Garry Curtis v. Propel Property Tax Funding , 915 F.3d 234 ( 2019 )

PUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
No. 17-2114
GARRY CURTIS,
Plaintiff – Appellee,
v.
PROPEL PROPERTY TAX FUNDING, LLC; PROPEL FINANCIAL
SERVICES, LLC,
Defendants – Appellants.
Appeal from the United States District Court for the Eastern District of Virginia, at
Richmond. John A. Gibney, Jr., District Judge. (3:16-cv-00731-JAG)
Argued: October 30, 2018 Decided: February 6, 2019
Before DUNCAN, KEENAN, and DIAZ, Circuit Judges.
Affirmed by published opinion. Judge Duncan wrote the opinion, in which Judge Diaz
joined. Judge Keenan wrote a separate opinion concurring in part and dissenting in part.
ARGUED: Charles Kalman Seyfarth, O’HAGAN MEYER PLLC, Richmond, Virginia,
for Appellants. Thomas Dean Domonoske, CONSUMER LITIGATION ASSOCIATES,
P.C., Newport News, Virginia, for Appellee. ON BRIEF: Elizabeth Scott Turner,
O’HAGAN MEYER PLLC, Richmond, Virginia, for Appellants. Dale W. Pittman, THE
LAW OFFICE OF DALE W. PITTMAN, P.C., Petersburg, Virginia, for Appellee.
DUNCAN, Circuit Judge:
Appellants Propel Property Tax Funding, LLC and Propel Financial Services, LLC
(collectively “Propel”) entered into a Tax Payment Agreement (a “TPA”) with Appellee
Garry Curtis pursuant to Virginia Code section 58.1-3018. Curtis sued Propel on behalf
of himself and other similarly situated individuals, alleging violations of the Truth in
Lending Act (the “TILA”), 15 U.S.C. § 1601 et. seq., the Electronic Funds Transfer Act
(the “EFTA”), id. § 1693 et. seq., and the Virginia Consumer Protection Act (the
“VCPA”), Va. Code Ann. § 59.1-196 et. seq. Propel moved to dismiss Curtis’s claims
under TILA and EFTA, contending that the TPA is not a consumer credit transaction
governed by those statutes. The district court denied Propel’s motion and sua sponte
certified two rulings for interlocutory review pursuant to 28 U.S.C. § 1292(b): (1) its
determination that Curtis has standing to proceed on his EFTA claims against Propel and
(2) its decision that these TPAs are consumer credit transactions for purposes of TILA
and EFTA. For the reasons that follow, we affirm the district court on both issues.
I.
Virginia allows taxpayers to enter into agreements with third parties to finance
payment of local taxes. Va. Code Ann. § 58.1-3018. 1 Under these agreements, a third
1
The statute governs “any agreement whereby a third party contracts with a
taxpayer to pay to a county, city or town on behalf of that taxpayer the local taxes,
charges, fees or other obligations due and owing to the county, city or town” and states
that “[s]uch agreement may have as its subject current taxes, charges, fees and
(Continued)
2
party agrees to pay taxes owed to a locality on behalf of a taxpayer, and the taxpayer
agrees to repay the third party in installments, with fees and interest. Id. The terms of
the agreement, including repayment periods, interest rates, and other fees, are prescribed
by statute. Id. For the period during which the taxpayer repays the third party, the
locality tolls the enforcement period for the taxes owed. Id. § 58.1-3018(E). Nothing in
the statute indicates that these agreements have any effect on tax liens that may be
imposed by Virginia law. 2 If the taxpayer defaults on the agreement despite the third
party’s good-faith efforts to collect from him, the third party can ask the locality to
reimburse the third party for any taxes paid and to reinstate the full tax obligation against
the taxpayer (minus any principal payments made by the taxpayer to the third party). Id.
§ 58.1-3018(C). Upon reimbursement, “[a]ny right of the third party to payment” under
the agreement terminates. Id. § 58.1-3018(C)(4).
Curtis owed $13,734.43 in residential property taxes to the city of Petersburg,
Virginia and entered into a TPA with Propel to finance payment of them. The parties
agree that the TPA at issue operates in conformity with Virginia’s statutory framework,
id. § 58.1-3018; see J.A. 32 (stating that under the terms of the TPA, “[o]ur financing of
taxes on your behalf pursuant to this Agreement is made pursuant to Va. Code Section
obligations, delinquent taxes, penalties and interest, or any combination of the
foregoing.” Va. Code Ann. § 58.1-3018(A).
2
For instance, Virginia state law imposes a lien on real property for tax payments
associated with that property, Va. Code Ann. § 58.1-3340. Moreover, the TPA between
Curtis and Propel explicitly disclaims any effect on tax liens. See J.A. 32.
3
58.1-3018”). For instance, the TPA requires Curtis to pay an origination fee equal to ten
percent of his tax obligation, which is the maximum origination fee allowed under the
statute. See Va. Code Ann. § 58.1-3018(B)(2); J.A. 30. The TPA also sets Curtis’s
interest rate at 10.95 percent, below the statutory maximum of sixteen percent, and
specifies that no interest shall accrue during the first six months of the agreement, as the
statute requires. See Va. Code Ann. § 58.1-3018(B)(2); J.A. 30. The TPA requires
Curtis to repay Propel in monthly installments for ninety-six months, which is the
maximum period allowed by the statute. See Va. Code Ann. § 58.1-3018(B)(2); J.A. 31.
Curtis nevertheless challenges the TPA and its associated documents as violating
TILA, EFTA, and VCPA on several grounds. For instance, he contends that many of the
terms of the TPA included incorrect amounts, that Propel did not include an itemized list
of closing costs in the documents, and that the TPA was missing certain allegedly
required financial disclosures. He also alleges that, as a condition of the TPA, he was
required to agree to repay Propel by preauthorized electronic fund transfers (“EFTs”) and
that the required authorization form does not contain a space that would allow him to
indicate that he declined to do so.
Curtis brought a proposed class action against Propel in federal district court,
alleging violations of TILA, EFTA, and VCPA. 3 Propel moved to dismiss for failure to
state a claim pursuant to Federal Rule of Civil Procedure 12(b)(6), contending that the
TPA is not subject to TILA or EFTA because it is not a consumer credit transaction and
3
Curtis named Propel Property Tax Funding, LLC as the sole defendant in his
TILA claim. He brought the EFTA and VCPA claims against both Propel entities.
4
that the TPA is exempt from the VCPA. The district court granted Propel’s motion to
dismiss as to the VCPA claim but denied its motion as to the TILA and EFTA claims.
The district court determined that Curtis had standing under EFTA because the
harm that he alleged--making the TPA contingent on Curtis agreeing to preauthorized
EFTs--was “exactly the type of harm that Congress sought to prevent when it enacted the
EFTA.” Curtis v. Propel Prop. Tax Funding, LLC, 265 F. Supp. 3d 647, 652 (E.D. Va.
2017). The district court also determined that the TPA is subject to TILA and EFTA
because, as “third-party financing of a tax obligation” for “personal, family, or household
purposes,” the TPA is both a credit transaction and a consumer transaction and thus
qualifies as a consumer credit transaction governed by those statutes. Id. at 652–53.
However, the court certified for interlocutory review (1) its decision that Curtis has
standing to proceed on his EFTA claims and (2) its determination that TPAs sanctioned
by Virginia Code section 58.1-3018 are subject to TILA and EFTA as consumer credit
transactions. This appeal followed.
II.
Propel makes two arguments on appeal. First, Propel contends that Curtis does
not have standing to bring a claim under EFTA because he did not adequately allege that
Propel required him to agree to EFTs or that he made or attempted to cancel any EFT
payments. Second, Propel contends that Curtis’s complaint does not state a claim for
relief under either TILA or EFTA because the TPA is not a consumer credit transaction
5
within the terms of those statutes. Before considering these issues, we first set forth the
statutory framework to provide the necessary context for our analysis.
TILA and EFTA are consumer protection statutes that regulate the terms of certain
transactions. 15 U.S.C. §§ 1601 et. seq., 1693 et. seq. The purpose of TILA is “to assure
a meaningful disclosure of credit terms” in order to improve consumer decisionmaking
and “to protect the consumer against inaccurate and unfair” credit practices. Id.§ 1601(a). Similarly, EFTA was enacted to establish “individual consumer rights” in the
context of EFT transactions. Id. § 1693(b). Thus, both TILA and EFTA are “remedial
consumer protection statute[s]” which we “read liberally to achieve [their] goals” of
protecting consumers. 4 Phelps v. Robert Woodall Chevrolet, Inc., 306 F. Supp. 2d 593,
596 (W.D. Va. 2003) (citation and internal quotation marks omitted) (referring to TILA);
cf. Hoke v. Retail Credit Corp., 521 F.2d 1079, 1082 n.7 (4th Cir. 1975) (explaining that
we interpret the Fair Credit Reporting Act liberally in light of “its broad remedial
purposes”). At issue in this appeal are TILA’s requirement that creditors disclose certain
information in consumer credit transactions, 15 U.S.C. § 1638, EFTA’s prohibition on
“condition[ing] the extension of credit to a consumer on such consumer’s repayment by
means of preauthorized electronic fund transfers,” id. § 1693k, and EFTA’s requirement
4
Our sister circuits have also endorsed this remedial approach to construing TILA
and EFTA. See Krieger v. Bank of Am., N.A., 890 F.3d 429, 438–39 (3d Cir. 2018)
(TILA); Marais v. Chase Home Fin. LLC, 736 F.3d 711, 714 (6th Cir. 2013) (TILA);
Rosenfield v. HSBC Bank, USA, 681 F.3d 1172, 1179–80 (10th Cir. 2012) (TILA);
Clemmer v. Key Bank Nat’l Ass’n, 539 F.3d 349, 353 (6th Cir. 2008) (EFTA); Bragg v.
Bill Heard Chevrolet, Inc., 374 F.3d 1060, 1065 (11th Cir. 2004) (TILA); Eby v. Reb
Realty, Inc., 495 F.2d 646, 650 (9th Cir. 1974) (TILA).
6
that no consumer agreement may operate as a waiver of one of EFTA’s substantive
rights, id. § 1693l. 5
Guided by the applicable statutes, we affirm the district court. First, we hold that
Curtis has standing to bring claims under EFTA because the harm that he alleges is a
substantive statutory violation that subjects him to the very risks that EFTA, a consumer
protection statute, was designed to protect against. Second, we hold that the TPA is
subject to TILA and EFTA because the TPA is a consumer credit transaction. Because
the statutes define these terms separately, we consider them as such. We determine that
the TPA is a credit transaction because it provides for third-party financing of a tax
obligation and that it is a consumer transaction because, as financing of a real property
tax debt, it is a voluntary transaction that Curtis entered into for personal or household
purposes.
III.
Propel contends that Curtis lacks standing to bring claims under EFTA. “We
review legal questions regarding standing de novo,” and “[w]hen standing is challenged
5
The alleged substantive right at issue here is EFTA’s requirement that consumers
“may stop payment of a preauthorized [EFT]” by notifying the financial institution up to
three days prior to a scheduled withdrawal. Id. § 1693e. With respect to EFTA, Curtis’s
complaint alleged violations of both § 1693k and § 1693l, but Propel’s motion to dismiss
only addressed § 1693k. The district court ordered supplemental briefing on § 1693l, in
which Propel raised new arguments for dismissal. The district court declined to consider
Propel’s new merits arguments “because Propel failed to raise [them] in its initial briefs,”
but it did consider Propel’s argument that Curtis lacks standing under § 1693l. Curtis,
265 F. Supp. 3d at 651. We follow the same approach here.
7
on the pleadings, we accept as true all material allegations of the complaint and construe
the complaint in favor of the complaining party.” David v. Alphin, 704 F.3d 327, 333
(4th Cir. 2013) (emphasis omitted). In a class action case, we look to the standing of the
named plaintiff. Dreher v. Experian Info. Sols., Inc., 856 F.3d 337, 343 (4th Cir. 2017).
To meet the constitutional minimum requirements for standing to sue, a “plaintiff
must have . . . suffered an injury in fact, . . . that is fairly traceable to the challenged
conduct of the defendant, and . . . that is likely to be redressed by a favorable judicial
decision.” Spokeo, Inc. v. Robins, 136 S. Ct. 1540, 1547 (2016). On appeal, Propel
challenges the injury-in-fact requirement. A plaintiff meets this requirement if he alleges
an injury that is “particularized,” “concrete,” and “actual or imminent, not conjectural or
hypothetical.” Id. at 1548 (quoting Lujan v. Defs. of Wildlife, 504 U.S. 555, 560 (1992)).
First, an injury must be particularized; that is, “it must affect the plaintiff in a
personal and individual way.” Id. (citation and internal quotation marks omitted). Here,
Curtis’s injury is particularized because it stems from his own TPA with Propel, which
allegedly required him to consent to EFT authorization when he entered into the
agreement and allegedly waived Curtis’s right to cancel preauthorized EFTs as conferred
by EFTA.
Second, an injury is concrete if it is “real, and not abstract.” Id. (citation and
internal quotation marks omitted). While a bare procedural statutory violation does not
create a concrete injury, id. at 1549, the concreteness requirement is met where the
plaintiff can show that the harm that he suffers as a result of a defendant’s statutory
violation is “the type of harm Congress sought to prevent” when it enacted the statute.
8
Dreher, 856 F.3d at 345–46 (holding that a plaintiff’s injury was not concrete because the
harm he suffered by the defendant’s procedural statutory violation was “not the type of
harm Congress sought to prevent when it enacted” the statute); cf. Fed. Election Comm’n
v. Akins, 524 U.S. 11, 21 (1998) (“[A] plaintiff suffers an ‘injury in fact’ when the
plaintiff fails to obtain information which must be publicly disclosed pursuant to a
statute.”).
Here, Curtis alleges a sufficiently concrete injury to establish standing. The harm
he alleges is not a “bare procedural violation,” Spokeo, 136 S. Ct. at 1549, but instead is a
substantive violation of the rights conferred by EFTA. Congress enacted EFTA to
protect “individual consumer rights” in the context of electronic fund transfers.
15 U.S.C. § 1693(b). Among these substantive rights is the right of a consumer to enter
into a credit agreement without being required to agree to preauthorized EFTs.
Id. § 1693k. This is the same right that Curtis alleges that Propel violated in its TPA with
him. Curtis also alleges that Propel violated another of EFTA’s substantive rights when
it included in the TPA an EFT stop-payment provision that was more restrictive than
what EFTA requires. See id. §§ 1693e, 1693l. Thus, the injury he alleges is of “the type
of harm Congress sought to prevent when it enacted” EFTA. See Dreher, 856 F.3d at
346.
Propel contends that Curtis’s injury is not concrete because Curtis did not
adequately allege that Propel required Curtis to agree to EFTs as a condition of the TPA.
But on appeal, we construe the complaint in favor of Curtis and accept its material
allegations as true. See David, 704 F.3d at 333. In his complaint, Curtis supported his
9
allegation that Propel provided him with no opportunity to decline EFT preauthorization
and that Propel violated his substantive rights under EFTA with respect to cancellation of
EFTs by pointing to the language and structure of the TPA and its supporting documents.
This is sufficient to establish standing. See id.; Spokeo, 136 S. Ct. at 1548.
Finally, an injury must be “actual or imminent, not conjectural or hypothetical.”
Spokeo, 136 S. Ct. at 1548 (citation and internal quotation marks omitted). Propel
contends that Curtis’s injury is hypothetical because Curtis has not yet made an EFT
payment or attempted to retract his EFT authorization. This argument mischaracterizes
the injury. Curtis satisfies the injury requirement because he alleged that he was required
to agree to EFT authorization as a condition of the TPA and that the TPA contained terms
requiring him to waive EFTA’s substantive rights regarding EFT withdrawal; whether he
made EFT payments or attempted to withdraw EFT authorization is irrelevant. And even
if we accept Propel’s premise that Curtis has not yet been injured, Curtis would still have
standing to challenge the TPA immediately because there is a “realistic danger” that
Curtis will “sustain[] a direct injury” as a result of the terms of the TPA. Babbitt v.
United Farm Workers Nat’l Union, 442 U.S. 289, 298 (1979). Specifically, because
Propel allegedly required Curtis to agree to preauthorized EFTs, when the time comes for
Curtis to pay Propel, 6 he will either need to make an EFT payment or attempt to
withdraw his EFT authorization in response. Therefore, Curtis’s injury is “actual or
imminent” for purposes of standing. Spokeo, 136 S. Ct. at 1548; see Babbitt, 442 U.S. at
6
According to the TPA documents, Curtis’s first monthly payment to Propel was
due on June 25, 2016.
10
298 (“[O]ne does not have to await the consummation of threatened injury to obtain
preventative relief. If the injury is certainly impending, that is enough.”) (citation
omitted).
Thus, we affirm the district court’s determination that Curtis has standing to
proceed on his claims under EFTA because, viewing the complaint in the light most
favorable to Curtis, he has alleged that he suffered an injury in fact.
IV.
Propel also contends that the TPA as authorized by Virginia Code section 58.1-
3018 is not subject to TILA and EFTA and that, therefore, Curtis’s claims under those
statutes cannot survive a motion to dismiss under Rule 12(b)(6). On interlocutory
review, “we employ the usual appellate standard governing motions to
dismiss[,] . . . consider[ing] questions of law de novo and constru[ing] the evidence in the
light most favorable to the non-movant.” EEOC v. Seafarers Int’l Union, 394 F.3d 197,
200 (4th Cir. 2005).
The provisions of TILA and EFTA at issue on appeal only apply to the TPA if the
TPA is a “consumer credit transaction.” See 15 U.S.C. § 1638(a) (describing TILA’s
disclosure requirements for consumer credit transactions); id. § 1693k (stating EFTA’s
rule against preauthorized EFTs with respect to “the extension of credit to a consumer”).
Because TILA and EFTA define the terms “credit” and “consumer” independently, we
first consider whether the TPA is a credit transaction and, second, whether it is a
consumer transaction.
11
A.
First, the TPA is a credit transaction within the meaning of TILA and EFTA.
TILA defines credit as “the right granted by a creditor to a debtor to defer payment of
debt or to incur debt and defer its payment.” 15 U.S.C. § 1602(f). 7 While credit has been
defined to generally exclude tax liens and tax assessments by the official Consumer
Financial Protection Bureau interpretation of TILA’s implementing regulation (the “Staff
Commentary”), the Staff Commentary, to which we defer, clarifies that “third-party
financing of such obligations (for example, a bank loan obtained to pay off a tax lien) is
credit for the purposes of the regulation.” 12 C.F.R. Pt. 1026, Supp. I, pt. 1, cmt.
2(a)(14); see Ford Motor Credit Co. v. Milhollin, 444 U.S. 555, 556 (1980) (explaining
that the Supreme Court grants a “high degree of deference” to administrative
interpretations of TILA and its regulations). Accordingly, the question here is whether
the TPA is a credit transaction on the basis that it involves third-party financing of a tax
obligation.
7
Similarly, under EFTA, credit is defined as “the right granted by a financial
institution to a consumer to defer payment of debt, incur debt and defer its payment, or
purchase property or services and defer payment therefor.” 12 C.F.R. § 205.2(f).
Therefore, if the TPA involves credit under TILA, it also involves credit under EFTA.
See Clemmer, 539 F.3d at 353 (explaining that, for questions under TILA and EFTA,
“courts draw upon case law interpreting one statute for persuasive authority for another
statute” because TILA and EFTA have “the common purpose of . . . protect[ing]
consumers with respect to financial credit”); Johnson v. W. Suburban Bank, 225 F.3d
366, 379 (3d Cir. 2000) (finding provisions in TILA and EFTA to have the same meaning
because “Congress would [not] have different intended meanings for identical statutory
language contained in similar statutes”).
12
We conclude that the TPA provides for third-party financing of a tax obligation as
set forth in the statute for two reasons. First, it is clear from the terms of the TPA itself,
which state that Propel will pay Curtis’s taxes in exchange for installment repayments,
interest, and fees from Curtis. By entering into that transaction, Curtis “defer[red]
payment” of his property tax obligation by having Propel, a third party, pay it
immediately in exchange for subsequent installment payments. 8 15 U.S.C. § 1602(f).
This is financing of a tax obligation, indistinguishable from the type of financing that
occurs when a homebuyer takes out a mortgage with a bank to defer payment of the
listing price in exchange for regular repayments. In this respect, the TPA thus operates as
any other financing transaction would.
Second, the TPA is a financing transaction because it creates third-party
obligations between Curtis and Propel. Specifically, the TPA requires Curtis to pay
Propel interest and fees--an obligation wholly separate from Curtis’s tax obligation to the
locality and owed only to Propel. Similarly, when a homebuyer takes out a home
mortgage, she agrees to pay the bank interest and fees--costs which are unrelated to the
homebuyer’s underlying obligation to pay the listing price to the seller. These
characteristics of the TPA--that it allows Curtis to defer payment of his property taxes
and that it creates third-party obligations between Curtis and Propel--align precisely with
8
To be clear, the TPA itself, and not the Virginia statute authorizing such TPAs, is
the mechanism deferring Curtis’s tax obligation--much as is the case with respect to any
other contract concerning a regulated transaction. For example, Virginia also regulates
the terms of payday loans by statute, see, e.g., Va. Code Ann. § 6.2-1817, but we see no
reason why payday loans would not be considered a form of credit.
13
those of third-party financing of a tax obligation as allowed by the statute. To dismiss the
third-party nature of the relationship between Curtis and Propel here would be to dismiss
the Staff Commentary, which defines third-party financing of tax obligations as credit,
altogether.
Propel contends that the TPA is not a credit transaction because it is different from
a bank loan. While that may be true, it is also irrelevant. In discussing what constitutes
acceptable third-party financing of tax liens and assessments, the Staff Commentary by
its terms used a bank loan as an “example,” not a limitation. 12 C.F.R. Pt. 1026, Supp. I,
pt. 1, cmt. 2(a)(14). Whether an agreement is a credit transaction is not determined by
how closely it resembles a bank loan. The inquiry is whether it provides for “third-party
financing” of a tax obligation. Id.Moreover, differences between the TPA and a bank loan do not transform the TPA
into something other than third-party financing of a tax obligation. For instance, TILA
does not only apply to payments made directly to consumers. We know this because, for
example, TILA requires creditors to describe how much credit they provide “to [the
consumer] or on [the consumer’s] behalf.” 12 C.F.R. § 1026.18(b) (emphasis added).
Therefore, the fact that Propel pays the locality directly instead of loaning money to
Curtis as a bank might 9 does not affect whether the transaction falls under TILA’s
definition of credit. Nor does the fact that the TPA is different from a bank loan because
it is a regulated transaction that includes protections for both third-party lenders
9
We note, however, that we have no reason to suppose that a lending bank might
not disburse funds directly to a third party at the direction of a borrower.
14
(reimbursement if the taxpayer defaults) and taxpayers (limited remedies for the third
party if the tax obligation is reinstated by the locality upon default) compel a different
result. See Va. Code Ann. § 58.1-3018(C). These protections do not change the
underlying nature of the TPA as an agreement that provides a mechanism for taxpayers to
finance payment of their tax obligations through a third party. Indeed, the TPA here
involves third-party financing of a tax obligation on its face, and the plain language of the
statute, regulations, and Staff Commentary in no way precludes TILA from covering
transactions like this one.
In support of its view, Propel cites cases from the Third and Fifth Circuits that are
neither binding nor, more importantly, analogous. See Billings v. Propel Fin. Servs.,
LLC, 821 F.3d 608 (5th Cir. 2016); Pollice v. Nat’l Tax Funding, L.P., 225 F.3d 379 (3d
Cir. 2000), abrogated on other grounds by Tepper v. Amos Fin., LLC, 898 F.3d 364 (3d
Cir. 2018). Critically, in those cases, the third-party tax transactions at issue involved
transfers of a taxpayer’s tax lien from a locality to a third party. See Billings, 821 F.3d at
610; Pollice, 225 F.3d at 385–86. The Fifth Circuit reasoned that because “the tax
obligation [wa]s simply transferred from the taxing authorities to the transferee lending
institution, and there [wa]s no independent line of credit extended to the property owner,”
these arrangements were not third-party financing of a tax obligation subject to TILA.
Billings, 821 F.3d at 613 n.4 (emphasis added) (citing Pollice, 225 F.3d at 409–11).
Central to the Fifth Circuit’s determination was the fact that the transaction involved a tax
lien transfer, bringing the transaction closer to a direct tax obligation held by a third party
as opposed to third-party financing of a tax obligation.
15
In stark contrast to those cases, the locality here does not transfer Curtis’s tax lien
to Propel. Instead, the locality retains the tax lien until Curtis has fully repaid Propel.
See J.A. 32 (explaining as a term of the TPA that the locality will retain any tax liens and
will not release any judgments until Curtis completely repays his balance to Propel). The
tax obligation here is therefore not “simply transferred” from the locality to the third-
party lender as it was in the cases on which Propel relies. Billings, 821 F.3d at 613 n.4.
Rather, by operation of the TPA, Propel extends a line of credit to Curtis to finance the
real property taxes that Curtis owes to the locality. The arrangement here thus severs the
direct linkage to a preexisting tax obligation that has led to the general rule excluding tax
liens from the definition of credit. 10 Instead, like a mortgage or a bank loan, the TPA
involves a consumer enlisting a third party to help it defer payment of a debt in exchange
for interest and fees.
Propel contends that the fact that the locality retains Curtis’s tax lien makes the
transaction look more like a tax obligation and thus is further evidence that the TPA is
not a credit transaction. But the fact that a third party has an interest in the thing being
financed does not transform a credit transaction into something else. Indeed, this is
10
In contrast to our analysis, the Third Circuit’s approach appears to do away
altogether with the distinction that the Staff Commentary carefully draws between the
lien itself, on one hand, and the third-party financing of that lien, on the other. See
Pollice, 225 F.3d at 409–10 (holding that a tax lien transfer agreement was not a credit
transaction under TILA because “the nature of the underlying claim” as a property tax
had not “been extinguished”); cf. St. Pierre v. Retrieval-Masters Creditors Bureau, Inc.,
898 F.3d 351, 361 (3d Cir. 2018) (applying Pollice in the Fair Debt Collection Practices
Act context to conclude that “the original source of the obligation--not the subsequent
method of collection--determines whether an obligation constitutes ‘debt’”).
16
common in ordinary consumer credit transactions. For example, suppose a consumer
purchases an automobile from a dealership and takes out a bank loan to finance it. Under
the terms of that loan, the bank places a lien on the automobile until the consumer has
paid off the balance. If the consumer sells the car to a secondhand buyer before she pays
off the balance of her bank loan, the secondhand buyer might take the automobile subject
to the lien. Any bank loan that the secondhand buyer might take out to finance his
purchase of the automobile does not cease to be a credit transaction merely because the
first bank still holds a lien over the automobile. Similarly, the TPA here does not lose its
character as a credit transaction just because a third party--here, the locality--retains a lien
related to the underlying obligation.
Indeed, straightforward application of the language of TILA, its regulations, and
the Staff Commentary tells us unambiguously that the TPA is a credit transaction because
it provides for third-party financing of a tax obligation. But even if the plain language
were ambiguous, policy considerations would counsel us to interpret TILA and EFTA to
cover transactions like the TPA here because “TILA is a remedial consumer protection
statute that is read liberally to achieve its goals,” and we “construe TILA broadly so that
it will provide protection for the consumer.” Phelps, 306 F. Supp. 2d at 596 (citation and
internal quotation marks omitted). Under this standard, it would frustrate the purpose of
TILA and EFTA to exclude the TPA here from regulation. Accordingly, we conclude
that the TPA is a credit transaction under those statutes.
B.
17
Having established that the TPA is a credit transaction, we next consider whether
it is also a consumer transaction within the meaning of TILA and EFTA. Under TILA, a
consumer transaction is “one in which the party to whom credit is offered or extended is a
natural person, and the money, property, or services which are the subject of the
transaction are primarily for personal, family, or household purposes.” 11 15 U.S.C.
§ 1602(i). Although “[t]here is no precise test for what constitutes credit offered or
extended for personal, family, or household purposes, nor for what constitutes the
primary purpose,” 12 C.F.R. Pt. 1026, Supp. I, pt. 1, cmt. 2(a)(12), there are things that
seem, on their face, to qualify. Here, the subject of Curtis’s transaction was his
residential home, and he sought credit to finance the property taxes he owed on that
home. It is hard to imagine a transaction more likely to constitute one “primarily for
personal, family, or household purposes.” Id.Propel urges us to look to bankruptcy law by analogy, arguing that because tax
obligations are not debt for purposes of bankruptcy, payment of those obligations cannot
involve a consumer transaction. This argument is plainly contradicted by the Staff
Commentary. The Commentary anticipates that consumer credit may be used to defer
payment of tax obligations; indeed, it includes third-party financing of tax obligations
within its definition of credit transactions covered by the statute. See 12 C.F.R. Pt. 1026,
Supp. I, pt. 1, cmt. 2(a)(14).
11
Under EFTA, a consumer is a “natural person,” 15 U.S.C. § 1693a(6), so there
is no dispute that Curtis is a consumer for purposes of EFTA.
18
Notwithstanding the Staff Commentary, however, Propel’s argument fails even
under bankruptcy law. When bankruptcy courts consider whether debt is consumer debt,
they look “to the purpose for which the debt was incurred” to determine “whether debt is
for ‘personal, family, or household purposes.’” In re Runski, 102 F.3d 744, 747 (4th Cir.
1996) (quoting 11 U.S.C. § 101(8)). In that context, a debt that “was not incurred with a
profit motive or in connection with a business transaction . . . is considered ‘consumer
debt’ for purposes of [the Bankruptcy Code].” In re Kestell, 99 F.3d 146, 149 (4th Cir.
1996). Thus, under this test, Curtis’s residential property tax obligation as financed by
Propel is consumer debt because it is unconnected with any sort of business transaction or
profit motive.
Propel nevertheless argues that the TPA is not a consumer transaction because the
imposition of the underlying obligation--property taxes--is motivated by the public
welfare rather than by personal, family, or household purposes. In support of this
position, it cites to a non-binding case in which the bankruptcy court held that “a debt for
personal property tax is not a consumer debt even where the property being taxed is held
for personal, family, or household use.” In re Stovall, 209 B.R. 849, 854 (Bankr. E.D.
Va. 1997). In so holding, the bankruptcy court explained that “a consumer debt is one
that is ‘incurred’--implying that some voluntary action is taken before a consumer
becomes liable on the debt. A tax, however, is not ‘incurred.’” Id. (emphasis added)
(citation omitted). Rather, it is “involuntarily imposed by a government for the public
welfare.” Id. But Stovall is not analogous. In that case, the debt at issue was the unpaid
personal property tax itself, not credit obtained to finance the payment of that debt. In
19
contrast, the debt at issue here is not the tax that Curtis owes to the locality. Instead, it is
one level removed--it is Curtis’s obligation to Propel, a third party, to repay Propel’s
financing of Curtis’s tax obligation. 12 Thus, even to the extent that Stovall holds that
property taxes are not consumer debts, that holding is inapplicable.
We are therefore constrained to conclude that the TPA entered into pursuant to
Virginia Code section 58.1-3018 at issue here is a consumer credit transaction subject to
TILA and EFTA. We affirm the district court’s denial of Propel’s motion to dismiss for
failure to state a claim under those statutes.
V.
We affirm the district court’s decision that Curtis has standing under EFTA
because he alleged that he suffered an injury in fact, and we affirm the district court’s
denial of Propel’s motion to dismiss Curtis’s TILA and EFTA claims because the TPA is
a consumer credit transaction subject to those statutes.
AFFIRMED
12
Further, the court in Stovall reasoned that personal property taxes are not
consumer debts because they are incurred involuntarily, but here, Curtis entered the TPA
with Propel voluntarily.
20
BARBARA MILANO KEENAN, Circuit Judge, concurring in part and dissenting in
part:
I concur in Part III of the majority opinion affirming the district court’s ruling that
Curtis has standing to bring claims against Propel under the Electronic Funds Transfer
Act, 15 U.S.C. § 1693 et seq. (EFTA). I write separately with respect to Part IV(A)
because I conclude that Curtis’ tax payment agreement with Propel (the TPA) does not
qualify as a “credit transaction” under the Truth in Lending Act, 15 U.S.C. § 1601 et seq.
(TILA). 1
TILA defines “credit” as “the right granted by a creditor to a debtor to defer
payment of debt or to incur debt and defer its payment.” 15 U.S.C. § 1602(f). The
associated regulation and commentary known as “Regulation Z” clarifies that tax liens,
tax assessments, and court judgments are excluded from the definition of “credit.” 12
C.F.R. Pt. 1026, Supp. I, pt. 1, cmt. 2(a)(14). However, “third-party financing of such
obligations (for example, a bank loan obtained to pay off a tax lien) is ‘credit’ for
purposes of the regulation.” Id. (internal quotation marks added).
In my view, the TPA does not qualify as a “credit” transaction because Virginia
Code § 58.1-3018 (the Virginia statute), rather than a creditor, grants to a taxpayer like
Curtis the right to defer payment of a local tax assessment by entering into a tax-payment
plan with a third-party payor like Propel. Among other things, the statute gives the third-
1
EFTA defines “credit” similarly to TILA, as “the right granted by a financial
institution to a consumer to defer payment of a debt . . . and defer its payment.” 12
C.F.R. § 205.2(f) (regulation implementing EFTA). I agree with the majority that if the
TPA does not qualify as a credit transaction under TILA, it likewise does not qualify
under EFTA.
21
party payor a right of recourse against the local government, Va. Code § 58.1-
3018(C)(1), and terminates the TPA as a matter of law once the third-party payor has
availed itself of that statutory remedy, id. § 58.1-3018(C)(4). Given these striking
differences, some of which restrict the rights of the third-party payor against the taxpayer,
I am puzzled that the majority opines that a TPA effectively “operates as any other
financing transaction would.” Maj. Op. 13. In my view, this simple declaration by the
majority is factually and legally incorrect.
A TPA is not a “credit transaction,” within the meaning of TILA, because the
preexisting obligation of the taxpayer is not severed by the third-party payor’s payment,
and the third-party payor does not grant any right to the taxpayer that is not conferred
already by statute. The TPA, a creature of Virginia statute, merely implements those
statutory rights, with accompanying benefits to both the taxpayer and the third-party
payor. The majority sidesteps this statutory framework and strains to conclude that the
TPA must be a credit transaction under TILA because (1) Propel has advanced payment
on behalf of the taxpayer, and (2) the taxpayer is required to pay that sum back to Propel,
unless (3) the taxpayer later defaults on its TPA obligations and Propel obtains repayment
from the locality. Any facial appeal of this approach, however, is undermined by the
plain terms of the statute.
Virginia Code § 58.1-3018 authorizes the mechanism of TPAs and exercises
substantial control over the formation and termination of such agreements. The statute
defines TPAs as agreements in which an entity like Propel “contracts with a taxpayer to
pay [local taxes] to a county, city or town on behalf of that taxpayer.” Va. Code § 58.1-
22
3018(A). The statute further requires that the TPA “provide for the reimbursement of the
third party by the taxpayer” in installment payments. Id. § 58.1-3018(B)(2).
Under this plain language, the Virginia statute authorizes the third-party payor to
pay the taxpayer’s outstanding local tax assessment in return for the taxpayer’s promise
to repay the third party in accordance with the TPA payment plan. The material terms of
that payment plan are regulated by the Virginia statute. See id. (setting forth the
maximum repayment period, the maximum interest rate, and the maximum origination
fee). The statute also requires the third-party payor to provide monthly status reports to
the local government regarding the taxpayer’s compliance with the TPA. Id. § 58.1-
3018(B)(4).
The locality’s oversight of the taxpayer’s compliance with the TPA continues
throughout the repayment process. After the third party pays the locality on behalf of the
taxpayer, the locality “toll[s]” any enforcement period for the taxes owed. Id. § 58.1-
3018(E). Notably, the locality does not remove the lien or transfer it to the third-party
payor, who lacks recourse against a defaulting taxpayer with respect to the underlying tax
obligation if the third-party payor obtains reimbursement from the locality as permitted
by statute. Id. § 58.1-3018(C)(4). Upon such repayment of principal from the locality,
the TPA terminates as a matter of law and the locality “reinstates” the full amount of its
tax assessment against the taxpayer, ending the tolling period of enforcement. Id. § 58.1-
3018(C)(2), (4). Thus, the link between the taxpayer and the preexisting tax assessment
is not severed by a TPA as the majority contends, but remains in effect throughout the
course of the TPA’s operation.
23
Contrary to the majority’s conclusion, a TPA cannot realign this statutory
relationship of the parties and transform the third party’s payment of the tax assessment
into a “credit transaction” under TILA. The Virginia statute merely invites a third-party
payor to “front” the money for payment of the taxpayer’s obligation, in return for
receiving fees and interest allowed by the statute, and tolls enforcement of the tax lien
against the taxpayer only so long as he complies with the parties’ tax-payment plan. In
other words, the TPA “changes only the entity to which” the taxpayer is “indebted for the
taxes originally owed, not the nature of the underlying debt.” Billings v. Propel Fin.
Servs., LLC, 821 F.3d 608, 613 (5th Cir. 2016) (citation omitted).
Moreover, TPAs authorized by the Virginia statute differ dramatically from
typical third-party financing of debt, such as “a mortgage or a bank loan,” in which a
“consumer enlist[s] a third party to help” defer payment “in exchange for interest and
fees.” Maj. Op. 16. Although the third-party payor under a TPA collects interest and
fees from the taxpayer, any similarity to a bank loan ends there. A TPA is not an
independent financial agreement in which a lender or its assignee retains full recourse
against the individual receiving the benefit of payment. See Billings, 821 F.3d at 613 &
n.4 (citing Pollice v. Nat’l Tax Funding, L.P., 225 F.3d 379, 409-11 (3d Cir. 2000),
abrogated on other grounds by Henson v. Santander Consumer USA Inc., 137 S. Ct.
1718 (2017)). And as noted, under a TPA, the taxpayer has a continuing obligation to the
taxing locality until the taxpayer has paid the entire amount of the principal due under the
TPA.
24
Because the third-party payor under a Virginia TPA cannot enforce the tax lien
upon default by the taxpayer, the TPA bears even less resemblance to a standalone third-
party financing of a tax obligation than the transactions at issue in Billings and Pollice.
There, the localities had transferred the tax liens to the third-party payors, who thereby
obtained that additional avenue of recourse against the taxpayers. See Billings, 821 F.3d
at 610; Pollice, 225 F.3d at 385-86. Yet, in holding that these transactions did not qualify
as “credit” under TILA, the Fifth and Third Circuits emphasized that the third parties
nevertheless did not extend a “line of credit” independent from the tax obligation.
Billings, 821 F.3d at 613 n.4; see Pollice, 225 F.3d at 410-11.
The same is true here. The TPA “did not create” a new debt “that would be
subject to TILA,” Billings 821 F.3d at 613, but instead granted Propel the authority to
implement a payment plan with Curtis for his existing tax obligation, which is not subject
to TILA.
I wish to emphasize that I appreciate the important purposes of TILA in protecting
consumers from unfair lending practices. But in my view, any protection for Virginia
taxpayers entering into TPAs is an issue to be resolved by Virginia, the sovereign entity
creating this form of tax-payment plan. For these reasons, I would vacate the judgment
of the district court that the TPA qualifies as “credit transaction” under TILA. 2
2
Based on this conclusion, I would not reach the question whether the TPA
qualifies as a “consumer” transaction as addressed by the majority opinion in Part IV(B).
25