Mann v. National Asset Management Enterprises, Inc. et al Document 13: Response to Motion

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1:04-cv-01304-JBM-JAG # 13 Page 1 of 17 E-FILED Tuesday, 09 November, 2004 03:13:17 PM Clerk, U.S. District Court, ILCD IN THE UNITED STATES DISTRICT COURT FOR THE CENTRAL DISTRICT OF ILLINOIS PEORIA DIVISION KAY F. MANN, Plaintiff, v.

NATIONAL ASSET MANAGEMENT
ENTERPRISES, INC.;
LAW OFFICES OF GERALD E. MOORE
& ASSOCIATES, P.C.,

Defendants.

04 C 1304

Judge McDade Magistrate Gorman PLAINTIFF’S RESPONSE TO DEFENDANTS’ MOTION TO DISMISS Defendant debt collectors charge a check by phone “convenience fee” of $7.50 per transaction for payment by phone. (Exhibits A and B). Defendants get bank account information from the debtor, create a check, sign it as agent of the debtor, and submit it through normal banking channels. For performing this “service” -- which benefits defendants by securing more prompt payment -- defendants add $7.50 “Convenience” fees. (Exhibits A and B). The explanation for the fee is explicit that it is collected “in addition to” the amount owed, and that “the fee [would] not be credited to [the consumers’] outstanding balance.” (Exhibits A and B).

I.

STATEMENT OF FACTS

On or about February 6, 2004, plaintiff was sent a form collection letter on the letterhead of defendant National Asset Management Enterprises, Inc. (“NAM”), and on May 9, 2004, plaintiff was sent a similar letter by Gerald E. Moore & Associates (“Moore”). Copies are attached as Exhibits A and B. (Cmplt., ¶¶15,19). Exhibits A and B sought to collect a credit card debt incurred for personal, family or household purposes. (Cmplt., ¶¶ 16, 20).

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The letters state that ““If you have elected to make payments via our ‘check by phone’ system, our office charges a convenience fee of $7.50 per transaction for this service. This fee is in addition to your actual payment and the fee will not be credited to your outstanding balance.” (Cmplt., ¶¶18, 22).

II.

THE FAIR DEBT COLLECTION PRACTICES ACT

The FDCPA states that its purpose, in part, is "to eliminate abusive debt collection

practices by debt collectors". 15 U.S.C. §1692(e). It is designed to protect consumers from unscrupulous collectors, whether or not there is a valid debt. Mace v. Van Ru Credit Corp., 109 F.3d 338 (7th Cir. 1997); Keele v. Wexler, 149 F.3d 589, 594 (7th Cir. 1998); Baker v. G.C. Services Corp., 677 F.2d 775, 777 (9th Cir. 1982); McCartney v. First City Bank, 970 F.2d 45, 47 (5th Cir. 1992). The FDCPA broadly prohibits unfair or unconscionable collection methods; conduct which harasses, oppresses or abuses any debtor; and any false, deceptive or misleading statements, in connection with the collection of a debt; it also requires debt collectors to give debtors certain information. 15 U.S.C. §§1692d, 1692e, 1692f and 1692g.

In enacting the FDCPA, Congress recognized the -universal agreement among scholars, law enforcement officials, and even debt collectors that the number of persons who willfully refuse to pay just debts is minuscule [sic]. . . . [T]he vast majority of consumers who obtain credit fully intend to repay their debts. When default occurs, it is nearly always due to an unforeseen event such as unemployment, overextension, serious illness, or marital difficulties or divorce.

S. Rep. No. 382, 95th Cong., 1st Sess. 3 (1977), reprinted in 1977 USCCAN 1695, 1697. The Seventh Circuit has held that whether a debt collector's conduct violates the FDCPA should be judged from the standpoint of an "unsophisticated consumer." Avila v. Rubin, 84 F.3d 222 (7th Cir. 1996); Gammon v. GC Services, LP, 27 F.3d 1254 (7th Cir. 1994). The

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standard is an objective one -- whether the plaintiff or any class member was misled is not an element of a cause of action. "The question is not whether these plaintiffs were deceived or misled, but rather whether an unsophisticated consumer would have been misled." Beattie v. D.M. Collections, Inc., 754 F.Supp. 383, 392 (D.Del. 1991).

Statutory damages are recoverable for violations, whether or not the consumer proves actual damages. Bartlett v. Heibl, 128 F.3d 497, 499 (7th Cir.1997); Baker, 677 F.2d at 780-1; Woolfolk v. Van Ru Credit Corp., 783 F. Supp. 724, 727 and n. 3 (D. Conn. 1990); Cacace v. Lucas, 775 F. Supp. 502 (D. Conn. 1990); Riveria v. MAB Collections, Inc., 682 F. Supp. 174, 177 (W.D.N.Y. 1988); Kuhn v. Account Control Technol., 865 F. Supp. 1443, 1450 (D.Nev. 1994); In re Scrimpsher, 17 B.R. 999, 1016-7 (Bankr.N.D.N.Y. 1982); In re Littles, 90 B.R. 669, 680 (Bankr. E.D.Pa. 1988), aff'd as modified sub nom, Crossley v. Lieberman, 90 B.R. 682 (E.D.Pa. 1988), aff'd, 868 F.2d 566 (3d Cir. 1989).

The FDCPA encourages consumers to act as "private attorneys general" to enforce the public policies expressed therein. Crabill v. Trans Union, L.L.C., 259 F.3d 662, 666 (7th Cir. 2001); Baker, 677 F.2d at 780; Whatley v. Universal Collection Bureau, 525 F. Supp. 1204, 1206 (N.D.Ga. 1981). "Congress intended the Act to be enforced primarily by consumers . . . ." FTC v. Shaffner, 626 F.2d 32, 35 (7th Cir. 1980). "Congress painted with a broad brush in the FDCPA to protect consumers from abusive and deceptive debt collection practices, and courts are not at liberty to excuse violations where the language of the statute clearly comprehends them . . . ." Pipiles v. Credit Bureau of Lockport, Inc., 886 F.2d 22, 27 (2d Cir. 1989).

Plaintiff need not prove intent, bad faith or negligence in an FDCPA case. The "FDCPA is a strict liability statute," and "proof of one violation is sufficient to support summary judgment for the plaintiff." Cacace v. Lucas, 775 F. Supp. at 505. Accord, Turner v. J.V.D.B. &

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Associates, Inc., 330 F.3d 991, 995 (7th Cir. 2003); Gearing v. Check Brokerage Corp., 233 F.3d 469, 472 (7th Cir.2000).

III.

ADDITION OF FEES AND CHARGES UNDER THE FDCPA

Section 1692f of the FDCPA prohibits “unfair or unconscionable means to collect

or attempt to collect any debt. Without limiting the general application of the foregoing, the following conduct is a violation of this section: . . . (1) [t]he 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". The FDCPA also prohibits “[t]he false representation of . . . (A) the character, amount, or legal status of any debt; or

(B) any services rendered or compensation which may be lawfully received by any debt collector for the collection of a debt”. 15 U.S.C. §1692e(2).

The Federal Trade Commission has interpreted this language to mean that “A debt collector may attempt to collect a fee or charge in addition to the debt if either (a) the charge is expressly provided for in the contract creating the debt and the charge is not prohibited by state law, or (b) the contract is silent but the charge is otherwise expressly permitted by state law. Conversely, a debt collector may not collect an additional amount if either (a) state law expressly prohibits collection of the amount, or (b) the contract does not provide for collection of the amount and state law is silent." Federal Trade Commission Staff Commentary on the Fair Debt Collection Practices Act, 53 Fed.Reg. 50,097 at 50,108 (Dec. 13, 1988).

This is the rule followed by the courts. “Whether the collection of a debt violates §1692f(1) depends solely on two factors: (1) whether the debt agreement explicitly authorizes the charge; or (2) whether the charge is permitted by law.” Turner v. J.V.D.B. & Assocs., Inc., 330 F.3d 991, 996 (7th Cir. 2003). “Under this provision, it is unconscionable for a debt collector to collect

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any amount in excess of the principal amount of a loan, including collection charges, unless these charges are authorized expressly by the terms of the agreement creating or evidencing the debt or unless the charges are authorized explicitly by applicable state law." Patzka v. Viterbo College, 917 F.Supp. 654, 658 (W.D. Wisc. 1996)(emphasis added). See also, West v. Costen, 558 F.Supp. 564 (W.D.Va. 1983); Tuttle v. Equifax Check, 190 F.3d 9, 13 (2nd Cir. 1999); Pollice v. National Tax Funding L.P., 225 F.3d 379, 408 (3rd Cir.2000). The $7.50 is a collection charge imposed for collection of the debt in a certain way, and is therefore “unconscionable,” and illegal. Examples of charges “authorized explicitly by applicable state law” are court costs and 5% statutory interest on debts where no rate is agreed upon, 815 ILCS 205/5. Defendants claim that §1692f(1) allows a debt collector to enter into a “subsequent agreement, “ other than the one creating the debt, to perform “services” for the debtor and charge a fee therefor, and that their “processing and handling fee” is permissible under such rationale. Both under Illinois law and the FDCPA, defendants’ processing and handling fee of $7.50 per transaction for payment by phone is illegal.

A.

ILLINOIS DEBTORS

With respect to plaintiff and other Illinois residents, Illinois law clearly and

unequivocally prohibits a debt collector attempting to collect a consumer debt from entering into a purported agreement with the debtor requiring payment of “service fees”. Since “a debt collector may not collect an additional amount if . . . state law expressly prohibits collection of the amount,” FTC Commentary, supra, defendants violate the FDCPA by charging Illinois consumers fees pursuant to any purported subsequent agreement with defendants.

The Illinois Collection Agency Act, 225 ILCS 425/9(a)(29), makes unlawful “Collecting or attempting to collect any interest or other charge or fee in excess of the actual debt

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or claim unless such interest or other charge or fee is expressly authorized by the agreement creating the debt or claim unless expressly authorized by law or unless in a commercial transaction such interest or other charge or fee is expressly authorized in a subsequent agreement. . . .” (Emphasis added) Defendants’ argument that “[c]ertainly, Illinois law allows two parties, in this case the consumer and the debt collector, to voluntarily contract for a service in exchange for a fee,” (Mtn at 5), is directly contrary to the Illinois Collection Agency Act, quoted above. Defendants, of course, do not cite this applicable law, which renders their argument frivolous. Nor is it difficult to see why Illinois might prohibit such “contracts.” For example, the Telemarketing Sales Rule, 16 C.F.R. § 310.3(a)(3), promulgated by the FTC, acknowledges the prospect for fraud when third parties have access to consumers’ checking information, making it an unfair practice for telemarketers to collect payments by phone unless there is express written or recorded audio authorization given by the consumer.

It is uncontested that defendants are attempting to collect a charge or fee in excess of the actual debt or claim. There is no suggestion that the charge or fee is authorized by the agreement creating the debt. Defendants do not identify any statute or regulation under which it might be “expressly authorized by law.” The statutory language “unless in a commercial transaction such interest or other charge or fee is expressly authorized in a subsequent agreement” both (a) makes clear that charges or fees purportedly authorized by subsequent agreements are encompassed within the basic prohibition of any “charge or fee in excess of the actual debt or claim” and (b) forbids a subsequent agreement for any charge or fee in a consumer transaction. Since “a debt collector may not collect an additional amount if . . . state law expressly prohibits collection of the amount,” FTC Commentary, supra, no Illinois consumer may be charged fees pursuant to any purported subsequent agreement with defendants.

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B.

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ALL DEBTORS

Furthermore, even apart from Illinois law, the FDCPA itself, properly construed,

forbids defendants’ fees in all cases. Section 1692f(1) prohibits "[t]he 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." A “subsequent agreement” is not “the agreement creating the debt.” Under the plain language of the statute, any charge which can only be justified by resort to an agreement other than the agreement creating the debt is forbidden.

The Third Circuit has expressly rejected the argument that a debtor can enter into an agreement with a debt collector that justifies the imposition of fees not provided for in the underlying obligation. In Pollice v. National Tax Funding, supra, 225 F.3d 379, 408 (3d Cir. 2000), defendants had purchased delinquent water and sewer bills and entered into payment plans with the debtors at rates of interest prohibited by state law. In finding a §1692f(1) violation, the Third Circuit expressly held that an FDCPA “debt collector” could not rely on a post-default agreement between the debt collector and the debtor to justify exaction of amounts not authorized by the agreement creating the debt:

Under the interpretation set forth in the Staff Commentary and Tuttle, the defendants presumably have violated section 1692f(1) regardless of the presence of any agreement authorizing the rates of interest and penalties, because state law specifically prohibits charging interest in excess of ten percent on the assigned claims. In any event, we do not believe the rates defendants charged are "expressly authorized by the agreement creating the debt." Although the agreement need not be in writing, we believe the term "expressly authorized by the agreement creating the debt" requires some actual knowledge or consent by the consumer during the course of the transaction which gives rise to the debt. As we have indicated, the "debts" which defendants have undertaken to collect are homeowners' original obligations arising out of their subscription to water and sewer services. The "agreement creating the debt" therefore was the transaction between each homeowner and the relevant government entity relating to the provision of water and

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sewer services. Defendants do not contend that the interest and penalty rates were "expressly" set forth in these agreements or transactions, nor do they contend that homeowners actually consented to or were aware of the rates when they subscribed to the services. The most defendants can say is that the rates were made an implicit part of such transactions because they are set forth in municipal ordinances and resolutions. We do not believe this suffices. Nor can defendants rely on the payment plans, as the plans are not the "agreement creating the debt." Rather, as stated, the "debts" to which all of defendants' collection activities have been directed are the original water and sewer obligations, which arose out of the transactions between homeowners and the government entities.

Thus, we conclude that defendants have violated section 1692f(1) by collecting amounts not expressly authorized by the agreement creating the debt or permitted by law. (Emphasis added) Like their discussion of Illinois law, defendants again ignore all authority contrary to what they want the law to be. The correctness of the Third Circuit’s holding is shown by the fact that in at least two places the FDCPA explicitly allows otherwise-prohibited conduct where authorized by a “subsequent agreement” between the debtor and the debt collector. Sections 1692c(a) and 1692c(b) allow certain third party communications with “the prior consent of the consumer given directly to the debt collector . . . .” Congress thus knew how to authorize agreements between consumers and debt collectors when it desired to do so. It did so in enacting §§1692c(a) and (b).

Defendants’ argument would have the effect of inserting similar language in §1692f(1).

Defendants effectively ask the Court to rewrite §1692f(1) as prohibiting "[t]he

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, or is charged with the prior consent of the consumer given directly to the debt collector.” Of course, the italicized language was not actually included by Congress. Courts are not free to rewrite statutes in the guise of “statutory construction.” “We

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must faithfully apply the law as Congress drafted it. We should not disregard plain statutory language in order to impose on the statute what we may consider a more reasonable meaning.” Jenkins v. Heintz, 25 F.3d 536, 539 (7th Cir. 1994), aff’d, 514 U.S. 291 (1995). The reference to the “agreement creating the debt,” coupled with the omission of the “consent” language in §1692f(1) when it is present elsewhere in the statute, must be treated as Congressional prohibition of “subsequent agreements” between debt collectors and debtors for the collection of fees and charges not provided for in the agreement creating the debt. Aubert v. American General Finance, Inc., 137 F.3d 976 (7th Cir. 1998). “[W]here Congress uses a particular phrase in one section but omits it in another, the difference in language is presumed to be intentional. See Russello v. U.S., 464 U.S. 16, 21 (1983).” Deberry v. Sherman Hosp. Ass'n, 769 F. Supp. 1030, 1033 (N.D.Ill. 1991). In Aubert, the Court of Appeals rejected a similar argument that terms should be imported into the FDCPA, holding: “[O]ur role, when the language of a statute is plain, is to enforce that statute according to its terms. See, e.g., Central States v. Bell Transit Co., 22 F.3d 706, 710 (7th Cir. 1994). . . . [W]hile Congress prescribed two conditions for the exclusion of corporate affiliates under §1692a(6)(B), it did not prescribe the third condition that Aubert asks us to read into the statute. Should Congress desire to eliminate this loophole, it is, of course, free to amend the FDCPA and add conditions to the §1692a(6)(B) exclusion. We, however, do not enjoy that freedom. ‘We are bound by the particular rules enacted by Congress and are not free to carve out our own exceptions merely because we believe that they would best serve Congress' policies and goals.’ Central States, 22 F.3d at 710.” (Aubert, 137 F.3d at 979) Defendants also suggest that the FTC Commentary concerning the general language at the beginning of §1692f can somehow alter the specific statutory language of §1692f(1). Not only does the general language not purport to do so, but an administrative agency does not have the

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power to alter a a statute, Krzalic v. Republic Title Co., 314 F.3d 875 (7th Cir. 2002), particularly where, as here, the agency has no power to issue regulations “with respect to the collection of debts by debt collectors as defined in this subchapter.” 15 U.S.C. § 1692l(d).

In short, under the plain language of the FDCPA, defendants’ fee is prohibited. Defendants’ motion should be denied. The Court cannot allow fees to be imposed pursuant to an agreement between the debtor and the debt collector when Congress expressly limited §1692f(1) to the “agreement creating the debt” and intentionally omitted language about agreements between the debtor and the debt collector found elsewhere in the FDCPA.

C.

DEFENDANTS’ CASES

Defendants rely on three cases: an unreported, non-precedential Sixth Circuit case

that they do not disclose as such, Lee v. Main Accounts, Inc., 1997 U.S.App. LEXIS 27922 (6th Cir. Oct. 6, 1997), the district court decision in Lewis v. ACB Business Services, Inc., 911 F.Supp. 290 (S.D.Ohio 1996), and DuBois v. Ford Motor Credit Co., 276 F.3d 1019 (8th Cir. 2002). Mtn at 3-4. In DuBois, Ford Credit required that a debtor who had received a bankruptcy discharge pay part of the discharged debt as a condition of entering into another financing agreement with him. The court held that this did not violate the discharge injunction or (assuming that Ford Credit was even a debt collector) the FDCPA. Agreements subsequent to discharge to pay a discharged debt are allowed. This case does not appear to be relevant at all. Ms. Longo’s case is not a bankruptcy case. 276 F.3d at 1022.

In Lewis, a debt collector offered the debtor the option of charging payments to a Visa or MasterCard without charge or using an “American Express Moneygram” if the debtor paid American Express’ processing fee. The court, in addition to holding the claim barred by limitations, held that there was no FDCPA violation because “any such fee, voluntarily chosen by the debtor if

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he or she chose this payment option, would not be paid to ACB or any entity it controlled and was a standard fee charged by the processor of the payment, an independent entity.” If the fee was simply the fee charged by American Express when it wires money to anyone the case is unexceptional. If a financial institution selected by the debtor charges for checks, wire transfers, or other transactions, that is between the financial institution and the debtor -- such charges are simply not fees collected or attempted to be collected by the debt collector. 911 F.Supp. at 292-93. In Lee, a debt collector passed on to debtors who paid by Visa the 5% charge imposed on the debt collector by the Visa credit card service provider. The court, after noting that the debt collector did not receive any portion of the fee, decided that it was “not a fee collected by Main Accounts, but a third-party charge triggered when the debtor chose the option of paying by credit card.” This unpublished Sixth Circuit case appears to be the only one of defendants’ three cases that involves a charge analogous to that at issue here. 1997 U.S.App. LEXIS 27922 at *2. None of the cases cited help defendants. The fees charged by defendants here go directly into defendants’ pockets, and do not represent a mere pass-on of amounts charged by a third party. Even Lee would have found a violation if the debt collector or an affiliate kept the fees. Moreover, the Lee case is wrongly decided. While the case refers to the usual fee that credit card companies charge merchants for processing credit card invoices as a “third party charge,” it is actually received by the debt collector. And while the fee reimburses the debt collector for a cost which it pays, businesses normally absorb the fee charged by the credit card processing company as a cost of doing business, just as salaries, rent and electricity. Consumers who walk into a store and pay by credit card are not ordinarily made to pay extra for the privilege. That fee is normally not 5%, but less.

As written by Congress, §1692f(1) imposes a simple, bright line test that makes such

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inquiries irrelevant. “Whether the collection of a debt violates §1692f(1) depends solely on two factors: (1) whether the debt agreement explicitly authorizes the charge; or (2) whether the charge is permitted by law.” Turner v. J.V.D.B. & Assocs., Inc., supra, 330 F.3d 991, 996 (7th Cir. 2003). The statute does not say anything about whether the consumer entered into an agreement with the debt collector to pay the fee, or the circumstances of such agreement. As noted earlier, a postdefault agreement between a consumer and a debt collector for the payment of fees that cannot be justified under the agreement creating the debt or applicable law is fraught with potential overreaching and abuse. The Court should apply the plain language of §1692f(1) as written rather than inquire into whether charges are for a separate “service” provided under some claimed subsequent agreement, whether any part of the charges is retained by the debt collector, and whether the consumer’s election was really “voluntary.” Defendant would have the Court inquire into such matters as part of an effort to revise the FDCPA to improve the profitability of debt collectors. However, that is not an interest protected by the FDCPA. On the contrary, the FDCPA should be liberally construed in favor of the consumer to effectuate its purposes. Cirkot v. Diversified Fin. Services, Inc., 839 F.Supp. 941 (D. Conn. 1993).

The [Consumer Credit Protection] Act is remedial in nature, designed to remedy what Congressional hearings revealed to be unscrupulous and predatory creditor practices throughout the nation. Since the statute is remedial in nature, its terms must be construed in liberal fashion if the underlying Congressional purpose is to be effectuated.

N.C. Freed Co. v. Board of Governors, 473 F.2d 1210, 1214 (2d Cir. 1973).

The plain language of the FDCPA prohibits debt collectors from charging fees that are not authorized by the agreement creating the debt or by applicable statutes and regulations. Defendant’s fees are neither.

Subsequent agreements between debtors and debt collectors are

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authorized for other purposes by the FDCPA, but not as a justification for adding fees to the debt. Defendants’ arguments based on such alleged subsequent agreements are impermissible and must be rejected.

IV.

DEFENDANTS’ CONDUCT WAS FALSE, MISLEADING AND DECEPTIVE.

Defendants argue that there is no violation of 15 U.S.C.§ 1692e. Defendants are

wrong. Section 1692e states in pertinent part:

A debt collector may not use any false, deceptive, or misleading representation or means in connection with the collection of any debt. Without limiting the general application of the foregoing, the following conduct is a violation of this section: ****

(2) The false representation of——

(A) the character, amount, or legal status of any debt; or

(B) any services rendered or compensation which may be lawfully received by any debt collector for the collection of a debt.

****

(10) The use of any false representation or deceptive means to collect or attempt to collect any debt or to obtain information concerning a consumer. Attempting to collect a fee for payments over the telephone implies that the debt collector is permitted to collect that fee. As described above, the fee is illegal. Because the fee is illegal, asking for it at all is (1) a false representation of the “compensation which may lawfully received” under §1692e(2); and (2) a deceptive means to attempt to collect a debt under §1692e(10). See Fields v. Wilber Law Firm, P.C., 383 F.3d 562, 2004 U.S. App. LEXIS 18681 at *7-8 (7th Cir. 2004). All three defendants are liable. Gerald E. Moore & Associates is the debt collector that imposed the charge. The two other debt collector / debt buyer defendants that hired Gerald E. Moore & Associates are vicariously liable for the violations. “[N]umerous courts utilize agency principles to make a principal vicariously liable for the acts of his authorized or apparent agent under the FDCPA.” Alger v. Ganick, O’Brien & Sarin, 35 F.Supp2d 148, 153 (D. Mass. 1999). A

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collection agency which employs an attorney who violates the FDCPA can be held liable for his actions. Fox v. Citicorp Credit Servs. Inc., 15 F.3d 1507, 1516 (9th Cir. 1994); Martinez v. Albuquerque Collection Servs., 867 F.Supp. 1495, 1502 (D.N.M. 1994); Kimber v. Federal Fin. Corp., 668 F.Supp. 1480, 1486 (N.D.Ala. 1987); Ditty v. Check Rite, Ltd., 973 F.Supp. 1320 (D.Utah 1997). See Farber v. NP Funding II, L.P., 1997 U.S. Dist LEXIS 21245, 1997 WL 913335 at * 2-3 & n.4 (E.D.N.Y. Dec. 9, 1997). Defendants’ motion should be denied. V.

DEFENDANTS ARE NOT ENTITLED TO FEES AND COSTS.

The above articulated legal arguments and theories illustrate that the well-researched

complaint states a claim, and reveals that plaintiff will likely prevail on the merits. This case was obviously not brought in “bad faith” or for “the purposes of harassment.” Plaintiff’s reliance on the text of the Illinois Collection Agency Act, the FDCPA and Pollice v. National Tax Funding L.P., 225 F.3d 379, 408 (3rd Cir.2000), a published opinion which is directly on point, is well founded and reasonable.

If anything, it is defendants’ motion to dismiss that was brought in bad faith. It is supported by nothing more than an unreported, non-precedential case, the status of which was not disclosed through defendants’ citation.

Indeed, at the time this Court sua sponte struck defendants’ motion and brief for failure to properly electronically sign the documents, defendants were aware of the controlling and persuasive authority cited supra. Another case had been filed by a different plaintiff with the same law firm in the Northern District of Illinois alleging the same violation, Longo v. Gerald E. Moore & Associates, Inc., 04 C 5759. Defendants filed an identical motion to dismiss in that case, which is on an earlier briefing schedule. Defendants received the Longo response to their motion to dismiss (substantively identical to this one) on October 22, 2004, five days before refiling this

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motion after it was stricken. Thus, although defendants were aware that the Illinois Collection Agency Act is controlling, they did not cite it. Defendants should not have filed this motion to dismiss without revision.

Indeed, defendants’ bad faith is further illustrated by their statement that “[c]ertainly, Illinois law allows two parties, in this case the consumer and the debt collector, to voluntarily contract for a service in exchange for a fee.” Mtn at 5. This flip statement of law is a flat legal misrepresentation. Defense counsel must be familiar with the Illinois Collection Agency Act because they deal with debt collection defense every day, and because plaintiff told them about it in the Longo brief. Common sense dictates this should have been the first place to search for state law on the issue of the legality of debt collection fees. Defendants’ failure to cite this statute has caused plaintiff to incur unnecessary legal fees, not defendants.1 Defendants’ request for fees should be denied.

CONCLUSION

For the foregoing reasons, defendants’ motion to dismiss should be denied.

Respectfully submitted, /s/ Daniel A. Edelman Daniel A. Edelman Daniel A. Edelman

1

Defendants state in their brief that plaintiff violated Rule 26(f) by issuing discovery. Besides that discovery issues should be brought through a Rule 37 conference before mentioning them to the Court, plaintiff’s counsel and defendants’ counsel discussed the issues contemplated by Rule 26(f) in that initial conversation, including discovery, the possibility of early settlement and the various theories of the case. Plaintiff’s counsel also carefully reviewed the cases cited by defendants, and found them inapposite.

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Cathleen M. Combs James O. Latturner Alexander H. Burke EDELMAN, COMBS, LATTURNER & GOODWIN, LLC 120 S. LaSalle Street, Suite 1800 Chicago, IL 60603

(312) 739-4200

(312) 419-0379 (FAX)

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CERTIFICATE OF SERVICE

I, Alexander H. Burke, hereby certify that on November 9, 2004, I electronically filed the foregoing with the Clerk of the Court using the CM/ECF system which will send notification of such filing to the following: Paul C. Ziebert, pziebert@mcguirewoods.com.

/s/ Alexander H. Burke Alexander H. Burke Attorney for Plaintiff (6281095) EDELMAN, COMBS, LATTURNER & GOODWIN, LLC 120 S. LaSalle Street, 18th Floor Chicago, IL 60603

(312) 739-4200

(312) 917-0379 (FAX) Aburke@edcombs.com