The opinion of the court was delivered by: Pallmeyer, District Judge.
MEMORANDUM OPINION AND ORDER
Plaintiff William D. Winterstein, individually and on behalf
of all others similarly situated, has brought this action
against Defendant CrossCheck under the Fair Debt Collection
Practices Act, 15 U.S.C. § 1692, et seq. (hereinafter
"FDCPA"). Winterstein seeks a declaration that CrossCheck's form
debt collection letter violates the FDCPA, and an award of
damages for CrossCheck's violations of the FDCPA. CrossCheck now
moves for summary judgment, arguing that CrossCheck is not a
"debt collector" within the meaning of the FDCPA. In considering
such a motion, the court draws every inference in the light most
favorable to Winterstein and determines whether CrossCheck can
demonstrate the absence of any issues of material fact requiring
trial. See Celotex Corp. v. Catrett, 477 U.S. 317, 324, 106
S.Ct. 2548, 91 L.Ed.2d 265 (1986). After considering the
evidence submitted by each party, the court concludes CrossCheck
has not carried its burden and denies CrossCheck's motion.
Defendant CrossCheck is a computer information company that
provides check authorization services. (Affidavit of John J.
Kieley, IV, Vice President of Consumer Relations and Legal
Affairs for CrossCheck ¶ 4, Ex. C to Defendant's Rule 56.1(a)(3)
Statement [hereinafter "Def. Rule 56.1(a)(3) St."].)*fn1
Under its standard application/service agreement, CrossCheck
contracts with retail merchants who receive and accept checks
from their customers. (Id. ¶ 5.) When a customer presents a
check to the merchant, the merchant contacts CrossCheck for
authorization. (Kieley Dep., at 25-27, Ex. C to Plaintiffs Local
Rule 56.1(b)(3)(B) Statement [hereinafter "Pl.
Rule 56.1(b)(3)(B) St."]) CrossCheck then consults its comprehensive
information base which estimates the probability that the check
the customer is presenting will clear the bank.*fn2 (Kieley
Aff.
¶ 6.) If CrossCheck's database shows that information relative
to the check (including, for example, the face amount of the
check, the date it was issued, and the magnetic ink character
recognition numbers on the bottom of the check) falls within an
"acceptable statistical range," CrossCheck issues the merchant
an approval number for placement on the check.*fn3 (Kieley
Dep., at 28.)
In the event a merchant accepts a check approved by CrossCheck
and the check is dishonored, CrossCheck pays the merchant the
face amount of the check. The application/service agreement sets
forth a "Submission Time Frame," which requires the merchant to
"mail any dishonored checks covered under [the] agreement and
all additional paperwork to Check Center [CrossCheck] within 30
calendar days of the approval date." (Ex. A to Kieley Aff.) If a
merchant wishes to be reimbursed for a dishonored check, the
merchant is required to mail the dishonored check to CrossCheck
after the merchant's bank returns the dishonored check to the
merchant. (Kieley Dep., at 53.) Upon receipt of a dishonored
check, CrossCheck creates a claim by entering the name and
address of the check writer, as well as the magnetic ink
character recognition number of the check, into the CrossCheck
computer system. (Id., at 54.) CrossCheck then attempts to
re-deposit the check. (Kieley Aff. ¶ 18.) While Kieley stated
that he "believes" the checks CrossCheck attempts to re-deposit
are endorsed over to CrossCheck (Kieley Dep., at 54), he was
uncertain; and it is undisputed that the check involved in this
case was not in fact endorsed over to CrossCheck. (Id. at 55.)
Approximately forty percent of all dishonored checks resubmitted
by CrossCheck clear when re-deposited by CrossCheck. (Kieley
Aff. ¶ 19.)
Only if CrossCheck's attempt to re-deposit a dishonored check
fails does CrossCheck take any further action to collect on a
debt. (Id. ¶ 21.) Approximately seven percent of CrossCheck's
employees are engaged in direct recovery or collection
activities,*fn4 and around six percent of CrossCheck's total
expenses are allocated to recovery or collection efforts. (Id.
¶¶ 1112.) The record does not indicate to what the remaining
ninety-four percent of CrossCheck's expenses are devoted.
In October 1996, CrossCheck and C & P Auto Service Center,
Inc. d/b/a Chuck's Firestone*fn5 (hereinafter "Firestone")
entered into an application/service agreement (hereinafter the
"Agreement"). (Id. ¶¶ 1314.) On February 16, 2000, Plaintiff
William Winterstein took his truck to Firestone, in Joliet,
Illinois, for a tune-up. (Pl. Rule 56.1(b)(3)(B) St. ¶ 1.)
Winterstein paid for the service with a personal check
in the amount of $93.72. (Id.) Firestone immediately contacted
CrossCheck to determine whether it should accept Winterstein's
check. (Def. Rule 56.1(a)(3) St. ¶ 23.) After reviewing its
database, CrossCheck determined that Winterstein's check fell
within acceptable standards, and Firestone accepted the check.
(Id. ¶ 2426.) Firestone then endorsed the check and deposited
it into Firestone's account at Financial Federal Trust and
Savings Bank, Joliet, Illinois. (Pl. Rule 56.1(b)(3)(B) St. ¶
2.) Dissatisfied with Firestone's work and unable to obtain
satisfaction from Firestone, Winterstein contacted his bank and
stopped payment on the check. (Id. ¶ 1.) The check was first
dishonored on or about February 18, 2000. (Kieley Aff. ¶ 29.)
Firestone then mailed the dishonored check to CrossCheck, and
CrossCheck, pursuant to the warranty provision of the Agreement,
reimbursed Firestone for the amount of Winterstein's approved
check, $93.72. (Id. ¶¶ 30-31.) On March 24, 2000, CrossCheck
sent Winterstein a letter stating that CrossCheck had all right,
title, and interest in the dishonored check and requested
payment in the amount of $93.72. (Id. ¶ 32.) Winterstein
asserts that the form of this letter violates Section 1692g of
the FDCPA, which requires a debt collector to provide a consumer
with notice that the consumer has thirty days to request, in
writing, that the debt collector provide proof of the debt's
validity to the consumer. Specifically, the letter from
CrossCheck to Winterstein included statements that "IT IS
IMPERATIVE THAT YOU GIVE THIS MATTER YOUR IMMEDIATE ATTENTION"
and that CrossCheck is "LEGALLY ENTITLED" to the debt, language
that Winterstein alleges overshadows the thirty-day validation
notice required by the Act. CrossCheck believes that it is
entitled to summary judgment because it does not qualify as a
"debt collector" under the FDCPA.
The Fair Debt Collection Practices Act imposes civil liability
only on "debt collectors." 15 U.S.C. § 1692k. The FDCPA defines
debt collector generally as "any person who uses any
instrumentality of interstate commerce or the mails in any
business the principal purpose of which is the collection of any
debts, or who regularly collects or attempts to collect,
directly or indirectly, debts owed or due or asserted to be owed
or due another." 15 U.S.C. § 1692a(6). The Act then lists
numerous exceptions to this general definition. See id. §
1692a(6)(A)-(F). CrossCheck contends it is not a debt collector
under several theories. The court addresses each argument below.
A. The Creditor Exception
CrossCheck first contends that it is a creditor within the Act
and therefore excluded from the definition of debt collector.
(Defendant's Memorandum of Law in Support of its Motion for
Summary Judgment [hereinafter "Defendant's Memorandum"], at 3.)
The FDCPA specifically excludes from the definition of debt
collector "any officer or employee of a creditor while, in the
name of the creditor, collecting debts for such creditor."
15 U.S.C. § 1692a(6)(A). The legislative history of the FDCPA
establishes that the Section 1692a(6)(A) exclusion includes both
creditors themselves and their employees. See Kimber v. Fed.
Fin. Corp., 668 F. Supp. 1480, 1484 (M.D.Ala. 1987) (citing
S.Rep. No. 95-382, 95th Cong. 1st Sess., reprinted in
1977 U.S.C.C.A.N. 1695, 1698). The FDCPA defines a creditor as "any
person who offers or extends credit creating a debt or to whom a
debt is owed," but the Act goes on to explain that the term
creditor "does not include any person to the extent that he
receives an assignment or transfer of a debt in default solely
for the purpose of facilitating collection of such debt for
another." 15 U.S.C. § 1692a(4).
CrossCheck contends that it is a creditor within the meaning
of the Act, but the court notes that the original debt here was
owed to Firestone, not CrossCheck: Winterstein's check was
negotiated by Firestone, and the check was initially deposited
into Firestone's account at Financial Federal Trust and Savings
Bank, as opposed to an account controlled by CrossCheck. (Kieley
Dep., at 47-48.) Congress intended the FDCPA to protect
borrowers from "third persons who regularly collect debts for
others." S.Rep. No. 95-382, 95th Cong. 1st Sess., reprinted in
1977 U.S.C.C.A.N. 1695, 1697 (emphasis added). CrossCheck is a
third party collecting a debt that was originally owed to
Firestone. Although CrossCheck, like other check authorization
services, "may facilitate the transactions of its subscribers,
it is not in the business of extending credit." Holmes v.
Telecredit Serv. Corp., 736 F. Supp. 1289, 1293 (Del. 1990).
Holmes involved a check authorization service, Telecredit,
that, like CrossCheck, used a computer database to advise its
merchant subscribers on whether to accept or decline a
consumer's check. 736 F. Supp. at 1290. Telecredit also entered
into agreements with its subscribers to purchase checks
authorized by Telecredit that later defaulted. Id. In a case
challenging Telecredit's practices under FDCPA, the Holmes
court concluded that Telecredit could not "escape the spirit of
the [FDCPA] merely by the technicality of purchasing the debt
upon default so that title technically rests in itself."
736 F. Supp. at 1293.
The assignee exception to the Act's definition of creditor
found in ยง 1692a(4) specifically applies in this context. Id.
Winterstein's check was not assigned to CrossCheck until after
Winterstein stopped payment on the check. Therefore, CrossCheck
is not a creditor within the ...