A federal judge said a company collecting consumer debts on behalf of theme park operator Six Flags did not violate federal law in a collections letter it sent an Illinois man who later filed a class action complaint. But the judge said he would still consider whether other letters may have yet violated the Fair Debt Collection Practices Act.
On Feb. 3, 2016, plaintiff Joseph Bernal sued National Recovery Agency, based in Harrisburg, Penn., in connection with a Feb. 17, 2015, letter reporting he owed Six Flags $267.31 in unpaid monthly membership fees. The letter also demanded Bernal pay a collection fee of $43.28. Bernal said NRA’s fee assessment breached the FDCPA, which prohibits “false, deceptive or misleading” statements and “unfair or unconscionable means” to collect a debt.
U.S. District Judge Gary Feinerman granted class certification in August 2016 for all Illinois residents who got a letter like Bernal. In cross motions for summary judgment, both sides agreed the issue was whether Bernal’s contract with Six Flags allowed him to be billed for costs associated with debt collection. Bernal said Six Flags should only be allowed to charge him exactly what it cost the collector to pursue payment. NRA said Bernal could be charged whatever it charged Six Flags, even it the charge was a fixed percentage.
Feinerman denied the cross motions, saying choosing one correct interpretation wasn’t needed because neither side cited evidence entitling it to summary judgment. He initially set a jury trial before both sides agreed to a bench trial. Before that began, Bernal again asked the court to resolve the contract interpretation issue, at which point Feinerman agreed with NRA’s take.
In an opinion issued Nov. 1 in Chicago, Feinerman said he accepted NRA’s reading of the contract, summarized the bench trial findings and established a post-trial procedure to resolve claims of absent class members.
Had Six Flags used its own employees to collect Bernal’s debt, Feinerman wrote, the law would have allowed it to recover only actual expenses. But there was no language prohibiting the company from retaining a collection agency or an attorney, nor any clause limiting what constitutes “costs incurred (by Six Flags) in attempting to collect amounts due.” The costs NRA incurred, he continued, are beside the point — all that matters is what NRA charged Six Flags for the work, and the law allows that cost to be passed on to the party that owes the money.
Bernal also said the fee was improper because NRA hadn’t charged Six Flags the collection fee at the time it sent him the letter. However, Feinerman said NRA likely would have violated the FDCPA by failing to inform him of a contingent fee in its initial collection notice.
“Simply identifying the fee as a cost, up front, gives the debtor a better understanding of his or her obligations,” Feinerman wrote.
Feinerman also detailed Six Flags’ collection agreement with AR Assist LLC, and said the fact Bernal was 232 days in arrears actually allowed a collection fee of 25 percent of the principal, whereas NRA levied costs of only 16 percent.
For other class members, he said the parties must determine what AR Assist could have charged and compare it to the costs cited in NRA collection letters. If the NRA fee was less, there was no federal violation. If any class member got a letter indicating an NRA fee in excess of what AR Assist would have charged, there was a violation.
Feinerman gave the parties until Nov. 21 to submit a status report indicating which class members received letters that contain a fee request in violation of FDCPA standards and which class members did not.
Bernal’s counsel — Philipps & Philipps, of southwest suburban Palos Hills — also represents the class.
NRA is defended by the Chicago firm of Rock, Fusco & Connelly, and by Olson Law Group, of Ann Arbor, Mich.