Opinion ID: 793621
Heading Depth: 3
Heading Rank: 1

Heading: Was IFS's Submission of Collection Fee a False, Deceptive, or Misleading Representation?

Text: 20 Section 1692e provides that [a] debt collector may not use any false, deceptive, or misleading representation or means in connection with the collection of any debt. 15 U.S.C. § 1692e. As earlier noted, IFS's contract with EFT states that IFS agrees to comply with all rules at the time each entry is initiated by [IFS] with respect to the most recent Represented Check Entry Program Guidelines . . . and that each entry [of a collection fee claim to the ACH] shall in no way breach any Federal, State or local statute or regulation pertaining to electronic funds transfers and/or electronic check representment . . . including the operating rules of NACHA. It then states that [IFS] must obtain written authorization from the account holder in order to collect a fee. The contract also says that [IFS] represents and warrants with respect to all entries that [EFT] originates for [IFS] that (1) each [debtor] has authorized the debiting or crediting of its account, (2) each entry is for an amount agreed by the [debtor], and (3) each entry is in all respects properly authorized.  (Emphasis added). 21 IFS promised EFT that its entries would comply with applicable law and the NACHA rules, and that IFS would obtain written permission from account holders to collect a fee. When IFS submitted Volden's checks to EFT for processing, it apparently did not have Volden's written authorization to collect the fees, which is required by NACHA's rules and is a direct requirement of the contract. Thus, by not obtaining Volden's written permission, IFS apparently breached the contract with EFT in two ways. But these breaches, by themselves, are not a false, deceptive, or misleading representation by IFS to EFT. IFS did not affirmatively tell EFT at the time it submitted Volden's checks that it had his permission to collect the fee; its actions breached the contract, the claim for which, if any, belongs to EFT. 22 IFS's contract with EFT does, however, state that an implicit representation flows with the submission of each check collection entry fee. IFS represents and warrants (emphasis added) with each entry submitted that the account holder has authorized the debiting of the account for the amount to be debited, and that each entry is in all respects properly authorized.  (Emphasis added). Whether IFS falsely represented that Volden had authorized collection of the fee, then, turns on the meaning of properly authorized under the contract. 23 Regulation E, 12 C.F.R. §§ 205.1 et seq., regulates electronic fund transfers through the ACH under the Electronic Fund Transfer Act (15 U.S.C. §§ 1693 et seq.). Supplement I to section 205.3 of Regulation E (entitled Coverage) states that a consumer authorizes a check collection fee to be debited electronically from his or her account where the consumer has received notice that a fee imposed for returned checks will be debited electronically from the consumer's account. The record indicates that both McDonald's and the Crow Bar had posted signs warning consumers of the check collection fee charged by IFS for returned checks. Thus, under Regulation E's notice-equals-authorization rule, Volden, by paying the merchants with a check and having notice of the fee, had authorized IFS to debit his account, and in that sense the collection fee entry was properly authorized. 24 But the contract expressly states that [IFS] must obtain written authorization from the account holder in order to collect a fee. (Emphasis added). The contract states it is governed by Nevada law. Under Nevada law, [a] contract is ambiguous if it is reasonably susceptible to more than one interpretation. Margrave v. Dermody Props., Inc., 110 Nev. 824, 878 P.2d 291, 293 (1994). While this contract provision does not specifically define properly authorized for purposes of the re-presentations section, that term is not reasonably susceptible to more than one interpretation in this case. The express terms of the contract contemplate written authorization, not implied authorization per Regulation E, and thus properly authorized means written authorization by the consumer. There is no dispute that IFS did not have Volden's written authorization. Thus, when IFS submitted the collection fees to EFT, by definition under the contract, IFS falsely represented to EFT that such submissions were properly authorized. 25