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NEFF v. CAPITAL ACQUISITIONS & MANAGEMENT COMPANY

November 20, 2002

NATHAN NEFF, PLAINTIFF,
V.
CAPITAL ACQUISITIONS & MANAGEMENT COMPANY AND CAPITAL ONE, F.S.B., DEFENDANTS



The opinion of the court was delivered by: James F. Holderman, United States District Judge.

MEMORANDUM OPINION AND ORDER

On June 20, 2002, plaintiff Nathan Neff ("Neff") filed a class action complaint against defendants Capital Acquisitions & Management Company ("CAMCO") and Capital One, F.S.B. ("Capital One") alleging unlawful credit and collection practices in violation of the Truth in Lending Act ("TILA"), 15 U.S.C. § 1601-1667f (2002), the Fair Debt Collection Practices Act ("FDCPA"), 15 U.S.C. § 1692-1692o (2002), and the Illinois Consumer Fraud Act ("ICFA"), 815 ILCS § 505/2 (2002). On September 17, 2002, CAMCO and Capital One (collectively referred to as "defendants") moved, pursuant to Federal Rule of Civil Procedure 12(b)(6), to dismiss Neff's complaint for failure to state a claim upon which relief can be granted. Having considered this matter fully, for the reasons stated herein, defendants' motions to dismiss are granted.

STATEMENT OF FACTS*fn1

TILA, 15 U.S.C. § 1637 (b), and Regulation Z, 12 C.F.R. § 226.7 (2002), require that the "creditor" on an open end credit account, such as a credit card, furnish a periodic statement during any month in which there is an outstanding balance or for which a finance charge is imposed. The purpose of the monthly billing statement is to apprise the consumer, among other things, that a balance is claimed to be owed, the amount of the balance, and the extent to which failure to pay the balance in full will result in an increase in the amount owed during the month as a result of the accrual of finance charges. (Compl. ¶ 26.) It is the policy and practice of Capital One and CAMCO to assess finance charges on delinquent accounts at annual percentage rates as high as 25% even though no periodic statements are provided. (Compl. ¶ 27.) At no time between 1997 and the filing of the complaint had Capital One or CAMCO sent monthly statements to Neff. (Compl. ¶ 21.) No monthly statement is sent on delinquent credit card accounts that Capital One and CAMCO purchase; however, Capital One and CAMCO continue to accrue interest on such accounts. (Compl. ¶¶ 23, 24.)

Neff asserts in count I, against Capital One, and count II, against CAMCO, that defendants violated TILA by failing to send monthly statements. Neff alleges in count III, against Capital One, and count IV, against CAMCO, that the collection of interest by a debt collector with respect to credit card accounts on which monthly statements have not been furnished is a deceptive and unfair practice in violation of the FDCPA. Neff also claims in count V, against CAMCO, and count VI, against Capital One, that defendants violated the ICFA by engaging in the same conduct With respect to the FDCPA and ICFA claims, Neff contends that the practice is deceptive because (1) the creditor or debt collector is failing to furnish material information required to be furnished by law, and (2) without periodic statements, consumers are unlikely to realize that the debt is increasing through the assessment and compounding of interest (Compl. ¶ 31.) Neff claims that the practice is unfair because (1) the failure to furnish periodic statements is contrary to public policy, as established by TILA, and (2) it causes substantial injury to consumers because without periodic statements, they are unlikely to realize that the debt is increasing through the assessment and compounding of interest and the extent of the increase. (Compl. ¶ 32.) Finally, in count VII, Neff asserts a FDCPA claim against Capital One for setting Neff's debt and then selling it to CAMCO. Defendants claim, inter alia, that because they are not "creditors" within the meaning of TILA, they had no obligation to provide the monthly statements to Neff.

In deciding these motions to dismiss, this court has considered the following: defendants' motions to dismiss and supporting memoranda, plaintiffs' response, defendants' replies, plaintiffs' motion for leave to respond and surreply, Capital One's response and motion for leave to respond, and plaintiffs' objection to Capital One's motion for leave to respond.

STANDARD OF REVIEW

Federal Rule of Civil Procedure 12(b)(6) allows this court to dismiss a complaint that fails to state a claim upon which relief may be granted. In considering the merits of a motion made pursuant to Rule 12(b)(6), the well-pled allegations of the complaint must be accepted as true. Thompson v. Illinois Dep't of Prot'l Regulation, 300 F.3d 750, 753 (7th Cir. 2002). In addition, all ambiguities will be construed in favor of the non-moving party. Id. A court generally should only dismiss a complaint where it is clear that no relief could be granted consistent with the allegations. Hishon v. King & Spaulding, 467 U.S. 69, 73 (1984). Rule 8(a) of the Federal Rules of Civil Procedure states that a complaint must identify the basis of jurisdiction and contain "a short and plain statement of the claim showing that the pleader is entitled to relief." Bartholet v. Reishauer A.G. (Zurich), 953 F.2d 1073, 1077-78 (7th Cir. 1992). Complaints can be "short and simple, giving the adversary notice while leaving the rest to further documents." Id. It follows that in deciding a Rule 12(b)(6) motion to dismiss, this court must ask whether relief is possible under any set of facts that could be established consistent with the allegations in the complaint. See id.

ANALISIS

I. Truth in Lending Act Claim

In TILA, the term "creditor" is statutorily defined in 15 U.S.C. § 1602 (f) as:

a person who both (1) regularly extends, whether in connection with loans, sales of property or services, or otherwise, consumer credit which is payable by agreement in more than four installments or for which the payment of a finance charge is or may be required, and (2) is the person to whom the debt arising from the consumer credit transaction is initially payable on the face of the evidence of indebtedness or, if there is no such evidence of indebtedness, by agreement. Notwithstanding the preceding sentence, in the case of an open-end credit plan involving a credit card, the card issuer and any person who honors the credit card and offers a discount which is a finance charge are creditors. For the purpose of the requirements imposed under part D of this subchapter and sections 1637(a)(5), 1637(a)(6), 1637(a)(7), 1637(b)(1), 1637(b)(2), 1637(b)(3), 1637(b)(8), and 1637(b)(10) of this tide, the term "creditor" shall also include card issuers whether or not the amount due is payable by agreement in more than four installments or the payment of a finance charge is or may be required, and the Board shall, by regulation, apply these requirements to such card issuers, to the extent appropriate, even though the requirements are by their terms ...

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