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Sivongxay v. Medcah, Inc.

United States District Court, D. Hawaii

November 7, 2017

MARYANN SIVONGXAY, Plaintiff,
v.
MEDCAH, INC., Defendant.

          ORDER (1) GRANTING DEFENDANT'S MOTION FOR PARTIAL SUMMARY JUDGMENT AS TO VIOLATIONS 1-3 OF COUNT I AND AS TO VIOLATIONS 1-5 OF COUNT II; AND (2) DENYING PLAINTIFF'S MOTION FOR PARTIAL SUMMARY JUDGMENT AS TO VIOLATIONS 1-3 OF COUNT I

          Derrick K. Watson, United States District Judge

         INTRODUCTION

         Sivongxay alleges that MEDCAH, Inc., a debt collection agency, violated the federal Fair Debt Collection Practices Act (“FDCPA”) and related Hawaii Revised Statutes (“HRS”) by attempting to collect prejudgment interest on her unpaid debts at the statutory rate of 10% where the original contracts with her creditor-service providers either did not provide for any fixed rate of interest or provided an interest rate greater than the rate set forth in HRS § 478-2. Sivongxay further alleges that MEDCAH's debt collection practices were false or deceptive due to its “confusing” account numbering system, whereby MEDCAH assigned its own account number and client reference number to her unpaid debts, and that MEDCAH improperly reported false amounts due on the accounts to a credit bureau.

         Because MEDCAH applied and attempted to collect a 10% per year rate of interest on Sivongxay's unpaid debts to her original creditors, as authorized by the service provider agreements and as permitted under the state's interest laws, MEDCAH is entitled to summary judgment on all of Plaintiff's interest-related claims. MEDCAH has also met its burden on summary judgment with respect to Sivongxay's claims that both MEDCAH's account numbering system and its credit reporting practices violated federal or state law. Consequently, because MEDCAH is entitled to summary judgment on Violations 1-3 of Count I and Violations 1-5 of Count II of the Amended Complaint, the Court GRANTS MEDCAH's Motion for Partial Summary Judgment (Dkt. No. 44) and DENIES Sivongxay's Motion for Partial Summary Judgment (Dkt. No. 46) for the reasons detailed below.[1]

         BACKGROUND

         I. Factual Background

         MEDCAH was retained by Waianae Coast Comprehensive Health Center, Pacific Radiology Group, Inc., The Radiology Group, Oceanic Time Warner Cable nka Spectrum, and Cardiology Associates, Inc. to collect more than twenty of Sivongxay's unpaid debts related to medical and utility services. On April 27, 2015, MEDCAH sent Sivongxay several collection letters identifying Waianae Coast Comprehensive Health Center as the original creditor, listing a “MEDCAH account #” as well as a “creditor account #, ” and providing the account balance, interest due, and total balance due to MEDCAH. See Am. Compl. ¶¶ 8-30, Ex. 1 (4/27/15 Collection Letters), Dkt. No. 28-1.

         On or around December 18, 2015, [2] MEDCAH sent Sivongxay an account summary setting forth balances owed on MEDCAH accounts assigned from creditors Waianae Coast Comprehensive Health Center, Pacific Radiology Group, The Radiology Group, Oceanic Time Warner Cable, and Cardiology Associates, and which included MEDCAH's addition of interest and fees to the unpaid accounts. See Am. Compl. ¶ 31, Ex. 2 (12/18/15 Account Summary), Dkt. No. 28-2.[3] For each account balance listed, the December 18, 2015 communication identified the name of the original creditor, listed a “MEDCAH account #” as well as a “creditor account #, ” and provided the account balance, interest due, and total balance due to MEDCAH. Id.

         Sivongxay made no payments to MEDCAH in response to these communications and, in January or February of 2016, MEDCAH reported Sivongxay's principal outstanding balance owed to her original creditors to Experian, a consumer credit reporting agency. Am. Compl. ¶¶ 32-33. Sivongxay pulled her Experian credit history on March 27, 2016, and alleges that the credit report shows MEDCAH reporting “to Experian that Plaintiff owed a different and greater amount than what Ms. Sivongxay actually owes, ” Am. Compl. ¶ 36, despite the undisputed fact that MEDCAH reported the same principal amounts to Experian listed on the account summary received by Sivongxay on December 18, 2015. See, e.g., Pl.'s CSOF ¶ 3, Dkt. No. 47 (“Despite no payments being made, Defendant reported that only the principal balances were owed [in the] Experian Report in January and/or February 2016.”); MEDCAH Reply and Obj. to Pl.'s CSOF ¶ 3, Dkt. No. 66 (“The principal amount listed in the account summary is the same as the principal amount reported to the credit bureau.”).

         Sivongxay disputed the unpaid amounts and requested verification from MEDCAH sometime in June 2016. Am. Compl. ¶ 42. She received a June 24, 2016 letter in response, informing her that “[i]nterest accrues daily on all accounts to the extent allowed by law, ” with an attached list of all outstanding accounts as of that date. Am. Compl. ¶¶ 43-48, Ex. 4 (6/24/16 Letter), Dkt. No. 28-4.[4] The June 24, 2016 letter includes additional “supportive original creditor documents, ” which Sivongxay alleges do not “show the imposition of any interest to the alleged accounts by the original creditors.” Am. Compl. ¶¶ 50-51.

         MEDCAH's President and Owner, Genevieve Freeman, attests that for each of Sivongxay's unpaid accounts, MEDCAH applied an annual interest rate of 10% under HRS § 478-2 because the underlying agreements documenting the debts either do not state a fixed interest rate or state an interest rate greater than 10% per annum. Decl. of Genevieve Freeman ¶¶ 7-8. For example, the terms and conditions of Sivongxay's Oceanic Time Warner Cable services agreement provide, in part, “[w]e are entitled to charge you interest on past due amounts, ” but the agreement does not specify the rate of interest. Freeman Decl. ¶¶ 9-10 (citing Ex. E, Dkt. No. 41 at 4- 20). The terms and conditions of services with Pali Momi Medical Center, applicable to amounts owed to Pacific Radiology Group and The Radiology Group, likewise state: “Should the account be referred to an attorney or collection agency for collections, I agree to pay any reasonable attorney's fees, collection expenses and interest at the statutory rate on all delinquent accounts whether or not the account is referred to a collection agency[, ]” but the terms do not state a fixed rate of interest. Freeman Decl. ¶¶ 12-13 (citing Ex. E, Dkt. No. 41 at 21-28). Nor does Sivongxay's Waianae Coast Comprehensive Health Center patient registration form provide a specific interest rate. Freeman Decl. ¶ 14 (citing Ex. E, Dkt. No. 41 at 28).

         Cardiology Associates was the only one of Sivongxay's creditors to specify an interest rate in the underlying services agreement: “a late monthly fee of 1.5% or 50 cents minimum [is] charged to all accounts past 60 days.” Freeman Decl. ¶ 15 (citing Ex. E, Dkt. No. 41 at 2). Although the physician services agreement provided for the late monthly fee of 1.5% (or an annual interest rate of 18%), MEDCAH instead assessed a lower rate of 10% per annum on Sivongxay's unpaid Cardiology Associates debt. Freeman Decl. ¶ 7.

         Sivongxay asserts that when her accounts were consolidated for collection on behalf of the original creditors, MEDCAH began charging 10% on all of the accounts, notwithstanding the service providers' failure to do so. She notes that MEDCAH added this interest to her account balances, and intended to retain any such interest collected, rather than remitting it to the original creditor. According to Freeman, MEDCAH's President, when it collects payment and interest from a debtor, MEDCAH posts the payment to the debtor's account, remits the negotiated amount to its client, and keeps the interest and its commission fee. Pl.'s Ex. A, 8/2/17 Freeman Dep. Tr. at 79-80, Dkt. No. 46-1. If the debtor instead repays the principal amount to the original creditor, MEDCAH writes off the unpaid interest and does not make further attempts to collect from the debtor. 8/2/17 Freeman Dep. Tr. at 78.

         II. Procedural Background

         Plaintiff filed her Complaint on July 28, 2016, alleging multiple violations of the FDCPA, 15 U.S.C. §§ 1692e and 1692f, and Hawaii's Unfair or Deceptive Acts and Practices Act. Dkt. No. 1. Sivongxay filed an Amended Complaint on July 5, 2017, including new claims that MEDCAH attempted to collect the debts after being served with the initial Complaint by calling her directly, despite knowing that she was represented by legal counsel, in violation of 15 U.S.C. § 1692c(a)(2) and HRS § 443B-19(5). Am. Compl. ¶¶ 85-89, 126-29, Dkt. No 28. The Amended Complaint includes two Counts for violations of the FDCPA and HRS, with each Count broken down into separately numbered violations, summarized as follows:

         Count I (FDCPA Violations):

1. False or Misleading Representations: Demanding Interest and Assigning New Account Numbers in violation of Section 1692e
2. False or Misleading Representations: Demanding Interest in violation of Section 1692e(2)
3. Collection of Illegitimate Interest: in violation of Section 1692(f)(1)
4. Communications After Attorney Representation: in violation of Section 1692c(a)(2)

         Count II (HRS Violations):

1. False or Misleading Representations: Demanding Interest in violation of HRS § 443B-18(5)
2. False or Misleading Representation: Demanding Fees and Interest in violation of HRS § 443B-18(8)
3. Use of Unfair Practices In Attempt to Collect a Debt: Demanding Fees and Interest in violation of HRS § 443B-19(4)[5]
4. Use of Unfair Practices In Attempt to Collect a Debt: Demanding Fees in violation of HRS § 443B-19(3)
5. Use of Unfair Practices In Attempt to Collect a Debt: Demanding Fees and Interest in violation of HRS § 443B-19(4)
6. Use of Unfair or Unconscionable Means In An Attempt to Collect a Debt: Contacting a Represented Debtor in ...

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