AO 450(Rev. 5/85)udgment in 9 Civil Case

United States District Court

Northern District of Illinois
Eastern Division

ROBB JUDGMENT IN A CIVIL CASE
v. Case Number: 02 C 5829

CAPITAL ACQUISITIONS &
MANAGEMENT CO etal

a] Jury Verdict. This action came before the Court for a trial by jury. The issues have been
tried and the jury rendered its verdict.

a Decision by Court. This action came to trial or hearing before the Court. ‘The issues
have been tried or heard and a decision has been rendered.

IT {S IEREBY ORDERED AND ADJUDGED that this action is hereby dismissed in its
entirety for failure to state a claim upon which relief can be granted.

Michael W. Dobbins, Clerk of Court

_
Date: 11/20/2002 | g C

J, Smith, Dfputy Clerk



pursuant to Rule 12(b)(6), the well-pled allegations of the complaint must be accepted as truc.
Thompson v. Illinois Dep’t of Prof’] 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 identily 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 resi 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.
ANALYSIS
1 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 ofa 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 title, 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



pertinent commentary in the Code of Federal Regulations states that “a financial institution may
become the agent of the card issuer if an agreement between the institution and the card issuer
provides that the cardholder may use a line of credit with the financial institution to pay obligations
incurred by use of the credit card.” ‘Truth in Lending; Official Stalf Commentary, 12 C.F.R. pt.
226.2, Supp. I, Commentary 2(a)(7), p. 329 (2002).° Robb’s complaint does not allege that Capital
Onc or CAMCO offered Robb “a line of credit with” cither financial institution.

Robb is right that “[t]he nature of a credit card or charge card is that future transactions and
dealings are expected.” (Pls.’ Resp. at 8.) However, there are no allegations that defendants
extended credit to Robb or sought future dealings with him. In fact, a letter from CAMCO that is
attached as Appendix A’ evidences that CAMCO was merely trying to collect the debt duc on the
delinquent accounts, not attempting to cultivate future business. Under cither alternative statutory
definition of “card issuer,” defendants are not “card issuers” under TILA. As discussed further
below, because defendants purchased delinquent accounts, i.c., debt on which defendants charged
interest, and extended no credit privileges of their own, defendants are “debt collectors” subject to
the FDCPA, not “creditors” subject to TILA.

Finally, Robb argues that defendants are obligees or assignees and thus assumed their
predecessor’s obligation to send out periodic statements. However, the first sentence of § 1602(f)

makes clear that the “only” obligee that qualifies as a TILA “creditor” is “the person to whom the

® ‘The Staff Interpretations construing TILA and its implementing regulations are held to be
dispositive unless demonstrably irrational. Hardison v. General Fin. Corp., 738 F.2d 893, 895 (7th
Cir. 1984) (quoting Ford Motor Credit Co, v. Milhollin, 444 U.S. 555, 565 (1980)).

” Because this letter was attached as an exhibit to Robb’s complaint, it is deemed to be a part
of the pleadings and may be considered in deciding this motion to dismiss. Thompson y. Illinois
Dep't of Prof'| Regulation, 300 F.3d 750, 753 (7th Cir. 2002).

9



disclosing a single rate for the total charge, disclose each such rate expressed as an
annual percentage ratc, and the part of the balance to which it is applicable.

(7) The balance on which the finance charge was computed and a statement of how
the balance was determined. If the balance is determined without first deducting al!
credits during the period, that fact and the amount of such payments shall also be disclosed.
(8) The outstanding balance in the account at the end of the period.

(9) The date by which or the period (if any) within which, payment must be made to
avoid additional finance charges, except that the creditor may, at his election and
without disclosure, impose no such additional finance charge if payment is received

after such date or the termination of such period.

(10) The address to be used by the creditor for the purpose of receiving billing
inquirics from the obligor.

15 U.S.C. § 1367(b) (emphasis added).

Defendants claim they are not statutorily obligated to transmit periodic billing cycle
statements because they are not within the definition of “creditor” under TILA. The first sentence
of § 1602(f) provides a two-part lest for determining who is a creditor. This sentence makes il clear
that both parts of the test must be met lor an individual or entity to be within the first sentence’s
statutory definition of creditor, and to be a creditor, one must be “the person to whom the debt
arising from the consumer credit transaction is initially payable ....” Neither Capital One nor
CAMCO is alleged to be the person to whom the debt was initially payable; First Card was. (Compl.
4.8.)° Thus, defendants arc not creditors under the first sentence of § 1602(f).

Robb asserts, however, that defendants are creditors under the second and third sentences of

§ 1602(f) because they are “card issuers.” The relevant portions of the second and third sentences

?In addition, Robb does not allege that Capital One or CAMCO regularly extend consumer
credit to anyone. This court takes judicial notice, however, that Capital One has and continues to
regularly extend credit to consumers.



applicable only to creditors offering open-end credit plans. Any person who
originates 2 or more mortgages referred to in subsection (aa) of this section in any
12-month period or any person who originates 1 or more such mortgages through a
mortgage broker shall be considered io be a creditor for purposes of this subchapter.

15 U.S.C. § 1602(f) (emphasis added).

Section 1637, and Regulation 7, 12 C.F.R. § 226.7, provide that a “creditor” is required to
send certain statements to a debtor as long as there is an outstanding balance or a finance charge is
imposed. With regard to this requirement, section 1637(b) states:

The creditor of any account under an open end consumer credit plan shall transmit
to the obligor, for each billing cycle at the end of which there is an outstanding
balance in that account or with respect to which a finance charge is imposed, a
statement setting forth cach of the following items to the extent applicable:

(1) The outstanding balance in the account at the beginning of the statement period.

(2) The amount and date of each extension of credit during the period, and a bricf
identification, on or accompanying the statement of each extension of credit in a form
prescribed by the Board sufficient to cnable the obligor either to identify the
transaction or to relate it to copies of sales vouchers or similar instruments previously
furnished. ...

(3) The total amount credited to the account during the period.

(4) The amount of any finance charge added to the account during the period,
itemized to show the amounts, if any, duc to the application of percentage rates and
the amount, if any, imposed as a minimum or fixed charge.

(5) Where one or more periodic rates may be used to compute the finance charge,
each such rate, the range of balances to which it is applicable, and, unless the annual
percentage rate (determined under section 1606(a)(2) of this title) is requited to be
disclosed pursuant to paragraph (6), the corresponding nominal annual percentage
rate determined by multiplying the periodic rate by the number of periods in a year.

(6) Where the total finance charge exceeds 50 cents for a monthly or longer billing
cycle, or the pro rata part of 50 cents for a billing cycle shorter than monthly, the total
finance charge expressed as an annual percentage rate (determined under section
1606(a)(2) of this title), except that if the finance charge is the sum of two or more
products of a rate times a portion of the balance, the creditor may, in licu of



never issued a credit card, simply because the company is also a card issuer to other consumers. In
this case, Robb alleges that the “debt was delinquent” (Compl. ff] 11, 12, 16) and makes no
allegation that Capital One or CAMCO, independently or on behalf of First Card, ever extended
credit to Robb. Further, this court’s interpretation of the statutory definition of “card issuer” does
not render the second sentence of the “creditor” definition meaningless.’ This court can think of
circumstances where one could be a creditor without the debt being initially payable to it. lor
example, suppose Company A issued a credit card on behalf of and payable to Bank B. Bank B, for
efficiency and economic purposes, had contracted with Company A to manage, issue, and oversee
the credit accounts. Bank B pays Company A for these services but all accounts reccivable arc assets
of Bank B. Under TILA, because a debt would be initially payable to Bank B, it is a “creditor” under
the first sentence, and because Company A is the “card issuer,” it is also a “creditor.” Finally, there
isno allegation that Capital One or CAMCO issued a “credit card” to Robb, Robb’s “accounts” with
defendants were not for the purpose of “obtaining money, property, labor, or services on credit.”
There is no allegation that Capital One or CAMCO extended any credit privileges to Robb.
Moreover, there is no allegation that Robb was authorized to obtain property, labor, or services on
the strength of Capital One’s or CAMCO’s credit.

Second, Robb cannot maintain a viable claim that either Capital One or CAMCO was First
Card’s, the card issuer, “agent with respect to the card.” Robb alleges that defendants purchased his
delinquent accounts. He does not allege that Capital One, on behalf of First Card, or CAMCO, on

behalf of Capital One, were attempting to collect the debt on behalf of their principals. Further, the

* A court should not construe a statute so that parts become superfluous. See United States
v. Ray, 238 F.3d 828, 833 (7th Cir. 2001).



‘ Minute on Form (06/97)
aw United States District Court, Northern District of Mlinois

Name of Assigned Judge James F. Holderman Sitting Judge if Other
or Magistrate Judge than Assigned Judge
CASE NUMBER 02 C 5829 DATE 11/20/2002
CASE ROBB ys. CAPITAL ACQUISITIONS & MANAGEMENT CO etal
TITLE

[In the following box (a) indicate the party tiling the motion, c.g,, plaintiff, defendant, 3rd party plaintiff, and (b) state briefly the nature

MOTION: of the motion being presented.]

DOCKET ENTRY:

(1) a Filed motion of [ usc listing in “Motion” box above.]

(2) oO Brief in support of motion due

(3) Oo Answer brief to motion due___. Reply to answer bricfdue__

@ oO Ruling/Hearing on. __actfor___at

(3) Oo Status hearing[held/continued to] [set for/re-set tor]on__set for__ at

(6) a Pretriat conference[held/continucd to] [set for/re-set for]on___ssetfor__—at__

(7) oO Trial{set tor/re-set for]on__at

(8) o [Bench/Jury trial} [Hearing] held/continued to at

(9) Q This casc is dismissed [with/without] prejudice and without costs[by/agrecment/pursuant to]

OFRCP4(m) OLocal Rule 41,1 OFRCP41(a)(1) OC FRCP41(a)(2).

do) x [Other docket entry] Defendants’ motions to dismiss arc granted. This action is dismissed in its
entirety. Any pending motions are moot.

gal oo [For further detail see order (on reverse side offattached to) the original minute order. ]

No nolices required, advised in open court,

No nolices required, ber of nati

Notices mailed by judge's staff. nov 21 2002

oa | Notified counsel by telephone, dat dacke

Doeketing to mail notices

Mail AO 450 form. unod Lom sia $n docket A io
Copy to judge/magistrate judge. Wey
courtroom heh WY 12 AON CO dated vie
Is deputy's
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various means to collect a debt. However, the PDCPA does not place an affirmative obligation on
adebt collector to, for example, send monthly statements. Because there is no affirmative obligation
under the FDCPA to send monthly statements, and Robb does not allege deceptive or unfair practices
independent of defendants’ alleged TILA obligations, counts III and TV fail to state a claim upon
which relief can be granted and therefore are dismissed.
Il. IHinois Consumer Fraud Act Claim

Because this court has dismissed Robb’s TILA and FDCPA claims, the federal claims over
which this court has original jurisdiction, this court, in its discretion, declines to exercise
supplemental jurisdiction over Robb’s state law claim in count V. See 28 U.S.C. § 1367(¢)(3).

Moreover, this court finds that Robb’s ICFA count fails to state a claim.'° In order to state
aclaim under ICFA, a plaintiff must allege that (1) a defendant engaged in a deceptive act or practice
(2) with the intent that the plaintiffrely on the deception (3) in the course of trade or commerce, and
(4) the deception was the proximate cause of the claimant’s alleged injury. See Connick v. Suzuki
Motor Co., 174 Til. 2d 482, 501, 675 N.E.2d 584, 593 (Ill. 1997). In addition, “a complaint alleging
a violation of consumer fraud must be pled with the same particularity and specificity as that

required under common law fraud.” Id, As discussed above, Robb docs not allege an independent

Section 505/2 states:

Unfair methods of competition and unfair or deceplive acts or practices, including
but not limited to the use or employment of any deception, fraud, false pretense, false
promise, misreprescntation or the concealment, suppression or omission of any
material fact, with intent that others rely upon the concealment, suppression or
omission of such material fact, or the use or employment of any practice described
in Section 2 of the "Uniform Deceptive Trade Practices Act", approved August 5,
1965, in the conduct of any trade or commerce are hereby declared untawful whether
any person has in fact been misled, deceived or damaged thereby. . . .

815 ILCS § 505/2 (2002).

il



debt. . .is initially payable.” Unless one is the “agent” of a “card issuer,” Congress has specifically
excluded subsequent obligees from TILA’s creditor definition. This court cannot alter Congress’s
carefully crafted definition of “creditor;” only Congress itself can do that. Thus, Robb’s TILA
counts, counts I and Il, must be dismissed.

I. Fair Debt Collection Practices Act Claim

Robb alleges that defendants violated 15 U.S.C. §§ 1692e and 1692! by collecting and
attempting to collect interest when no periodic statements had been furnished. As discussed in detail
above, Robb cannot state a claim under TILA. Because his KDCPA claim is entirely predicated on
anonexistent TILA violation,’ Robb’s FDCPA claim must be dismissed.

Although Robb’s FDCPA claim is based on a nonexistent TILA violation, this court notes
that § 1692e (“A debt collector may not use any false, deceptive, or misleading representation or
means in connection with the collection of any debt.”) and § 1692f (“A debt collector may not use
unfair or unconscionable means to collect or attempt to collect any debt.”) are not dependent on the
existence of any TILA violations. In other words, the use of any false, deceptive, or misleading
representation or any unfair or unconscionable means of collection constitute violations of the

FDCPA. As quoted above, sections 1692e and 1692f state that a debt collector” “may not use”

® Robb states that attempting “to collect interest on a credit card account on which periodic
statements have not been furnished” (Compl. 26) is deceptive because “the creditor or debt
collector is failing to furnish material information required to be furnished by law” (Compl. 27)
(emphasis added), and such practice is unfair because “the failure to furnish periodic statements is
contrary to public policy, as established by TILA... .” (Compl. § 28) (emphasis added).

° Robb alleges that because his debt was delinquent, defendants were “debt collectors.”
(Compl. ff 12, 16.) Section 1692a defines “debt collector,” in relevant part, 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... .” 15 U.S.C. § 1692a(6). Pursuant to this definition and
Robb’s allegations, both Capital One and CAMCO are “debt collectors” under the Act.

10



3 A person can mect the

define a creditor, in the case of an open-end credit plan, as a “card issuer.
statutory definition of “card issuer” in two alternative ways: (1) as “any person who issues a credit
card,” or (2) as a person who is “the agent of such person [(i.e., the credit card issuer)] with respect
to such card.” 15 U.S.C. § 1602(n), A “credit card” is defined as “any card, plate, coupon book or
other credit device existing for the purpose of obtaining money, property, labor, or services on
credit.” 15 U.S.C, § 1602(k).

In this case, Robb does not allege that Capital One or CAMCO initially issued Robb’s credit
card, Robb, however, claims that Capital One and CAMCO became “card issuers” when the initial
First Card credit card debt was sold to them. Robb’s argument fails under both statutory definitions
of “card issuer” in TILA,

First, although Capital One issues credit cards to the public, this alone is not sufficient to
make Capital One a “card issuer” under TILA as to Robb. It belies logic to believe Congress, in
enacting TILA, intended that every time a company that purchases debt or delinquent credit card
accounts, on which credit privileges have been terminated by the initial issuer of the card, itself
becomes a “card issuer” under TILA and in turn a “creditor” subject to TILA’s provisions simply
because that company is also a card issuer to other consumers.* This court cannot find that a

financial institution, which issues credit cards to certain persons, becomes a “creditor” when it, in

unrelated transactions, purchases accounts receivable, on accounts of other persons to whom it has

‘Robb docs not allege that defendants are “person[s] who honor{] the credit card and offer[]
a discount which is a finance charge.” 15 U.S.C. § 1602(f).

4 Robb may be correct that a purchasing entity is a “creditor” when it buys current credit
accounts and offers the consumer a line of credit to pay for additional purchases. Ilowever, Robb’s
allegations make clear that what defendants purchased was a “delinquent credit card account”
(Compl. 4 15), iLe., “debt.” (Compl. JF 11, 12, 16).

7



Robb asserts in count 1, against Capital One, and count II, against CAMCO, that defendants
violated TILA by failing to send monthly statements. Robb alleges in count IIL, 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 unlair
practice in violation of the FDCPA. Robb also claims in count V that CAMCO violated the ICFA
by engaging in the same conduct. With respect to the FDCPA and ICT'A claims, Robb 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. 427.) Robb claims that the practice is unfair because (1) the failure to furnish periodic
statements is contrary to public policy, as established by TIT.A, 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, §28.) Defendants claim, inter alia, that because they are not “creditors” within the meaning
ol TILA, they had no obligation to provide the monthly statements to Robb.

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



STATEMENT OF FACTS'

Tn about 1990, Robb obtained a credit card issued by First Card. (Compl. ¥ 8.) Sometime
thereafter, Robb fell behind on the account. (Compl. 410.) After the debt was delinquent, First Card
sold it to Capital One. (Compl. § 11.) Robb sought assistance with respect to his and other debts
through Consumer Credit Counseling and believes that it was paid or compromised. (Compl. 4 13.)
On or about May 22, 2002, CAMCO sent Robb a letter stating that it had purchased Robb’s credit
card account from Capital One and that Robb owed $6,994.13 on it. (Compl. 7 14.)

TILA, 15 U.S.C. § 1637(b), and Regulation Z, 12 C.E.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. § 22.) Itis 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. 23.) Atno time during the last five years had
Capital One or CAMCO sent monthly statements to Robb. (Compl. ¥ 18.) 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. ff 19, 20.)

The following facts are taken from the well-pled allegations of Robb’s complaint and must
be accepted as true for purposes of this motion to dismiss. Thompson v. Illinois Dep’t of Prof”l
Regulation, 300 F.3d 750, 753 (7th Cir. 2002),



IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS

EASTERN DIVISION
)
Robert Steven Robb, )
)
Plaintiff, )
) _
v. ) No. 02 C 5829 ~“—s
) ge
Capital Acquisitions & Management ) t. ”
Company and Capital One, F.S.B., ) ne ay
)
Defendants. ) ov
, ae
MEMORANDUM OPINION AND ORDER Ce

JAMES F. HOLDERMAN, District Judge:

On August 30, 2002, plaintiff Robert Steven Robb (“Robb”) filed an amended class action
complaint against defendants Capital Acquisitions & Management Company (“CAMCOQ”) and
Capital One, I'.8.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. §§ 1692-16920 (2002), and the Iinois Consumer Fraud Act,
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 Robb’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 arc granted.



unfair or deceptive act or practice by CAMCO." Robb docs not allege that CAMCO made any
untrue or misleading statement to him with the intent that he take some action as a result. Asa
result, count V is dismissed.
CONCLUSION
For the above stated reasons, defendants’ motions to dismiss are granted. This case is

dismissed in its entirety. Any pending motions are moot.

ENTER:

Cente Miberne

MES F. HOLDERMAN
inited States District Judge

DATE: November 20, 2002

" The Illinois Supreme Court has held that compliance with TILA precludes liability under

ICFA. Jackson v. South Holland Dodge, Inc., 197 Ill. 2d 39, 46-47, 755 N.E.2d 462, 467-68 (IIL.
2001).

12