsection [of the E-SIGN Act] logically
associated with § 1693e(a) of the EFTA, because it deals with the provision of information to
consumers.” (Docket No. 38 at 6). Blatt’s assertion that § 7001(c) is the only subsection of the
E-SIGN Act to apply to Blatt’s EFTA claim is unsurprising, seeing as he has already stipulated
to facts definitively establishing that his May 6, 2014 phone call created an “electronic
signature” and “electronic record” in compliance with the E-SIGN Act. (Docket No. 32 at 2).
Because § 7001(c) of the E-SIGN Act does not apply to Blatt’s situation, and the parties
have stipulated to facts establishing that Blatt’s May 6, 2014 phone call created an electronic
signature in accordance with the applicable portions of the E-SIGN Act, the Court finds that
COAF met the written authorization requirement as contemplated in the EFTA.
Blatt’s Claim Regarding the Copy of His Authorization
Blatt’s second claim argues that COAF violated the § 1693e(a) requirement that “a copy
of such authorization shall be provided to the consumer when made.” (Docket No. 38 at 1).
Blatt argues that COAF violated this provision in two ways: (1) COAF did not send the copy of
the authorization “when made” but instead waited two business days; and (2) the copy that
COAF did eventually send was insufficient, in both form and substance, for purposes of the
EFTA. Id. at 7-9.
A. “When made”
Blatt argues that “when made” means contemporaneously with the authorization.
(Docket No. 38 at 6-7). To support this claim, Blatt cites two cases. Neither of them is
convincing. First, Blatt cites a Sixth Circuit case, Wike v. Vertrue, Inc., 566 F.3d 590, 594 (6th
Cir. 2009), which states that “if and when the payee secures the consumer’s consent in writing it
must furnish a copy of that writing to the consumer.” Wike, 566 F.3d at 594. However, the
phrase “if and when” does no more to suggest “contemporaneously” than the EFTA itself does
when it uses the words “when made.” Next, Blatt cites the District of Connecticut’s statement in
L.S. v. Webloyalty, Inc., 138 F. Supp. 3d 164, 182 (D. Conn. 2015), aff'd in part, vacated in part
sub nom. L.S. v. Webloyalty.com, Inc., No. 15-3751, 2016 WL 7402617 (2d Cir. Dec. 20, 2016)
that the “discernible individual consumer right protected by § 1693e(a) is a consumer’s right to
receive a contemporaneous copy of the terms and conditions of a preauthorized electronic fund
transfer he has authorized from his account.” However, as the citation indicates, this case was
later vacated in part by the Second Circuit. Specifically, the Second Circuit vacated the portion
on which Blatt relies. L.S. v. Webloyalty.com, Inc., No. 15-3751, 2016 WL 7402617, at *5 (2d
Cir. Dec. 20, 2016) (“[W]e vacate as to the grant of the motion to dismiss on appellant’s second
claim that Webloyalty violated EFTA by failing to provide him with a copy of his funds transfer
authorization.”). Consequently, any influence this opinion may have had is no longer relevant.
Two business days is an appropriate amount of time to provide a copy of the
authorization when looking at both the plain language of the EFTA as well as other notice
requirements in the statute. Examples include: (1) for transfers to a consumer’s account, the
financial institution must provide “oral or written notice of the transfer within two business days
after the transfer occurs;” 12 C.F.R. § 1005.10; (2) when a consumer notifies a financial
institution about an alleged error and the financial institution investigates and determines that no
error occurred, the financial institution “shall deliver or mail to the consumer an explanation of
its findings within 3 business days after the conclusion of its investigation;” 15 U.S.C. § 1693f;
(3) when a consumer learns of a lost or stolen card, the consumer must inform the financial
institution within two business days in order to limit the consumer’s financial responsibility for
unauthorized charges; 15 U.S.C. § 1693g(a); and (4) the issuer of a prepaid account must provide
“the consumer a copy of the consumer’s prepaid account agreement no later than five business
days after the issuer receives the consumer’s request.” 12 C.F.R § 1005.19. Furthermore, to
impose a requirement upon companies the size of COAF that all copies of authorizations must be
provided at the very moment in which they are made would be unreasonable and unworkable.
To be clear, the Court is not establishing a specific deadline by which a company must have the
copy of an authorization mailed. The Court is merely saying that two business days is an
appropriate amount of time to meet the EFTA notice requirement in § 1693e(a). Giving the
words of the EFTA their ordinary and plain meaning while also considering other portions of the
statute, the Court finds that contemporaneousness is not required, and two business days after the
authorization reasonably meets the requirement of “when made.”
B. Insufficiency of the Copy of the Authorization
Blatt next argues that the paper copy of the authorization that COAF eventually mailed to
him did not meet the requirements of the EFTA in two ways. (Docket No. 38 at 8). First, Blatt
claims that because COAF obtained Blatt’s authorization via the electronic IVR system, COAF
was then required to give Blatt an audio recording of the phone call he placed with the IVR
system. Id. at 8-9. Blatt claims this is required by § 7001(e) of the E-SIGN Act, which states
that “the legal effect . . . of an electronic record . . . may be denied if such electronic record is not
in a form that is capable of being retained and accurately reproduced for later reference[.]” 15
U.S.C. § 7001(e); (Docket No. 38 at 8-9).
Second, Blatt claims that the paper copy of his authorization that he was eventually
mailed fails to make up for COAF’s failure to send him a copy of the phone call because the
letter did not contain the full terms to which Blatt agreed when he used the IVR system. More
specifically, Blatt cites the following differences between the IVR system and the paper copy he
received in the mail: (1) the IVR system informed Blatt that he would no longer be receiving
monthly statements while the letter did not mention this fact; and (2) the IVR system told Blatt
that if he “wish[ed] to change or cancel DirectPay, call [COAF] at 800-946-0332” while the
letter told Blatt that he “can stop payment of any entry by notifying [COAF] three (3) business
days or more before [his] account is charged.” (Docket No. 38 at 9).
The Court finds that § 7001(e) of the E-SIGN Act does not apply to Blatt’s situation
because Blatt is not disputing the contents of the original phone call in which Blatt gave his
authorization; Blatt has stipulated to exactly what the IVR message said, that he agreed to the
terms in the message, and that he pressed “1” to confirm his enrollment in the DirectPay
program. To any extent that it does, the stipulated facts contain an accurate reproduction of the
IVR transaction to which all parties have agreed.
Furthermore, the EFTA’s official
interpretations allow financial institutions to comply with the copy requirement by providing the
copy of the authorization “either electronically or in paper form” and do not require that it be
provided in the same form in which the authorization was obtained. 12 C.F.R. § Pt. 1005, Supp.
I. 10(b) ¶ 5. Therefore, COAF’s letter mailed to Blatt was a correct form in which to give a copy
of the electronic authorization.
Finally, the Court finds that the terms contained in the letter mailed to Blatt are sufficient
to meet the standards of 15 U.S.C. § 1639e(a), and the letter’s failure to recite the exact words
used in the IVR system is immaterial. The CFPB Compliance Bulletin published in November
2015 states that “[t]wo of the most significant terms of an authorization are the timing and
amount of the recurring transfers from the consumer’s account.” CFPB Compliance Bulletin
2015-06, 2015 WL 10372389. The CFPB notes that it previously found companies in violation
of this requirement when the companies mailed copies of authorizations that failed to “disclose
important authorization terms such as the recurring nature of the preauthorized EFTs, or the
amount and timing of all the payments to which the consumer agreed.” Id.
The copy of the
authorization that COAF mailed to Blatt contained the amount of the payments to COAF, the
recurring schedule of the payments, the date on which the first withdrawal would take place, the
date on which Blatt agreed to the terms via the IVR system, and information on how to cancel or
change his DirectPay enrollment. (Docket No. 32, Ex. C). Blatt fails to cite any case law,
statute, or regulation requiring the terms in the copy of the authorization be an exact replica of
the IVR system’s message, and the Court is unwilling to impose such an obligation. Here, the
letter mailed to Blatt contained the material and important terms of his DirectPay enrollment.
This letter is sufficient to meet COAF’s duty under 15 U.S.C. § 1693e(a) that COAF mail Blatt a
copy of his authorization.
As stated at the outset, there are no material factual issues remaining in this case.
Construing the EFTA as well as the E-SIGN Act in reasonable and ordinary terms, the Court
finds that COAF has not violated 15 U.S.C. § 1693e(a) in relation to Blatt. For the foregoing
reasons, the Court will grant Defendant’s Motion for Summary Judgment and deny Plaintiff’s
Motion for Summary Judgment. A separate order shall be entered.
KEVIN H. SHARP
UNITED STATES DISTRICT JUDGE
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