In Poghosyan v. First Fin. Asset Mgmt., No. 1:19-cv-01205-DAD-SAB, 2020 U.S. Dist. LEXIS 14137 (E.D. Cal. Jan. 27, 2020), Judge Drozd found that a plaintiff might be able to state a claim for improper debt collection under the CLRA.

Although the California Supreme Court has not yet addressed whether the CLRA applies to certain types of financial transactions such as debt collection, see, e.g., Underwood v. Future Income Payments, LLC, No. SACV171570DOCDFMX, 2018 WL 4964333, at *12 (C.D. Cal. Apr. 26, 2018) (discussing this in relation to lump sum loans that were repaid using borrowers’ pensions); Rex v. Chase Home Fin. LLC, 905 F. Supp. 2d 1111, 1156 (C.D. Cal. 2012) (noting the same with regards to mortgage loans and the activities involved in receiving and maintaining them), this court must apply “California law as we believe the California Supreme Court would apply it.” In re KF Dairies, Inc. & Affiliates, 224 F.3d 922, 924 (9th Cir. 2000). Defendant urges the court to find that debt collection is neither a good nor a service under the CLRA, citing the decisions in Fairbanks v. Superior Court, 46 Cal. 4th 56 (2009) and Berry v. American Express Publ’g, Inc., 147 Cal. App. 4th 224 (2007). In Fairbanks, the California Supreme Court declared that life insurance policies are not services as defined by the CLRA, and that ancillary services provided by life insurance providers do not bring such policies within the CLRA’s [*8]  coverage. 46 Cal. 4th at 61, 65. In Berry, a California Court of Appeal decided that “credit transactions separate and apart from any sale or lease of goods or services” are not covered by the CLRA. 147 Cal. App. 4th at 233. However, neither of these decisions precludes the possibility that debt collection—especially of debt related to a good or service—falls under the purview of the CLRA. Here, the collection of debt that plaintiff incurred in connection to a car rental (i.e. the short-term “lease” of a “tangible” “good” for “personal . . . purposes”) is distinguishable from insurance and credit cards.1 Cf. Fairbanks, 46 Cal. 4th at 61, 65 (noting that life insurance policies are “not work or labor, nor is it related to the sale or repair of any tangible chattel”); Berry, 147 Cal. App. 4th at 223 (holding that “the issuance of a credit card [even one with an annual fee] was not ‘a transaction intended to result or which results in the sale or lease of goods or services to [a] consumer'”). Moreover, plaintiff alleges that FFAM refused to notify Enterprise, the car rental agency that plaintiff had been trying to rent a car from, that his Debt had been settled unless he paid the Disputed Debt. It is reasonable to infer at this stage of the litigation [*9]  that FFAM intended to leverage plaintiff’s desire to rent a car to coerce him into paying the Disputed Debt; such a transaction could be viewed as one that is either indirectly “intended to result,” or incidentally “results in the sale or lease of goods or services[.]” Cal. Civ. Code § 1770(a). Keeping in mind the CLRA’s statutory command that it shall be “liberally construed and applied” to promote its purpose of protecting consumers against unfair and deceptive business practices, California Civil Code § 1760, the court concludes that the CRLA applies to the instance of debt collection at issue in this case. See Hernandez v. Hilltop Fin. Mortg., Inc., 622 F. Supp. 2d 842, 849 (N.D. Cal. 2007) (“In similar matters involving financial transactions, the California Supreme Court and intermediate appellate divisions have found the CLRA applicable.”) (listing cases involving individual retirement accounts, automobile loans, and mortgage financing services). Dismissal with prejudice is therefore inappropriate; plaintiff’s FAL and CLRA claims will instead be dismissed with leave to amend.

The District Court also held that the FDCPA/Rosenthal Act claim was subject to Rule 9(b)’s heightened pleading standard because the claim was grounded in fraud.

As a preliminary matter, the court notes that plaintiff’s RFDCPA and [*18]  FDCPA claims are subject to Rule 9(b)’s heightened pleading standards because the conduct that serves as the basis of plaintiff’s RFDCPA and FDCPA claims is also the basis of his fraud claims and so “sound in fraud.” See Kearns, 567 F.3d at 1125 (“A plaintiff may allege a unified course of fraudulent conduct and rely entirely on that course of conduct as the basis of that claim. In that event, the claim is said to be ‘grounded in fraud’ or to ‘sound in fraud,’ and the pleading . . . as a whole must satisfy the particularity requirement of Rule 9(b).”). Because of that, plaintiff’s RFDCPA and FDCPA claims fail for the same reasons that his fraud claim fails