In Johnson-Morris v. Santander Consumer USA, Inc., 2016 WL 3671468, at *5-6 (N.D.Ill., 2016), Judge Kocoras denied an auto finance company’s motion to dismiss a Plaintiff’s FDCPA class action alleging that the Company kept a portion of “convenience fees” that were paid to pay-by-phone vendor.  The Plaintiff alleged:

Western Union allegedly “kept a portion of the fees paid by Plaintiff and Santander kept the remainder.” Id. at ¶ 33, “As such, the convenience fees that Plaintiff paid to make her Santander consumer debt payments exceeded any actual pass-through costs that Santander paid to third parties to process such payments.” Id. Count I of Johnson-Morris’s Complaint (which Santander now moves to dismiss) alleges that Santander’s collection of these “convenience fees” violated 15 U.S.C. § 1692f(1) of the FDCPA, “which prohibits debt collectors from collecting ‘any amount’ concerning a consumer debt unless such amount is ‘expressly authorized by the agreement creating the debt or permitted by law.’ ” Id. at ¶ 48. According to the Complaint, “the consumer debts owed by Plaintiff and the members of the Classes were, in effect, artificially enlarged, and they each paid and lost amounts of money above and beyond what they legally owed.” Id. at ¶ 50.

After concluding that the Plaintiff’s claim was not time barred under either the discovery rule or because of the pendency of other class actions under the American Pipe rule, the District Court denied the Motion to Dismiss.

Finally, Santander contends that, wholly apart from its potential untimeliness, Johnson-Morris’s FDCPA claim still “fails as a matter of law” because § 1692f(1) prohibits only fees “incidental to the principal obligation.” Dkt. 23, at 12; see also 15 U.S.C. § 1592f (prohibiting “(1) 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.”). To support this contention, Santander cites a recent decision from the Central District of California, Flores v. Collection Consultants of Cal., No. 14-0771, 2015 WL 4254032 (C.D. Cal. Mar. 20, 2015), which held that a $5 convenience fee did not violate § 1692f(1). “The majority of courts have determined, however, that similar flat transaction fees are incidental to the principal obligation, and thus, fall under the scope of the FDCPA.” See Wittman v. CB1, Inc., No. 15-105-BLG-BMM, 2016 WL 3093427, at *2 (D. Mont. June 1, 2016) (distinguishing Flores and citing cases). [FN 4  See, e.g., Weast v. Rockport Fin., LLC, 115 F. Supp. 3d 1018, 1021 (E.D. Mo. 2015); Quinteros v. MBI Assocs., Inc., 999 F. Supp. 2d 434, 438-39 (E.D.N.Y. 2014); Shami v. Nat’l Enter. Sys., No. 09-cv-722, 2010 WL 3824151, at *3-4 (E.D.N.Y. Sept. 23, 2010); Longo v. Law Offices of Gerald E. Moore Assocs., P.C., No. 04 C 5759, 2005 U.S. Dist. LEXIS 48493, at *13 (N.D. Ill. Feb. 3, 2005).]  Flores is also distinguishable from the present case in two important respects. Unlike Flores, where the charges at issue “did not inure benefits to the collector,” 2015 WL 4254032, at *9, Johnson-Morris alleges that the convenience fees Santander charged “exceeded any actual pass-through costs that Santander paid to third parties to process such payments,” Dkt. 14, ¶¶ 4, 33, and thus, “were used by Santander to turn a profit.” Dkt. 30, at 10. Additionally, whereas Flores noted that debtors were not “steered” to make credit card payments that would generate the fees at issue, id. at *10, Johnson-Morris alleges that “Santander often pushes consumers to pay through a Western Union service—which imposes large processing fees that are surreptitiously shared with Santander—even though other free methods of timely payment are in fact available.” Dkt. 14, ¶ 4. Johnson-Morris also alleges that “Santander has routinely represented that payment methods with convenience fees, processing fees, or other such fees were the only payment methods available for consumers to use to make timely payments on their personal debts, even when other no-cost or lower-cost payment methods were actually available.” Id. at ¶ 17. And further, that “Consumers complain about Santander’s fee-steering, but due to its other practices—such as imposing stiff late fees while taking up to two full business weeks to post payments—consumers feel compelled to pay Santander’s arbitrary fees anyways.” Id. at ¶ 18.  These facts alone require departure from Flores, just as other courts have held.5But also, Santander’s argument that its “convenience fees” are not “incidental” to the underlying debt is itself a departure from Seventh Circuit authority demonstrating that a charge is “incidental” to a debt within the meaning of § 1692f if it is incurred in connection with efforts to collect that debt, as was certainly the case here. See Shula v. Lawent, 359 F.3d 489, 493 (7th Cir. 2004) (“There is no doubt that the defendants’ claim for the payment of costs by Shula was ‘incidental’ to Shula’s alleged debt to the doctor….Had it not been for the suit against Shula to collect the debt he owed the doctor, no claim for costs would have arisen.”). Nor is Santander’s position strengthened by its repeated insistence that such fees are not “involuntary” and were instead “elected,” because the payment methods that generate such fees are not “the only payment means available.” Dkt. 23, at 11; Dkt. 31, at 10. “It is immaterial that the fee was optional and fully disclosed if the fee is impermissible altogether.” Acosta v. Credit Bureau of Napa County, No. 14 C 8198, 2015 WL 1943244, at *3-4 (N.D. Ill. Apr. 29, 2015). Thus, as other courts have concluded, “offering a payment option that does not violate the statute does not save offering a payment option that would violate the statute, as the later is still an attempt to collect a fee which is prohibited by the FDCPA.” Weast, 115 F. Supp. 3d at 1023. Accordingly, while Santander may indeed have meritorious arguments to support the permissibility of the convenience fees over which Johnson-Morris complains, those defenses must (as Santander acknowledges) await “a more developed factual record.” See Dkt. 23, at 12 n.6. At this stage of the proceedings, accepting Johnson-Morris’s allegations as true as the Court is required to do under Rule 12(b)(6), Santander’s motion to dismiss Johnson-Morris’s FDCPA claim must be denied