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United States District Court, Northern District of Illinois, Eastern Division

September 14, 2000


The opinion of the court was delivered by: Moran, Senior District Judge.


The Patterson case began with two different issues. Those were determined adversely to plaintiff in a different case, and that ruling was affirmed in January of this year. Plaintiff thereafter filed an amended complaint, and defendants moved to dismiss. In the meantime, the Banks case had been filed. Since it raised the same issue, the case was transferred to this court as related on April 6, 2000.*fn1 We now grant the motions to dismiss in both cases.

In Patterson, Columbia House Video Club operates a video club. A consumer signing up for the club receives seven video movies for seven cents, plus shipping and handling. He also agrees to purchase five more video movies over a three-year period at $19.95 to $29.95 per movie, plus shipping and handling. The material furnished to the consumer further provides as follows:

What If I Don't Fulfill My Part of the Agreement?

That is, if you:

• Cancel your membership before buying the number of selections agreed upon, or

• Fail to make your purchase within the specified length of time, or

• Are late paying a bill.

First, we'll send you a reminder, and hopefully the matter will be cleared up quickly.

If you still don't meet the terms of your agreement, we'll bill you for an amount called "Due on Contract." This represents the total cost of the selections you haven't yet bought. We calculate this charge by multiplying the number of unpurchased selections by our commitment Club price of $19.95. We also add shipping and handling and any applicable tax. Once you've paid this charge, you may order and receive the number of selections you've paid for.

In Banks, the product is books but the system is the same. The consumer receives several books at a very low cost and obligates herself to purchase several additional books at stated prices. That agreement provides as follows:

Your Membership Agreement

• When you joined the club, you agreed to purchase a given number of books at regular club prices to satisfy your membership agreement. Please note that clearance and non-book (merchandise and audio) purchases do not count toward your membership agreement.

• If you[sic] book purchase obligation is not fulfilled within your agreed-to time period, you may receive a reminder.

• After completing your commitment, you may cancel your account at any time. If you do not fulfill your agreement or your account becomes overdue, you may be billed for the number of books you've failed to buy,

• The commitment charges are calculated by taking the number of outstanding book purchases required to fulfill your commitment and multiplying it times the Club's average book price. These commitment charges include shipping and handling fees and any applicable sales tax.

• Upon payment of your commitment charge, you will be given a catalogue from which to make your selections of the books you will receive to fulfill your commitment.

In Patterson, North Shore Agency, Inc., a debt collector, sent plaintiff a collection letter which included a demand for payment of $93.24 as "DUE ON CONTRACT." In Banks, the same agency sent the plaintiff a collection letter that included a "bill for commitment" charge. Plaintiff in each case claims that the collection letter violates Section 1692e of the Fair Debt Collection Practices Act (FDCPA), 15 U.S.C. § 1692 et seq., because each letter falsely claims an amount not due. The amount is inflated, plaintiffs claim, because the creditor seeks payment of the amount that would have been due if the videos and books had been ordered and shipped, but they were not. Accordingly, the creditor was obligated to reduce the amount sought by its cost for the merchandise it has not sent because it has saved that amount.*fn2

Plaintiffs claim that the creditors have "padded" the debts with charges not authorized by law or contract. We assume that a demand for payment of a padded debt is a violation of FDCPA. See Micro Data Base Systems, Inc. v. Dharma Systems, Inc., 148 F.3d 649, 656 (7th Cir. 1998). But that is not what happened here. The consumers and the creditors agreed upon what were their mutual obligations upon default. Thus the creditors are not remitted to the remedies for breach of contract in the absence of agreement. They were entitled to pursue those contractual remedies unless those remedies were unreasonable. And they were not. Upon the consumer's payment of the amount claimed the creditor becomes obligated to ship, at the request of the consumer, all the videos or books covered by the payment. The net effect, then, is to place the consumer and the creditor in the same position they would have been in if the consumer had performed his contractual obligations in the first place. That is hardly an unconscionable outcome.

The motions to dismiss are granted. All other motions are denied.

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