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GULLY v. ARROW FINANCIAL SERVICES

June 8, 2005.

JIMMY L. GULLY, RAQUEL M. ONTIVEROS, and MAI THURMAN, Plaintiffs,
v.
ARROW FINANCIAL SERVICES, LLC, Defendant.



The opinion of the court was delivered by: REBECCA PALLMEYER, District Judge

MEMORANDUM AND OPINION ORDER

Plaintiffs Jimmy L. Gully, Raquel M. Ontiveros, and Mai Thurman each received a letter from Defendant Arrow Financial Services LLC ("Arrow") offering to settle their outstanding credit card debts to Capital One Services ("Capital One") for less than the full amounts due if Arrow received the specified settlement payment by a certain date. Plaintiffs allege on behalf of a class of debtors that these debt collection letters are misleading in violation of the Fair Debt Collection Practices Act ("FDCPA"), 15 U.S.C. § 1692 et seq., because they convey the false impression that the settlement offers are only available for a limited period of time. Arrow denies that the letters violate the Act and seeks judgment on the pleadings pursuant to FED. R. CIV. P. 12(c). For the reasons set forth here, the motion is denied.

BACKGROUND

  Gully is a resident of Gary, Indiana who owed a $1,167.17 debt to Capital One. (SAC ¶ 3; Collection Letter of 5/26/04, Ex. A to SAC.)*fn1 Ontiveros is a resident of Chicago, Illinois who owed Capital One a debt of $503.19. (Id. ¶ 4; Collection Letter of 9/14/04, Ex. B to SAC.) Thurman, also of Chicago, Illinois, owed Capital One a debt of $3,351.43. (Id. ¶ 5; Collection Letter of 1/14/04, Ex. C to SAC.) Plaintiffs all incurred their individual Capital One credit card debts "for personal, family or household purposes." (Id. ¶¶ 11, 17, 23.) At some point Capital One referred Plaintiffs' debts to Arrow, which is in the business of buying bad debts and which acted as a collection agency in this case. (Id. ¶ 7.) Arrow and Capital One agreed that Arrow had the authority to settle any of Capital One's accounts at a discount according to the following formula:
Account Balance Days Since Charge-Off*fn2
0-90 91-180 181-730 730 $0 — $1,500 70% 70% 50% 50% $1,501 — $3,000 70% 50% 50% 50% $3,000 70% 50% 40% 40%
(Id. ¶ 31.)
A. The Collection Letters
  On May 26, 2004, Ray Thompson, an Account Representative for Arrow, sent Gully a form collection letter seeking to recover his defaulted debt to Capital One. (Id. ¶¶ 10-12.) The letter stated:
 
At this time our client is willing to settle your past due account for 75% of the full balance and accept this amount as settlement of the referenced account. The settlement amount must be made in one payment and received by our office on or before June 7, 2004.
* * * *
Should you have any questions please feel free to contact me at 800-807-3490 ext. 2467.
(Id. ¶ 13, 15; Collection Letter of 5/26/04, Ex. A to SAC.)

  On September 14, 2004, Arrow Account Representative James Smith sent Ontiveros a similar form collection letter seeking to recover her defaulted debt to Capital One. Aside from a different payment due date — September 27, 2004 — this letter was essentially identical to the one sent to Gully. (Id. ¶¶ 16-19, 21; Collection Letter of 9/14/04, Ex. B to SAC.) Thurman, too, received a nearly identical letter from Arrow Account Representative George Perry on January 15, 2004. In Thurman's letter, Arrow offered to settle her past due account for 40% of the full balance if it received payment by February 12, 2004. (Id. ¶¶ 22-25, 27; Collection Letter of 1/15/04, Ex. C to SAC.)

  B. Plaintiffs' Lawsuit

  On October 25, 2004, Gully filed a class action complaint against Arrow, alleging that the May 26, 2004 collection letter was false or misleading in violation of § 1692e of the FDCPA. Thurman filed a similar lawsuit against Arrow on January 7, 2005. On January 18, 2005, Gully requested that Thurman's case, which was pending before Judge Filip, be reassigned to this court and consolidated with Gully's lawsuit. This court granted Gully's motion on January 26, 2005.

  On February 16, 2005, Gully amended the complaint to add Ontiveros as a Plaintiff. In this Second Amended Complaint currently before the court, Plaintiffs allege that the collection letters they received are misleading in violation of the FDCPA because they state that Arrow and Capital One are willing, "[a]t this time," to settle the claims for a certain percentage of the total debt, and set a deadline for receipt of the reduced payment. These statements, Plaintiffs allege, falsely suggest that the offers are only available for a brief period.*fn3 (SAC ¶¶ 14, 15, 20, 21, 26, 27.) In the case of Gully and Ontiveros, Arrow conveyed the false impression that it would accept 75% of their debts as full payment, but only for a limited time; in fact, Arrow and/or Capital One will "take 75% of a Capital One-owned debt at any time, and will also settle for less than 75%." (Id. ¶ 32.) With respect to Thurman, Arrow similarly conveyed the false impression that the offer to accept 40% of the debt was available only for a limited time; in reality, "if a debt in excess of $3,000 reaches the point on the above schedule at which a 40% settlement is authorized by Capital One [i.e., 181 days or more have passed since the charge-off], Arrow is authorized to and will in fact take 40% of a Capital One debt at any time." (Id. ¶¶ 46, 47.)

  Arrow argues that the collection letters are accurate and cannot be deemed misleading to the unsophisticated consumer. It thus moves for judgment on the pleadings.

  DISCUSSION

  A motion for judgment on the pleadings pursuant to FED. R. CIV. P. 12(c) is evaluated using the same standard applicable to Rule 12(b)(6) motions to dismiss for failure to state a claim. Guise v. BWM Mortgage, LLC, 377 F.3d 795, 798 (7th Cir. 2004). Under that standard, judgment on the pleadings should be granted "only if it appears beyond doubt that the plaintiff cannot prove any facts that would support his claim for relief. In evaluating the motion, [the court] accept[s] all well-pleaded allegations in the complaint as true, drawing all reasonable inferences in favor of the plaintiff." Thomas v. Guardsmark, Inc., 381 F.3d 701, 704 (7th Cir. 2004) (quoting Midwest Gas Servs., Inc. v. Indiana Gas Co., 317 F.3d 703, 709 (7th Cir. 2003)).

  A. The Case Law

  In the SAC, Plaintiffs cite several cases in support of their theory that Arrow's collection letters are misleading. In Goswami v. American Collections Enterprise, Inc., 377 F.3d 488 (5th Cir. 2004), Capital One authorized the defendant debt collector to provide debt collection services and to settle any Capital One accounts at a discount according to a schedule very similar to the one at issue in this case. Id. at 491. See supra p. 2. Pursuant to that authority, the defendant sent the plaintiff, who was one of Capital One's delinquent debtors, a form collection letter stating, in part:
Effective immediately, and only during the next thirty days, will our client agree to settle your outstanding balance due with a thirty percent (30%) discount off your above balance owed. This settlement must be in one payment and must be received in our office no later than 30 business days from the date of this letter unless you contact our office to make other arrangements.
Id. at 491-92. The plaintiff filed suit against the defendant arguing, among other things, that the letter ...

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