In Martinez v. Integrated Capital Recovery, LLC, Judge Ishii of the District Court for the Eastern District of California granted the Defendants’ motion to dismiss two Fair Debt Collection Protection Act (“FDCPA”) claims brought by Brandon Martinez, Plaintiff, on behalf of a class of similarly situated individuals. In its ruling, the Court reiterated that a debt collector does not violate the FDCPA by taking collection actions permitted by the underlying contracts.
In that case, Plaintiff owed a debt to Build Card–Republic Bank. Build Card sold the debt to DNF, and DNF contracted with ICR to collect the debt from Plaintiff. ICR sent a debt collection letter to Plaintiff containing the following language regarding a service fee: “[a] service fee of $9.95 may be charged for payments if paying by Credit/Debit card depending on consumer’s location and applicable contractual documents.” Plaintiff filed suit, alleging Defendants violated the FDCPA, in reference to the service fee language, by causing him “informational injury” in using “false representation in collection of a debt” and “unfairly advis[ing] him that he owed more money than the amount of the debit.” DNF filed a Motion to Dismiss, arguing that Plaintiff lacked standing as he did not allege DNF sent the letter, that Plaintiff paid the service fee, or that Plaintiff made a credit or debit card payment to ICR.
The issue in the case was whether Plaintiff alleged violations of § 1692(e) or § 1692(f) of the FDCPA. If so, the Court reasoned, “the practices would themselves constitute a concrete injury.” Under § 1692(e), “[a] debt collector may not use any false, deceptive, or misleading representation or means in connection with the collection of any debt.” Under § 1692(f), “[a] debt collector may not use unfair or unconscionable means to collect any debt.” To determine whether a violation occurred, the Court reasoned it must apply the objective “least sophisticated debtor” analysis to determine whether a “hypothetical ‘least sophisticated debtor’ would likely be misled” by the statements.
Here, the Court held that Plaintiff failed to show a violation of his rights under the FDCPA because the FDCPA allows for collection of debts “permitted by contract or applicable law.” It reasoned that the service fee language of the letter ICF sent to Plaintiff simply stated the “same conditions and limitations on the collection of service fees that the FDCPA places on debt collection in general,” and that the “least sophisticated debtor” would not see the language as a “threat to impose unlawful fees or a false statement as to ICR’s power with respect to debt collections.” Accordingly, the Court granted the motion to dismiss. Further, the Court held that Plaintiff lacked Article III standing because he could not show harm traceable to Defendants’ conduct.