In a putative class action, Santoro v. State Farm Mutual Automobile Insurance Co., 2020 WL 6586630, 19-CV-9782 (CS) (S.D.N.Y. Nov. 9, 2020), District Court Judge Cathy Seibel dismissed the plaintiff’s complaint under Rule 12(b)(6) for failure to state a violation of New York General Business Law (“GBL”) § 399-zzz, which is enforceable through GBL § 349 (the “Deceptive Practices Act”).

The plaintiff’s claim was based on GBL § 399-zzz(1), which prohibits businesses, including auto finance lenders and auto insurers, from “charg[ing] a consumer an additional rate or fee or a differential in the rate or fee associated with payment on an account when the consumer chooses to pay by United States mail or receive a paper billing statement.” The law further provides that “[t]his subdivision shall not be construed to prohibit a [business] from offering consumers a credit or other incentive to elect a specific payment or billing option.” N.Y. Gen. Bus. Law § 399-zzz(1). Section 399-zzz(2) provides that “[e]very violation of this section shall be deemed a deceptive act and practice subject to enforcement under article twenty-two-A of this chapter.” Id. § 399-zzz(2). Article 22-A, in turn, includes New York’s Deceptive Practices Act, which prohibits “[d]eceptive acts or practices in the conduct of any business, trade or commerce or in the furnishing of any service.” Id. § 349(a). Thus, the Southern District determined that viability of the plaintiff’s claim depended on the meaning of § 399-zzz(1).

In the complaint, the plaintiff alleged that for many years she insured her vehicles through the defendant, State Farm. Under her insurance policies, the plaintiff opted for an installment payment plan, the terms of which were set forth in a payment plan agreement. The agreement provided three options: (i) “Non Recurring Accounts,” which are charged a $3 fee; (ii) “Recurring Accounts Print Billing Notice,” which are charged a $2 fee; and (iii) “Recurring Accounts,” which are charged a $1 fee. Thus, under the terms of the payment plan agreement, installment payors who choose automatic electronic payments pay less than installment payors who pay by check, and automatic electronic installment payors who eschew a monthly paper bill pay less than those who receive such a bill. In this case, the plaintiff elected the “Non-Recurring Account” option, a non-automatic payment mode under which she received monthly paper bills and paid in installments by check, including paying a $3 service fee with each installment payment.

The plaintiff alleged that defendant violated New York State law, particularly GBL § 399-zzz(1) and the Deceptive Practices Act by charging members of the proposed class, its insurance customers, “an additional or differential fee to receive a paper billing statement and/or pay by United States mail.” However, the District Court disagreed, holding that the defendant’s installment plan fees do not violate § 399-zzz(1) because they are based on a permissible incentives for which the statute expressly provides. Specifically, the court held that under a plain reading of the payment plan agreement, the $3 charge was the default fee and the $1 charge associated with the optional recurring accounts was a permissible incentive under GBL § 399-zzz(1). Further, the court noted that defendant stated on its website that selecting the paperless option might result in a “reduction” of the installment fee. The District Court concluded therefore that plaintiff’s characterization of the additional charges/fees as unlawful was conclusory and not factually supported, mandating dismissal of the complaint.