Miller, Melissa v. Interstate Auto Group, Inc. (WI)
Filing
28
OPINION AND ORDER denying 20 Motion for Judgment on the Pleadings; granting 21 Motion for Summary Judgment. Signed by Magistrate Judge Stephen L. Crocker on 4/21/15. (jat)
IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF WISCONSIN
MELISSA MILLER,
Plaintiff,
OPINION AND ORDER
v.
14-cv-116-slc
INTERSTATE AUTO GROUP, INC. (WI)
d/b/a CARHOP,
Defendant.
_____________________________________________________________________________________
Plaintiff Melissa Miller has filed this civil lawsuit against defendant Interstate Auto
Group, Inc., pursuant to the Electronic Fund Transfer Act (“EFTA”), 15 U.S.C. §§ 1693-1693r.
Before the court are competing dispositive motions: plaintiff has moved for judgment in her
favor on her claim that defendant violated the EFTA’s anti-waiver provision, 15 U.S.C. § 1693l;
defendant has moved for summary judgment on plaintiff’s anti-waiver claim and her claim that
defendant violated § 1693e(a). For the reasons stated below, I am denying plaintiff’s motion
and granting defendant’s.1
The relevant facts are straightforward and undisputed:
FACTS
Plaintiff Melissa Miller is a resident of Wisconsin and is a “consumer” as defined by the
EFTA, 15 U.S.C. § 1693a(5) and its implementing regulation, Regulation E.
Defendant
Interstate Auto Group, Inc., d/b/a Carhop, is a Minnesota corporation licensed in the state of
Wisconsin to conduct business, namely, selling and financing the sale of motor vehicles.
1
The court’s ruling takes into account plaintiff’s offer to withdraw her claim under § 1693e(a),
see dkt. 26 at 1, n.1. Infra at 6.
Defendant is not a bank, credit union, savings and loan association or mutual savings bank, and
it does not hold any deposits or deposit accounts belonging to consumers.
On or about May 6, 2013, plaintiff entered into a retail installment sales contract with
defendant for the purchase of a 2001 Chevrolet Impala. Sec. Aff. of Matthew Pfohl, dkt. 24,
exh. A.
Plaintiff also entered into an optional recurring electronic funds transfer (EFT)
authorization with defendant so that she could make installment payments under the contract.
Id. at 7. By signing the EFT Authorization, plaintiff authorized defendant “to make electronic
fund transfers in the form of ACH [Automated Clearing House] debit entries” from her bank
account and to electronically credit those amounts upon receipt to the amounts due under her
retail installments sales contract with defendant. Id. The authorization committed plaintiff to
making a weekly payment of $94, beginning May 10, 2013. Defendant is the designated payee
on the EFT authorization. Id.
The EFT Authorization contains this provision:
You understand and agree that this authorization will remain in
effect until (I) your contract with us is paid in full or (ii) you
cancel this authorization by calling us at (800) 414-2622,
completing a change notice at www.uac.com, or by submitting a
new copy of this form to us. We must be notified of cancellation
at least 5 days prior to the payment due date. You agree to notify
us of any changes to your bank account information. You
acknowledge that the origination of ACH transactions to your
account must comply with the provisions of applicable law and the
Rules of the National Automated Clearing House Association.
You request the financial institution that holds the account to
honor the debit entries that we initiate.
Id.
2
Plaintiff’s two-count complaint claims that this provision violates § 1693e(a) and §
16931 of the EFTA; in her pending motion, she seeks judgment on Count II, her § 16931 claim.
Defendant seeks judgment on both of plaintiff’s claims.
OPINION
I. Standard of Review
Plaintiff has moved for judgment on the pleadings pursuant to Fed. R. Civ. Pro. 12(c).
When considering such a motion, the court must apply the same legal standards that govern
motions to dismiss under Rule 12(b)(6) (failure to state a claim on which relief can be granted).
R.J. Corman Derailment Servs., LLC v. Int'l Union of Operating Eng'rs, Local Union 150, AFL–CIO,
335 F.3d 643, 647 (7th Cir. 2003). A court may not grant a motion under Rule 12(c) “unless
it appears beyond a doubt that the non-moving party cannot prove any facts that would support
his claim for relief.” Id. (citations and alterations omitted). In deciding such a motion, the court
may consider only the pleadings: the complaint, answer, and any written instruments attached
as exhibits. Housing Auth. Risk Retention Grp., Inc. v. Chicago Housing Auth., 378 F.3d 596, 600
(7th Cir. 2004).
Defendant has moved for summary judgment pursuant to Fed. R. Civ. P. 56(c).
Summary judgment is proper where there is no showing of a genuine issue of material fact in the
3
pleadings, depositions, answers to interrogatories, admissions and affidavits, and where the
moving party is entitled to judgment as a matter of law. Fed. R. Civ. P. 56(c).2
Both parties agree that this case involves a pure question of law that can be resolved on
the parties’ submissions.
II. The Electronic Funds Transfer Act
In 1978, Congress enacted the EFTA as part of the comprehensive Consumer Credit
Protection Act (the “CCPA”), codified as amended at 15 U.S.C. §§ 1601 et seq. See Clemmer v.
Key Bank Nat. Ass'n, 539 F.3d 349, 350 (6th Cir. 2008). In addition to the EFTA, the CCPA
includes several other consumer-protection statutes, including the Truth in Lending Act, 15
U.S.C. §§ 1601–1667f, and the Fair Credit Reporting Act, 15 U.S.C. §§ 1681–1681x.
Congress enacted the EFTA in order “to provide a basic framework establishing the rights,
liabilities, and responsibilities of participants in electronic fund and remittance transfer systems.”
15 U.S.C. § 1693(b). Its primary objective, however, is to provide individual consumer rights.
Id. “The EFTA, like the TILA and other CCPA provisions, is a remedial statute accorded ‘a
broad, liberal construction in favor of the consumer.’” Clemmer, 539 F.3d at 353 (quoting Begala
2
In addition to the pleadings, the installment contract and the EFT Authorization form ,
defendant has submitted an affidavit establishing that it is not a financial institution, along with payment
notes from plaintiff’s account showing that defendant complied with oral requests from plaintiff that it
refrain from initiating debits to plaintiff’s bank account on certain dates. Sec. Aff. of M atthew Pohl, dkt.
24. Although this evidence is not disputed, I agree with plaintiff that the fact that defendant
accommodated her verbal requests to delay debiting her account is irrelevant. The EFTA is a strict liability
statute and plaintiff is seeking only statutory damages. See Burns v. First Am. Bank, No. 04 C 7682, 2006
W L 3754820, at *6 (N.D. Ill. D ec. 19, 2006) (citing Bisbey v. D .C. National Bank, 793 F.2d 315, 318-19
(D.C.Cir.1986)).
4
v. PNC Bank, Ohio, Nat'l Ass'n, 163 F.3d 948, 950 (6th Cir. 1998) (citations omitted)). The
EFTA is implemented through Regulation E, codified at 12 C.F.R. § 1005.3
One of the rights conferred by the EFTA is the right to “stop payment of a preauthorized
electronic fund transfer by notifying the financial institution orally or in writing at any time up
to three business days preceding the scheduled date of such transfer.” 15 U.S.C. § 1693e(a).
An electronic fund transfer under the Act is “any transfer of funds, other than a transaction
originated by check, draft, or similar paper instrument, which is initiated through an electronic
terminal, telephonic instrument, or computer or magnetic tape so as to order, instruct, or
authorize a financial institution to debit or credit an account,” including direct withdrawals of
funds. 15 U.S.C. § 1693a(7); 12 C.F.R. § 1005.3(b). A “preauthorized electronic fund transfer”
is an electronic fund transfer “authorized in advance to recur at substantially regular intervals.”
15 U.S.C. § 1693a(10); 12 C.F.R. § 1005.2(k). The parties agree that the recurring transfers
from plaintiff’s bank account pursuant to the EFT Authorization constitute “preauthorized
electronic fund transfers” as defined by the Act.
Set out in full, 15 U.S.C. § 1693e(a) provides:
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. A consumer may stop payment of a preauthorized
electronic fund transfer by notifying the financial institution orally
or in writing at any time up to three business days preceding the
scheduled date of such transfer. The financial institution may
3
Rule-making authority under the EFTA initially was exercised by the Federal Reserve Board,
which published regulations implementing the Act at 12 C.F.R. § 205. In 2010, the Dodd-Frank W all
Street Reform and Consumer Protection Act transferred rule-making authority to the Consumer Financial
Protection Bureau (CFPB). In December 2011, the CFPB restated Regulation E without substantive
changes at 12 C.F.R. § 1005.
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require written confirmation to be provided to it within fourteen
days of an oral notification if, when the oral notification is made,
the consumer is advised of such requirement and the address to
which such confirmation should be sent.
Similarly, Regulation E provides at 12 C.F.R. § 1005.10(c):
Consumer's right to stop payment—
(1) Notice. A consumer may stop payment of a preauthorized
electronic fund transfer from the consumer's account by notifying
the financial institution orally or in writing at least three business
days before the scheduled date of the transfer.
(2) Written confirmation. The financial institution may require
the consumer to give written confirmation of a stop-payment order
within 14 days of an oral notification. An institution that requires
written confirmation shall inform the consumer of the requirement
and provide the address where confirmation must be sent when the
consumer gives the oral notification. An oral stop-payment order
ceases to be binding after 14 days if the consumer fails to provide
the required written confirmation.
III. 15 U.S.C. § 1693e(a)
In her complaint, plaintiff alleged that defendant violated § 1693e(a) by requiring her
to provide five days rather than three days notice to defendant in the event she wished to cancel
her EFT authorization. After defendant moved for summary judgment on this claim, plaintiff
indicated her consent to “withdraw” this claim “to simplify the briefing in this matter.” Br. in
Opp. to Mot. for Summ. Judg., dkt. 26 at n1. The court appreciates the gesture, but because
it is unclear whether plaintiff is volunteering to withdraw this claim with prejudice, the court will
rule on it.
Defendant contends that, under the plain terms of the statute and Regulation E,
§ 1693e(a) applies only to financial institutions. I agree. The statute confers upon a consumer
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the right to stop payment of a preauthorized electronic fund transfer by notifying her “financial
institution.” The EFTA defines “financial institution” as “a State or National bank, a State or
Federal savings and loan association, a mutual savings bank, a State or Federal credit union, or
any other person who, directly or indirectly, holds an account belonging to a consumer . . . .”
15 U.S.C. § 1693a(9). An “account” is defined by the act as “a demand deposit, savings deposit,
or other asset account.” Id. at § 1693a(2). It is undisputed that defendant does not hold any
depository accounts held by consumers and therefore is not a financial institution.
The EFTA’s implementing regulation confirms, at 12 C.F.R. § 1005.3(a), that only
certain parts of the EFTA apply to persons other than financial institutions. The regulation goes
on to list the parts that apply to “any person;” the stop-payment provision (set out in the
regulation at § 1005.10) is not on this list.
Also buttressing the court’s conclusion are 15 U.S.C. § 1693c and 12 C.F.R. § 1005.7,
which require only financial institutions to inform consumers of their stop payment rights, and
§ 1693h(a)(3), which limits liability to financial institutions for violations of the stop payment
provisions concerning preauthorized transfers. 15 U.S.C. § 1693h(a)(3).
Finally, at least two other district courts that have considered this same question agree
that the terms of 1693e(a) are enforceable only against financial institutions. Baldukas v. B &
R Check Holders, Inc., No. 12-CV-01330-CMA-BNB, 2012 WL 7681733, at *5 (D. Colo. Oct.
1, 2012) report and recommendation adopted sub nom. Baldukas v. B & R Check Holders, No. 12-CV01330-CMA-BNB, 2013 WL 950847 (D. Colo. Mar. 8, 2013); Murphy v. Law Offices of Howard
Lee Schiff, P.C., No. CIV.A. 13-10724-RWZ, 2014 WL 710959, at *1 (D. Mass. Feb. 26, 2014).
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For all these reasons, I find that the stop payment provisions of the EFTA and Regulation
E are enforceable against financial institutions only and not against third-party payees such as
defendant. Defendant is entitled to summary judgment on this claim.
IV. 15 U.S.C. § 1693l
This leaves plaintiff’s claim under 15 U.S.C. §1693l, known as the EFTA’s anti-waiver
provision. That section provides:
No writing or other agreement between a consumer and any other
person may contain any provision which constitutes a waiver of
any right conferred or cause of action created by this subchapter.
Nothing in this section prohibits, however, any writing or other
agreement which grants to a consumer a more extensive right or
remedy or greater protection than contained in this subchapter or
a waiver given in settlement of a dispute or action.
15 U.S.C.A. § 1693l. Defendant acknowledges that this section prohibits any person–not just
financial institutions–from requiring a consumer to waive rights she has under the EFTA.4
Plaintiff contends that defendant’s EFT Authorization violated the anti-waiver provision
because it contained a provision imposing greater requirements to stop payment than what is
allowed under the EFTA. Specifically, plaintiff points to the cancellation provision, which reads:
You understand and agree that this authorization will remain in
effect until (I) your contract with us is paid in full or (ii) you
cancel this authorization by calling us at (800) 414-2622,
completing a change notice at www.uac.com, or by submitting a
new copy of this form to us. We must be notified of cancellation
at least 5 days prior to the payment due date.
4
For a violation of the EFTA by a non-financial institution, a prevailing consumer is entitled to
recover “an amount equal to the sum of ... any actual damage sustained by such consumer as a result of
such [violation]; ... [or] an amount not less than $100 nor greater than $1,000; ... [plus] the costs of the
action, together with a reasonable attorney's fee as determined by the court.” 15 U.S.C. § 1693m(a).
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According to plaintiff, this provision violates § 1693l because it
only allowed Plaintiff to cancel the preauthorization by contacting
Defendant, as opposed to Plaintiff’s financial institution, at least
5 days prior to the payment due date.
Mot. for Judg. on Pleadings, dkt. 20, at 4. Plaintiff’s argument rests on the notion that there
is no meaningful distinction between the right of cancellation set forth in defendant’s EFT
Authorization with the statutory right to stop payment. Defendant, on the other hand, argues
that there is a distinction: whereas the EFTA confers upon consumers the right to stop a single
preauthorized fund transfer, defendant’s EFT Authorization confers upon the consumer the right
to entirely revoke her authorization for transfers to be made in the first place.
I begin with an examination of the specific right conferred by the EFTA.
Accord
CompuCredit Corp. v. Greenwood, 132 S. Ct. 670 (2012) (examining statutory language of Credit
Repair Organizations Act to determine scope of right conferred before deciding whether
arbitration agreement violated CROA’s non-waiver provision). The language is straightforward:
it guarantees the consumer the right to stop payment of a preauthorized electronic fund transfer
by contacting her financial institution, either orally or in writing, up to three days preceding the
scheduled date of the transfer.
Defendant argues that its proposed interpretation of the statute–that it confers the right
to stop a single transfer–is confirmed by Congress’s use of the singular before the term
“preauthorized electronic fund transfer.” Defendant’s interpretation is consistent with how the
term “stop payment” is used in the Uniform Commercial Code, which describes a consumer’s
stop payment right in terms of a single “item.” See Uniform Commercial Code § 4-403(a)
(customer may “stop payment of any item drawn on the customer’s account . . . by an order to
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the bank describing the item . . . with reasonable certainty received at a time and in a manner
that affords the bank a reasonable opportunity to act on it before any action by the bank with
respect to the item”). In the EFTA, however, Congress did not afford a right to stop payment
of an “item;” instead, it used the term “preauthorized electronic fund transfer.” That term,
defined in the statute, means an electronic fund transfer “authorized in advance to recur at
substantially regular intervals.” 15 U.S.C. § 1693a(10). Given that its recurrent nature is
encompassed within the definition, there is room to argue that a stop payment order of “a
preauthorized electronic fund transfer” would encompass not just one fund transfer but all
future preauthorized recurrences.
Lacking clear guidance from the statute or implementing regulation, I turn next to the
CFPB, which has issued “Official Interpretations” of Regulation E at 12 C.F.R. pt. 1005, Supp.
1. It is not clear to what degree this court should defer to these “official interpretations.” In
Fridman v. NYCB Mortgage Co., LLC, 780 F.3d 773, 776 (7th Cir. 2015), the court, when
addressing CFPB Official Interpretations of Regulation Z, suggested that these interpretations,
which did not go through a formal notice-and-comment procedure, may be considered unless
they are “demonstrably irrational.” In dissent, Judge Easterbrook rejoined that it was not clear
that the court owed the commentary any deference at all.
Id. at 781. (Easterbrook, J.,
dissenting). The CFPB has this to say about the right of stop payment described in the statute
and regulations:
1. Stop-payment order. The financial institution must honor an
oral stop-payment order made at least three business days before
a scheduled debit. If the debit item is resubmitted, the institution
must continue to honor the stop-payment order (for example, by
suspending all subsequent payments to the payee-originator until
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the consumer notifies the institution that payments should
resume).
2. Revocation of authorization. Once a financial institution has
been notified that the consumer's authorization is no longer valid,
it must block all future payments for the particular debit
transmitted by the designated payee-originator. (However, see
comment 10(c)-3.) The institution may not wait for the
payee-originator to terminate the automatic debits. The institution
may confirm that the consumer has informed the payee-originator
of the revocation (for example, by requiring a copy of the
consumer's revocation as written confirmation to be provided
within 14 days of an oral notification). If the institution does not
receive the required written confirmation within the 14-day period,
it may honor subsequent debits to the account.
The agency’s commentary raises as many questions as it answers. Why the change in
terminology from “stop payment” in the first paragraph to “revocation of authorization” in the
second? Is the agency implying that a request by a consumer to stop payment is the same as
notification that her “authorization is no longer valid”? This is essentially what plaintiff in this
case is arguing. Or, is the agency saying that a consumer’s notice to her financial institution that
she has “revoked” her authorization is something different from a stop payment order? If the
latter, would this be a rational interpretation of the statute, which says nothing about
“revocation of authorization”?
Notwithstanding this interpretive fog, the agency’s commentary is clear about this: the
right to stop payment is a right that a consumer exercises directly with her financial institution
independently of any right of cancellation or revocation that she might have with respect to the
third party payee-originator. The payee, as the originator of the debit entries to the consumer’s
account, is not statutorily obliged to stop making debits simply because a consumer has notified
her bank to stop payments. In other words, the stop-payment rights described in the EFTA
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apply only at the transfer end of the electronic fund transfer process, not at the origination end.
To stop debits from being made at the origination end, the consumer must notify the payee. In
fact, a bank may lift a stop payment order if the consumer fails to confirm that she has notified
the payee that the payee no longer is authorized to originate transfers from her account.
Contrary to plaintiff’s position, the agency responsible for implementing the EFTA does see a
meaningful difference between a consumer’s statutory right to stop payment and her contractual
right to revoke her authorization for the payee to initiate debits.
Defendant’s EFT Authorization is entirely consistent with this understanding.
It
provides that plaintiff’s authorization would remain in effect unless plaintiff cancelled it, notified
defendant that she had changed banks, or paid off her debt. It says nothing about plaintiff’s
right to stop payment and it does not purport to describe plaintiff’s rights with respect to her
financial institution. When the EFT Authorization is read as a whole, it is plain that the 5-day
notification requirement for “cancellation” refers to plaintiff’s contractual right to revoke her
entire authorization, not to her co-existent and separate statutory right to ask her bank to stop
payments made pursuant to that authorization. As such, the EFT Authorization does not
“constitute a waiver” of plaintiff’s right to stop payment under § 1693e(a).
To the extent that the non-binding district court opinions in Baldukas and Murphy suggest
a different conclusion, I decline to afford them any weight. Although both courts offered a
thorough analysis of the claims brought under § 1693e(a), neither court offered an equally
satisfactory analysis of the plaintiffs’ § 1693l claims. Moreover, the provisions at issue in those
cases each contained wording that arguably implicated the plaintiffs’ statutory stop-payment
rights. Baldukas, 2012 WL 7681733, *1 (providing that authorization was “to remain in full
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force and effect until Loan Stop and the subject Financial Institution have received written
notification from me of its termination in such time and in such a manner as to afford Loan Stop
and the Financial Institution a reasonable opportunity to act on it.”); Murphy, 2014 WL
710959, *1 (stating that deductions would commence on date selected by plaintiff “and will
continue until your balance is paid in full or we receive your WRITTEN REQUEST to stop ACH
payments.”). Finally, both opinions were issued in the context of a motion to dismiss, not
summary judgment.
In sum, defendant’s EFT Authorization does not contain a provision that amounts to a
waiver of plaintiff’s statutory right to stop payment of a preauthorized electronic funds transfer
by contacting her financial institution. Plaintiff remained free to exercise that right regardless
of the EFT Authorization’s notice requirements concerning cancellation, which applied only to
plaintiff’s contractual arrangement with defendant.
ORDER
IT IS ORDERED that (1) Plaintiff’s motion for judgment on the pleadings, dkt. 20, is
DENIED; and (2) Defendant’s motion for summary judgment, dkt. 21, is GRANTED.
The clerk of court is directed to enter judgment in favor of defendant and close this case.
Entered this 21st day of April, 2015.
BY THE COURT:
/s
STEPHEN L. CROCKER
Magistrate Judge
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