In Kennedy v. CompuCredit Holdings Corp., — F.Supp.2d —-, 2014 WL 1284495 (M.D.Fla. 2014), Judge Adams found that an FDCPA Plaintiff stated a claim based on the theory that a Debt Buyer’s “Fresh Start” program violated the FDCPA since participation in the Program was conditioned on waiving certain rights available under the FDPCA, such as debt validation.
Plaintiff Kennedy failed to pay $561.25 in consumer debt. Her account was charged off and sold to Defendant Jefferson Capital Systems, LLC (Jefferson Capital). On October 24, 2011, Jefferson Capital sent Plaintiff a letter (Offer Letter) giving her the opportunity to pay down the debt while at the same time qualifying for a new credit card through its Fresh Start Solution Program (Program). This workout plan allows a consumer to pay down debt for a discounted amount and potentially qualify for an unsecured credit card through Mid America Bank and Trust Company (Mid America Bank or Bank). The card is subject to a Bank Credit Card Agreement (Credit Card Agreement). ¶ According to Plaintiff, “at the time of the October 2011 Offer Letter, Plaintiff’s alleged debt was indisputably time-barred in Florida and could not be col-lected in a court of law. Nonetheless, the Offer Letter advised Plaintiff that to participate in the Program, she had to pay at least $184.00 within eight months. If Plaintiff had made all of the requisite payments, she would have qualified for a credit card with a $250 limit,FN2 and the remainder of the alleged debt (minus the debt reduction credit) would be transferred to the new card. Thus, once the stale debt was transferred to the card, Plaintiff would have $42.00 in credit availa-ble, at a 19.99 percent interest rate. ¶ Notably, the Offer Letter advised Plaintiff that if she requested validation of her alleged debt pursuant to federal law, she would be ineligible for the Program, debt reduction credit, and credit card. Unbeknownst to Plaintiff, at the time she received the Offer Letter, Defendants could not have validated Plaintiff’s debt and did not have any documentation from the original creditor. That is, Defendants threatened to withhold the benefits of the Program, such as a partial waiver of the debt, if Plaintiff exercised her validation rights under federal law, while knowing that they would be unable [to] validate the debt if Plaintiff disputed its validity” (record citations omitted). ¶ Plaintiff enrolled in the Program and made four monthly payments. Defendants removed her from the Program when she stopped making payments. ¶ Plaintiff points out that Defendants’ Offer Letter contains the following provision: “If you take any steps to exercise any of the above-described [debt validation] rights within the 30–day period for dispute that begins with your receipt of this letter, then (I) the Program will no longer be available to you, (ii) your choice to participate, if any, will be cancelled …” (Dkt. 1, Exhibit A, p. 3) Plaintiff maintains this provision “overshadows” the notice provisions required by the FDCPA because Defendant conditions Program participation on a consumer’s waiver of rights to dispute the validity of the relevant debt. ¶ Defendant asserts that the Offer is based upon the expectation that the debt is valid and that the Program cannot be offered if the debt is disputed. Specifically, Defendant maintains that “if the debt is disputed, then there can be no meeting of the minds to proceed, and the offer necessarily must terminate …” ¶ The Court does not completely understand Defendant’s position. Regardless, this fact based determination is not appropriate for consideration at the motion to dismiss stage.
Among other things, the Court found that the defendant’s statements might qualify it as a Credit Repair Organization.
Defendants maintain all three Counts filed under the CROA should be dismissed because they do not fall within the definition of a Credit Repair Organization. As already discussed, Defendants are credit repair organizations if they (1) used any instrumentality of interstate commerce, or the mails, to (2) sell, provide, or perform (or represent that they could do so) (3) in return for valuable consideration (4) services or advice about services (5) for the express or implied purpose of improving a consumer’s credit record, credit history, or credit rating. ¶ Defendants argue that they do not provide a service, there is no charge imposed for the Program, the Offer is not advertised to improve a consumer’s credit record and the Offer Letter specifically denies that it is offering a credit repair program. ¶ Of course, the fact that Defendants disclaim Plaintiff’s assertion that they are credit repair organizations is not dispositive. Further, Plaintiff has alleged that “the overall net impression conveyed by Defendants’ Offer Letter and marketing material is that participation in the Program will provide a ‘Fresh Start’ to improve any consumer’s credit record, credit history, or credit rating.” Plaintiff also maintains that the monies paid to participate in the Program—payments on an uncollectible debt—qualify as fees. ¶ The Court agrees with Plaintiff that she has plausibly alleged that Defendants qualify as Credit Repair Organizations and, further, the actual determination on this point is fact-intensive and not suitable for the motion to dismiss stage.