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Everett v. Financial Recovery Services, Inc.

United States District Court, S.D. Indiana, Indianapolis Division

November 28, 2016

Valerie Beth Everett, Plaintiff,
v.
Financial Recovery Services, Inc. and LVNV Funding, LLC, Defendants.

          ORDER

          Jane Magnus-Stinson, Judge United States District Court Southern District of Indiana

         In 2014, Plaintiff Valerie Everett defaulted on payments for her consumer credit card, and the debt was charged off. Defendant LVNV Funding, LLC (“LVNV”) purchased the collection rights to the debt, then engaged the services of Defendant Financial Recovery Services, Inc. (“FRS”) to collect payment from Ms. Everett. A letter from FRS to Ms. Everett offered to accept payment for less than the amount due, and noted that the settlement “may have tax consequences.” Ms. Everett claims that Defendants violated the Fair Debt Collection Practices Act, 15 U.S.C. § 1692, et seq. (“FDCPA”) because none of the settlement options proposed in the letter would have required the Defendants to report the settlement to the Internal Revenue Service, so the communication from Defendants was misleading.

         Presently pending before the Court is a Joint Motion to Dismiss filed by FRS and LVNV. [Filing No. 10.] Defendants argue that dismissal is warranted because Ms. Everett does not have standing to assert her FDCPA claims, and because she fails to state a claim upon which relief can be granted. For the reasons detailed herein, the Court GRANTS Defendants' Joint Motion to Dismiss. [Filing No. 10.]

         I. Background

         The factual allegations in the Complaint filed by Ms. Everett, which the Court must accept as true at this time, are as follows.

         FRS and LVNV are debt collection agencies. [Filing No. 1 at 2-3.] Ms. Everett incurred debt on a consumer credit card issued by Citibank, N.A. (“Citibank”), and subsequently defaulted on her payments. [Filing No. 1 at 3.] Citibank charged off the debt, and LVNV purchased the collection rights to the debt from Citibank. [Filing No. 1 at 3.] LVNV then engaged the services of FRS to collect payment from Ms. Everett. [Filing No. 1 at 4.]

         On March 3, 2016, FRS sent Ms. Everett a letter (the “Letter”) which stated in relevant part:

Please be advised that LVNV FUNDING LLC the current creditor-debt purchaser has purchased the account referenced above and it has placed it with our office for collection. The account listed above has been assigned to this agency for collection.
* * *
As of the date of this notice you owe $2, 665.79 and we are authorized to offer you the following options:
1. () Our office will allow you to settle your account for 85.00% of the above referenced balance for a total 1 time lump sum payment of $2, 265.92. We request this payment within 35 days after receipt of this letter. If you need additional time to respond to this offer, please contact us. Upon receipt and clearance of the payment of $2, 265.92, this account will be considered settled in full for less than the full balance and you will be released of all liability to the creditor relative to the above listed account. We are not obligated to renew this offer.; or
2. () Our office will allow you to settle your account for 90.00% of the above referenced balance for a total payment of $2, 399.22. You can pay this in 2 payments and we request the first payment within 35 days after receipt of this letter and the payments can be no more than 30 days apart. If you need additional time to respond to this offer, please contact us. Upon receipt and clearance of these two payments of $1, 199.61, this account will be considered settled in full for less than the full balance and you will be released of all liability to the creditor relative to the above listed account. We are not obligated to renew this offer.; or
3. () Our office will allow you to settle your account for 95.00% of the above referenced balance for a total payment of $2, 532.51. You can pay this in 3 payments and we request the first payment within 35 days after receipt of this letter and the payments can be no more than 30 days apart. If you need additional time to respond to this offer, please contact us. Upon receipt and clearance of these three payments of $844.17, this account will be considered settled in full for less than the full balance and you will be released of all liability to the creditor relative to the above listed account. We are not obligated to renew this offer.

         This settlement may have tax consequences. Please consult your tax advisor. [Filing No. 1-1 at 2 (emphasis in original).]

         Ms. Everett initiated this lawsuit on July 6, 2016, focusing on the language “This settlement may have tax consequences.” [Filing No. 1 at 5 (the “Tax Consequences Language”).] Ms. Everett alleges that Defendants violated 15 U.S.C. §§ 1692d, 1692e, and 1692f by “invoking the possibility of tax consequences in the March 3, 2016 collection communication.” [Filing No. 1 at 5.] She alleges that the Internal Revenue Code did not require Defendants to report cancellation of debt because “the largest amount Defendants proposed to forgive was $399.87, well below the $600.00 reporting requirement.” [Filing No. 1 at 5.] She alleges that Defendants “needlessly and falsely invoking the possibility of tax consequences had the natural effect of harassing [her].” [Filing No. 1 at 6.]

         Ms. Everett also alleges that “Defendants intended to elevate [her] concern over and response to the collection communication, increasing the likelihood of payment on the subject consumer debt.” [Filing No. 1 at 6.] She alleges that Defendants breached their “duty not to make false and misleading statements to consumers they seek payment from.” [Filing No. 1 at 5.] She alleges that she “has been harmed and suffered damages as a result of Defendants' false and deceptive actions.” [Filing No. 1 at 6.] Ms. Everett seeks actual and statutory damages, as well as attorneys' fees and costs, under 15 U.S.C. §§ 1692k(a)(1)-(3). [Filing No. 1 at 6.]

         Defendants now move to dismiss Ms. Everett's Complaint for lack of standing under Fed.R.Civ.P. 12(b)(1), and for failure to state a claim upon which relief may be granted under Fed.R.Civ.P. 12(b)(6). [Filing No. 11.]

         II.

         Standard of Review

          “Federal Rule of Civil Procedure 12(b)(1) allows a party to move to dismiss a claim for lack of subject matter jurisdiction.” Hallinan v. Fraternal Order of Police of Chicago Lodge No. 7, 570 F.3d 811, 820 (7th Cir. 2009). The burden is on the plaintiff to prove, by a preponderance of the evidence, that subject-matter ...


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