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Aldaya v. Encore Capital Group, Inc.

United States District Court, D. Hawaii

March 20, 2017

MARIVIC ALDAYA (fka Marivic Amistoso), et al., Plaintiff,


          Susan Oki Mollway United States District Judge.


         This putative class action asserts violations of the Fair Debt Collection Practices Act and Hawaii's consumer protection laws arising out of credit card debt sold to debt collectors. Defendants seek judgment on the pleadings pursuant to Rule 12(c) of the Federal Rules of Civil Procedure. The court grants Defendants' motion with respect to Plaintiff's claim based on allegedly confusing account numbers, as well as with respect to a claim Plaintiff offered to withdraw (i.e., the claim arising out of Defendants' alleged failure to pay Hawaii's general excise taxes). The court denies the remainder of the motion.

         II. BACKGROUND.

         On July 22, 2016, Plaintiff Marivic Aldaya filed a First Amended Class Action Complaint denominated as a class action. The First Amended Complaint asserts claims under the Fair Debt Collection Practices Act, Hawaii's statutory prohibition against unfair or deceptive acts or practices, and Hawaii's statutory prohibition against the use by collection agencies of fraudulent, deceptive, or misleading misrepresentations, or unfair or unconscionable means of collecting or attempting to collect debts. See ECF No. 33.

         This case arises out of a credit card debt incurred for personal, family, or household use that Aldaya originally owed HSBC Bank Nevada, N.A. See First Amended Complaint ¶¶ 12, 18, ECF No. 33, PageID # 272-73. The First Amended Complaint's allegations concerning the credit card debt are minimal. No credit card agreement is attached to or described in the First Amended Complaint. Nor is the exact amount of the alleged debt clearly established in it.

         This court takes judicial notice of Aldaya's Equifax credit report, attached as Exhibit 6 to the First Amended Complaint, which shows that Aldaya had a $600 credit limit with HSBC. See ECF No. 33-6, PageID # 325. According to the same report, Aldaya first failed to make payments on her account in February 2010. Id., PageID 326. The credit report indicates that HSBC eventually “charged off” $546 of debt. Id. The First Amended Complaint alleges that either $546 or $600 “was the amount of the alleged debt sold by HSBC.” ECF No. 33, PageID # 294.

         According to Paragraph 107 of the First Amended Complaint, federal regulations require a “charge off” when a debt is 180 days overdue. Id. According to Equifax's glossary of terms, a “charge off” is an

[a]ccounting term to indicate the creditor does not expect to collect a balance owing and chooses to transfer the account to an accounting category such as “bad debt” or “charged to loss”. These accounts are usually turned over to collection agencies. This is the most adverse status reported on accounts. f-credit-terms (last visited February 21, 2017). Aldaya alleges that her debt was “charged off” in March 2011. ECF No. 33 ¶ 109, PageID # 294.

         Aldaya says her charged off credit card debt was at some point “assigned” to Defendants Midland Funding, LLC, and Midland Credit Management, Inc. See First Amended Complaint ¶¶ 13, 17, ECF No. 33, PageID # 272. Midland Funding is allegedly Defendant Encore Capital Group, Inc.'s wholly owned subsidiary. Id. ¶ 9, PageID # 271. The First Amended Complaint has no allegations concerning whether the Midland entities are registered with the State of Hawaii as debt collectors, but Aldaya conceded at the hearing on the present motion that they are so registered. Aldaya represented, however, that the parent company, Encore, is not so registered. Whether any company is registered as a debt collector is not relevant to the present motion. Aldaya says that neither of the Midland entities pays general excise taxes in Hawaii. See ECF No. 33 ¶¶ 182-84, PageID #s 308-09.

         The Equifax credit report attached to the First Amended Complaint shows that Aldaya owed the following balances on her account:

August 2013

$1, 304

September 2013

$1, 314

December 2013

$1, 337

January 2014

$1, 345

February 2014

$1, 357

March 2014

$1, 365

May 2014

$1, 383

June 2014

$1, 388

August 2014

$1, 406

October 2014

$1, 424

December 2014

$1, 437

January 2015

$1, 439

February 2015

$1, 439

March 2015

$1, 439

April 2015

$1, 439

May 2015

$1, 439

         ECF No. 33-6, PageID #s 327-29. The uneven monthly totals suggest that a variable interest rate might have been assessed. There is no explanation as to how Aldaya's debt went from the charge off amount of $546 in November 2010 to $1, 304 in August 2013, which appears to be when Midland first reported to Equifax that Aldaya owed it money. At most, the letter of May 15, 2015, indicates a “Previous Balance” of $1, 026.59 with “Accrued Interest” of $412.80, for a total of $1, 439.39. ECF No. 33-1, PageID # 315.

         The record does not contain allegations concerning Midland's initial communication with Aldaya or allege that Aldaya failed to receive the validation disclosures required by the Fair Debt Collection Practices Act, 15 U.S.C. § 1692g(a).

         A. Letter Dated January 29, 2015.

         The earliest communication attached to the First Amended Complaint is a letter from Midland Credit Management, Inc., to Aldaya dated January 29, 2015. See ECF No. 33-2, PageID #s 316-17. In its top right corner, this letter prominently identifies the original creditor as HSBC and lists the original HSBC account number, redacted in the exhibit to include only the last four digits, 4087. Id. PageID # 316. There is no dispute that the original copy of this letter that Aldaya received (and all other letters attached to the First Amended Complaint) listed the complete original HSBC account number.

         The letter noted a new Midland Credit Management account number of 8538045269. Id. The letter stated that the balance owed was $1, 439.39, but that Aldaya could pay off the loan for $863.63, in which event Midland would report that the account was “Paid in Full for less than the full balance.” Id. The letter indicated that it was a communication from a debt collector and that any information obtained would be used to collect the debt. Id., PageID 317. It then listed various state rights, most applicable to people living in states other than Hawaii. Id.

         A very similar letter was sent to Aldaya by Midland Credit Management in March 2015. See ECF No. 33-3, PageID #s 318-19.

         B. Letter Dated April 27, 2015.

         In a letter to Aldaya dated April 27, 2015, Midland Credit Management, Inc., explained that Midland Funding LLC owned the balance of $1, 439.39 that Aldaya had allegedly owed to HSBC. ECF No. 33-4, PageID # 320. The letter acknowledged that Aldaya was disputing her debt and asked Aldaya's help to reach a quick resolution. Id. Like the January and March 2015 letters, the April 2015 letter prominently included Aldaya's original HSBC account number in its upper right corner. Id.

         The April 2015 letter appears to have been a response to Aldaya's assertion that the Midland entities' records were inaccurate:

We understand that you are disputing the accuracy of our records concerning the above referenced account. After reviewing the information you provided, as well as our account notes, and information provided by the previous creditor, we are unable to determine the nature of your dispute, and consequently deny that our records are inaccurate.
If you still believe the account information is inaccurate, please provide an explanation of why you believe it is inaccurate along with any documentation you have supporting this explanation. Upon receipt of this new ...

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