### In the 

# United States Court of Appeals For the Seventh Circuit

____________________ No. 14

- 3774

C ARMEN F RANKLIN and J ENIFER C HISM , on behalf of themselves and all others similarly situated
, Plaintiffs

- Appellants
,

v.

P ARKING R EVENUE R ECOVERY S ERVICES , I NC

. , and
B RYON B ELLERUD II, P.C.
, Defendants

- Appellees

.

____________________ Appeal from the United States District Court for the Northern District of Illinois
, Eastern Division.

No. 13 C 0 2578

— Edmond E. Chang
, Judge

____________________
A RGUED S EPTEMBER 10, 2015

— D ECIDED A UGUST 10, 2016

____________________

Before F LAUM , R IPPLE , and S YKES , Circuit Judges

. S YKES , Circuit Judge

. Carmen Franklin and Jenifer Chism park ed their car s in a Chicago

- area lot owned by Metra, the public commuter railroad, and operated by CPS Chicago Parking, LLC. (“CPS”). The lot offers parking spaces to the2 No. 14

- 3774

public at the rate of $1.50 per day. CPS says the two failed to
pay and sent them violation notices demanding payment of the $1.50 fee and a $45 nonpayment penalty. When they still did not pay, CPS referred the matter for collection to Parking
Revenue Recovery Services, Inc. (“Parking Revenue”)
, which sent them collection letters for the $46.50 total due

. Franklin and Chism responded with this class action against Parking Revenue alleging violations of the Fair Debt Collection Practices Act (“FDCPA”), 15 U.S.C. § § 1692 et seq. The district court entered summary judgment for Parking Revenue, holding that the FDCPA does not apply because the unpaid parking obligations are not “debts” as that term is defined in § 1692a(5)

. We reverse. T he obligations at issue here

— unpaid par king fees and nonpayment penalties

— are “debts” within the meaning of the FDCPA. Th at statutory term comprises obligations “ arising out of” consumer “transactions.” Par king in a lot that is open to all customers subject to stated charges is a “ transaction. ” The obligation that arises from that transaction is a “debt
, ” and an attempt to c ollect it must comply with the F D CPA. 1

1 We solicited the view s of the Federal Trade Commission on this issue. The FTC has an interest in protecting consumers from abusive debt

collection practices. The FTC accepted our invitation and filed a brief as amicus curiae joined by the Consumer Financial Protection Bureau
, which shares the FTC’s interest in protecting consumers and is autho rized to enforce the FDCPA. 15 U.S.C. § 1692 l (b)(6). In the view of these federal agencies charged with enforcing the statute, the obligations at issue here are indeed debts covered by the FDCPA. The agencies take no position on the ultimate merits. W e appreciate their willingness to assist the court.No. 14

- 3774 3

I. Background
In June 2012 Franklin and Chism parked their car s in a Chicago

- area lot owned by Metra ( the Commuter Rail Division of the Regional Transportation Authority ) and operated by CPS , a wholly owned s ubsidiary of Central Parking System, Inc. CP S is a private company that contracts with Metra to manage parking lots adjacent to commuter rail stations throughout the Chicago area. Under its contract with Metra , C PS keep s a percentage of the gross revenues collected from the lots that it operates. The signage and the pay machine at the lot plainly state that it cost s $1.50 for daily parking. And C P S tells us that the sign age also states that a fee of up to $60 will be assessed to parkers who fail to
pay

. Franklin and Chism both insist that they paid the $1.50
upon p arking , but CPS claims they parked without paying

an d now owe the $1.50 parking fee and a $45 nonpayment penalty. C P S referred the matter to Parking Revenue, which
in turn sent the women collect ion letters. The letters noted that Franklin and Chism had previously received one or more parking

- violation notic es and demanded payment of “this debt” within 30 days or alternatively, notification in writing that they dispute the debt’s validity.

Franklin and Chism responded with th is class action against Parking Revenue alleging that the collection letters violated the FDCPA in numerous ways

. The suit alleges that parking in the lot was a “transaction”

— Central Parking offers park ing to all comers
, which the plaintiffs accepted by parking in the lot

— and the payment obligation therefore

was a debt , the collection of which is governed by FDCPA

.4 No. 14

- 3774

The district judge disagreed. He characterized the colle ction letters as attempt s to collect fine s imposed for viola ting the parking lot’s rules

. The judge said that the payment obligation w as “ materially indistinguishable from a ticket issued for failure to feed a parking meter

. ” As such, it did not reflect a consensual transaction ; Franklin and Chism essentially stole the parking spaces from CP S

. On this reaso ning, t h e judge concluded that the obligation s were not debt s within the meaning of the FDCPA and granted Parking
Revenue ’s motion for summary judgment

. 2

II. Discussion

We review the court’s ord er granting summary judgment de novo, e valuating the record in the light most favorable to Franklin and Chism and drawing all reasonable inferences from the evidence in their favor. Townsend v. Cooper , 759 F.3d 678, 685 (7th Cir. 2014). The FDCPA prohibits various “abusive debt collection practices,” 15 U.S.C. § 1692(e), including the use of false or misleading representations, id. § 1692e, and other unfair practices
, id. § 1692f, to collect any debt. Franklin and Chism contend that Parki ng Revenu e ’s collection letters violate the FDCPA in several ways

. 3 Our present concern, however, is

2 The suit also named Bryon Bellerud II, an attorney for Parking Revenue responsible for sending the collection letters. The judge entered an order of default against Bellerud because he failed to answer or otherwise plead. As we’ve just explained, however, the judge later concluded that the FDCPA is inapplicable.

3 Franklin and Chism allege that the letters (1) falsely represented that in orde r to avoid a presumption of the debt’s validity, they must dispute the charges and fees in writing; (2) attempted to collect the additional $45 charge without express authorization to impose the charge; and (3) madeNo. 14

- 3774 5

limited to the threshold question whether the FDCPA even applie s . Th at question turns on whether the underlying payment obligations are debt s within the me aning of § 1692a(5). If they are, then the FDCPA applies and su mmary judgment was improper.
Section 1692a(5) defines a “debt” as “a ny obligation or alleged obligation of a consumer to pay money arising out of
a transaction in which the money, property, insurance, or services which are the subject of the transaction are primar ily for personal, family, or household purposes

. ” Two parts of the definition need further explanation. First, a lthough the statute does not define “tr ansaction,” we have held that the term is “a broad reference to many diffe rent types of business dealings between parties.” Bass v. Stolper, Koritzinsky, Brewster & Neider, S.C., 111 F.3d 1322, 1325 (7th Cir. 1997). Next, the “arising out of” language limi ts the FDCPA’s reach to only those obligations that are created by the contracts the parties used to g ive legal force to the ir transaction. Id. at 1326. This means that, in general, efforts to collect on obligations that are created by other kinds of legal authorities, like tort law or traffic regulations
, are not covered by the FDCPA. The parties rightly agree that if Franklin ’s and Chism’s obligations arise out of contract law , the y are debt s covered by the FDCPA. And i t’s clear that contract law is the source of the obligations at issue here

. Ind eed, at oral argument Parking Revenue’s attorney was unable to explain what

false, deceptive, or misleading representations. The judge didn’t reach the merits of these arguments because he concluded that the FDCPA was inapplicable.6 No. 14

- 3774

source of law other than contract could have created the obligations that its letters attempted to collect

. By parking in the lot
, Franklin and Chism accepted C P S ’s offer to park at the stated cost

. At that moment a contract was formed obligating them to pay the stated price or pay a higher price if they left the parking lot without paying

. It matters not that Metra owns the lot , or that the contract between Metra and CP S sometimes refers to the $45 no npayment charge as a “fine

. ” The crucial question is the legal source of the obligation. Although Metra is a governmental

a gency, no municip al ordinance or regulation obligates park

- and

- dashers to pay t he $45; that obligation comes from the contract that is formed when a customer parks in the lot.
Metra owns th ese lots like any other parking

- lot proprietor and con tracts with C P S to operate the m . That contract provides that any dispute between “patron[s]” (parkers) and

“ [o] perator” ( C P S ) shall be handled “as a matter of co ntract.” So t he district judge ’s analogy to fines assessed for nonpayment at municipal parking meters wa s inapt. These obliga tions have no source in municipal law. The judge’s analogy to theft wa s also inapt . The judge thought a car parker’s failure to pay resembled the condition of the thief that we described in Bass

. There we noted that the FDCPA doesn’t cover a thief’s obliga tion to pay for the goods he steals if his obligation is created by tort law (e.g., the tort of conversion )
, see R ESTATEMENT (S ECOND ) OF T ORTS § 222A ( Am. Law Inst. 1965)
, rather than by contract law
, s ee Bass, 111 F.3d at 132 6

. T he obligations at issue here , howe ver, are not premised on the tort of conversion; they are premised exclusively on the contract that was formed b etween Franklin and Chism on one side and C P S on the other.No. 14

- 3774 7

This distinction between contract and tort is the reason that the obligati on incurred after paying with a bad check give s rise to a “ debt ” under the FDCPA while shoplifting does not

. See id. at 1325. When the check is tendered for payment
, a contract is formed

. See id.

To conclude: The signs at the parking lot offered a par king spot to all comers for $1.50 per day and noted a penalty for failing to pay. Franklin and Chism each accepted this offer

— and thus formed a contract

— when they parked in the lot . Their obligation to pay the $46.50 is premised entirely on this contract. P arking Revenue was therefore attempting to collect debt s , and its attempts are regulated by the FDCPA ’s protections.

R EVERSE D

.