Troy L. Freyermuth v. Credit Bureau Serv.

United States Court of Appeals
FOR THE EIGHTH CIRCUIT
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No. 00-2661
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Troy L. Freyermuth *
*
Appellant, *
*
v. * Appeal from the United States
* District Court for the District
Credit Bureau Services, Inc, * of Nebraska.
d/b/a Checkmate of Fremont *
*
Appellees. *
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Submitted: February 15, 2001
Filed: April 27, 2001
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Before RICHARD S. ARNOLD, and HANSEN, Circuit Judges, and DAVIS,1
District Judge.
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DAVIS, District Judge.
Troy L. Freyermuth (Freyermuth) appeals the district court's entry of
summary judgment in favor of Credit Bureau Services, Inc., d/b/a/ Checkmate of
Fremont (Checkmate). Freyermuth commenced this action pursuant to the Fair Debt
Collection Practices Act (FDCPA), for abusive practices in seeking to collect
1
The Honorable Michael J. Davis, United States District Judge for the District
of Minnesota, sitting by designation.
payment for dishonored checks. 15 U.S.C. §§1692 et seq. The District Court2
granted summary judgment for defendant. We affirm.
I.
Between May 11, 1990, and April 8, 1998, Freyermuth wrote fourteen checks
which were returned for insufficient funds (NSF) to various merchants in Fremont,
West Point, and Wisner, Nebraska. The merchants referred the NSF checks to
Checkmate, a check authorization service, for collection. Six of the checks were
referred to Checkmate in 1990; two checks were then referred in 1994, five in 1995,
and one in 1998. Checkmate sent individual notices (“Initial Notices”) to Freyermuth
within two business days after receiving each of the referred checks. Each Initial Notice
was sent to Freyermuth at his last known address. The Initial Notices indicated that
Freyermuth had an amount due on Checkmate’s permanent bad check data file, and
listed the outstanding balance and applicable service charges. Freyermuth paid the
principal balance on seven of the fourteen checks; he did not pay service charges on
any of the fourteen checks. On May 6, 1998, Checkmate sent Freyermuth two follow-
up notices ("Subsequent Notices") regarding the NSF checks identified in the fourteen
Initial Notices.
The language of the Subsequent Notices reads: “Our records show the amount
due indicated below remains in our CHECKMATE PERMANENT BAD CHECK
DATA FILE. TO PROTECT YOUR CHECK-WRITING PRIVILEGES, REMIT
THE BALANCE DUE IMMEDIATELY (CASH OR MONEY ORDER ONLY)... To
be sure of proper credit and to stop further procedure[sic], make your payment in full.”3
2
The Honorable William G. Cambridge, United States District Judge for the
District of Nebraska.
3
The language of the two notices differs slightly. One notice addresses the
checks for which the principal balance and the service charges are outstanding. The
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On May 20, 1998, Freyermuth, through his counsel, wrote Checkmate requesting
the names and addresses of the original creditors and the amount in controversy
concerning each check. On June 2, 1998, Checkmate replied in writing with a list of
11 creditors, and a principal amount for each creditor. Freyermuth filed this lawsuit
against Checkmate on May 5, 1999, for abusive debt collection practices in violation
of the FDCPA. He alleged that Checkmate unlawfully attempted to collect a service
charge in violation of 15 U.S.C. §1692f(1).
Checkmate brought a motion for summary judgment. In his response to
Checkmate's motion, Freyermuth raised the new claim that Checkmate had further
violated the FDCPA by attempting to collect on debts that were probably time-barred,
and moved for partial summary judgment in his favor. The district court granted
summary judgment to Checkmate, holding that the entire claim was barred by the
FDCPA's one year statute of limitation. Furthermore, the court held, Nebraska law did
not prohibit the collection of a service fee for a bad check, and thus no violation of the
FDCPA had occurred.
II.
This court reviews a grant of summary judgment de novo. Thus, summary
judgment is appropriate when the evidence, viewed in the light most favorable to the
nonmoving party, demonstrates that there is no genuine issue of material fact, and the
moving party is entitled to judgment as a matter of law. See Hill v. St. Louis Univ.,
123 F.3d 1114, 1118-19 (8th Cir. 1997); Duffy v. Wolle, 123 F.3d 1026, 1033 (8th
Cir. 1997).
other notice addresses those checks on which only the service charge is outstanding.
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The Fair Debt Collection Practices Act (FDCPA) makes it unlawful for debt
collectors to use "any false, deceptive, or misleading representation or means in
connection with the collection of any debt." 15 U.S.C. §1692e. The Act prohibits a
debt collector from collecting any service charge “unless such amount is expressly
authorized by the agreement creating the debt or permitted by law.” 15 U.S.C.
§1692f(1). In addition, it is a violation of the Act to threaten to take "any action that
cannot legally be taken." 15 U.S.C. §1692e(5).
The FDCPA states that any action to enforce any liability created by the Act
must be brought "...within one year from the day on which the violation occurs." 15
U.S.C. §1692k(d). This Court has previously held that in cases regarding abusive debt
collection letters, the date of the violation of the FDCPA occurs on the date the letter
that allegedly does not comply with the FDCPA's requirements is sent to the debtor.
See Mattson v. U.S. West Communications, Inc., 967 F.2d 259, 261 (8th Cir. 1997).
This action was filed on May 5, 1999, more than one year after the last of the Initial
Notices was mailed, on or about April 10, 1998. To the extent the complaint rests on
an alleged violation of the Act committed when Checkmate sent the Initial Notices, this
action is time-barred.
Freyermuth argues that his Complaint concerns alleged violations of the Act by
the Subsequent Notices, not the Initial Notices. Even if we were to find that the
Subsequent Notices form the basis of the Complaint and therefore it is not time barred,
the claim would nonetheless fail on the merits. Checkmate did not violate the FDCPA
when it attempted to collect service fees, nor when it attempted to collect on a debt that
was potentially time-barred.
Under the FDCPA, a debt collector may not impose a service charge unless (i)
the agreement creating the debt expressly authorizes the charge, or (ii) the charge is
permitted by law. See 15 U.S.C.A.§1692f(1). Neither party has argued that the
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charge was expressly authorized, and so we must look to applicable state law.
Nebraska law authorizes reimbursement to the seller for incidental damages incurred
as a result of the buyer's breach. Such incidental damages may include any
commercially reasonable charges. Neb. Rev. Stat. U.C.C. §2-710 (1963). A person
"in the position of a seller" can also recover incidental damages. In Nebraska, a
"person in the position of a seller" is one who "who has ... become responsible for the
price of goods on behalf of his principal...." Neb. Rev. Stat. U.C.C. §2-707(1)(1963).
In this case, various merchants referred the checks to Checkmate for collection.
The merchants retained ownership of the debt, but enlisted the services of Checkmate
to collect on the amount due. In this way, Checkmate "became responsible for" the
debts, and thus stands in the position of the merchants for purposes of collecting
incidental damages, in the form of a commercially reasonable charge. See Tuttle v.
Equifax Check, 190 F.3d 9, 14-15 (2d Cir. 1999). Checkmate therefore did not violate
Nebraska law when it imposed the service fees, and did not violate the FDCPA when
it attempted to collect them.
The question of whether a debt collector violates the FDCPA when it attempts
to collect on a potentially time-barred debt is one of first impression in this Circuit.
Congress enacted the Fair Debt Collection Practices Act in order to stop "the use of
abusive, deceptive and unfair debt collection practices by many debt collectors." 15
U.S.C.A.§1692(a). Impermissible practices include harassing, oppressive or abusive
conduct; false, deceptive or misleading representations; and unfair or unconscionable
collection methods. 15 U.S.C.A. §1692d-f. A court evaluating debt collection letters
must view them "through the eyes of the unsophisticated consumer." Duffy v.
Landberg, 215 F.3d 871, 873 (8th Cir. 2000).
The case law on this issue focuses on the debt collector's actions, and whether
an unsophisticated consumer would be harassed, misled or deceived by them. In
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Kimber v. Fed. Fin. Corp., 668 F. Supp. 1480 (M.D. Ala. 1987), the court held that the
debt collector's filing of a lawsuit on an apparently time-barred debt, without having
first determined after a reasonable inquiry that the limitations period had been tolled,
was a violation of the FDCPA. Subsequent cases have similarly turned on the threat,
or actual filing, of litigation. See Beattie v. D.M. Collections, Inc., 754 F. Supp. 383,
393 (D.Del. 1991)(threat of lawsuit which debt collector knows or should know is
time-barred is violation of FDCPA); Aronson v. Commercial Fin. Serv., 1997 WL
103818, *3 (W.D. Pa)(no FDCPA violation where no lawsuit threatened, and language
of letters tracked language of statute); Shorty v. Capital One Bank, 90 F. Supp. 2d 1330,
1332 (D.N.M. 2000)(no FDCPA violation where no lawsuit or further collection action
threatened); Johnson v. Capital One, 2000 WL 1279661, *1 (W.D.Tex.)(no violation
of the FDCPA where creditor only expressed intent to pursue lawful collection
attempts).
Only one court has found a violation of the Act in the absence of an express
threat of litigation when a creditor attempts to collect on a time-barred debt. See
Stepney v. Outsourcing Solutions, Inc., 1997 WL 722972, 4 (N.D. Ill.)(FDCPA claim
stated where collection notice promised "no further collection action" if the time-barred
debt was paid). Here, no legal action was taken or even threatened. As several cases
have noted, a statute of limitations does not eliminate the debt; it merely limits the
judicial remedies available. We decline to extend the reasoning of Kimber, and hold
that, in the absence of a threat of litigation or actual litigation, no violation of the
FDCPA has occurred when a debt collector attempts to collect on a potentially time-
barred debt that is otherwise valid.
III.
For the aforementioned reasons, we affirm the district court's grant of summary
judgment for Checkmate.
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A true copy.
Attest:
CLERK, U.S. COURT OF APPEALS, EIGHTH CIRCUIT.
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