Court Opinion

ID: 2747606
Source: CourtListenerOpinion
Date Created: 2014-11-03 18:00:36.308332+00
Date Added: 2024-06-11T10:15:35.112315
License: Public Domain

NOT PRECEDENTIAL

                       UNITED STATES COURT OF APPEALS
                            FOR THE THIRD CIRCUIT
                               ________________

                                      No. 13-4689
                                   ________________

                                  SELENA A. SCOTT,

                                                  Appellant

                                             v.

         BANK OF AMERICA; BANK OF AMERICA CONSUMER CREDIT;
          BANK OF AMERICA FUNDING, LLC; CAVALRY SPV I, LLC;
                           JOHN DOES 1-100
                           ________________

                     On Appeal from the United States District Court
                         for the Eastern District of Pennsylvania
                         (D.C. Civil Action No. 2:13-cv-00987)
                       District Judge: Honorable Gene E.K. Pratter
                                   ________________

                       Submitted Under Third Circuit LAR 34.1(a)
                                   October 20, 2014

             Before: AMBRO, FUENTES, and NYGAARD, Circuit Judges

                           (Opinion filed: November 3, 2014)

                                   ________________

                                       OPINION *
                                   ________________
AMBRO, Circuit Judge

                                             I.

*
 This disposition is not an opinion of the full Court and pursuant to I.O.P. 5.7 does not
constitute binding precedent.
       Selena A. Scott opened a credit card account with Bank of America/FIA Card

Services, N.A. (“Bank of America”) in 2005. It “securitized” the receivables from

Scott’s and other credit card accounts, and sold them to a trust under a so-called Pooling

and Servicing Agreement. This move—a typical one by credit card issuers—“provides

steady liquidity for card issuers” and “transfer[s] most downside credit risk on the

card[.]” Adam J. Levitin, Skin-in-the-Game: Risk Retention Lessons from Credit Card

Securitization, 81 GEO.WASH. L. REV. 813 (2013).

       Scott’s account became delinquent on June 30, 2009. After the default, Bank of

America “charged-off” her account (i.e., wrote the debt off as “uncollectable”). It then

sold Scott’s debt to Cavalry SPV I, LLC (“Cavalry”), and Cavalry in turn filed a

collection action against Scott seeking $3,936.54 (the amount Scott owed) plus interest.

Scott’s counsel notified Cavalry of its belief that Bank of America did not have an

interest in Scott’s account to transfer, and Cavalry promptly withdrew its suit.

       Motivated by her apparent victory, Scott filed a class-action complaint against,

among others, Bank of America and Cavalry alleging violations of the Fair Debt

Collection Practices Act, 15 U.S.C. § 1692 et seq., and the Pennsylvania Fair Credit

Extension Uniformity Act, 73 PA. CONS. STAT. § 2270.1 et seq. In an amendment to that

complaint, she further alleged violations of the federal RICO statute, 18 U.S.C. § 1961, et

seq., and Pennsylvania’s Unfair Trade Practices and Consumer Protection Law, 73 PA.

CONS. STAT. § 201.1 et seq. Underlying all of Scott’s allegations was her belief that

Bank of America had nothing to transfer to Cavalry once it securitized the receivables

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from Scott’s account. Thus, Cavalry’s attempt to collect the amount Scott owed was

unlawful.

       Bank of America and Cavalry moved to dismiss Scott’s Amended Complaint,

arguing that the critical premise on which Scott’s claims rely—that once a credit card

company securitizes the receivables of a credit card account, it no longer retains an

ownership interest in the account—is incorrect. The District Court granted the motion to

dismiss with prejudice. Scott appeals that dismissal. We affirm in all respects. 1

                                              II.

       Scott renews the argument she advanced before the District Court: because Bank

of America lost any interest in Scott’s credit card account once it securitized and sold the

receivables, it had nothing to transfer to Cavalry. Thus, Cavalry’s attempt to collect on

the amount she owed was unlawful.

       Scott misapprehends the effect of securitizing a credit card receivable. “Credit

card securitization involves the securitization solely of the receivables, not of the

accounts themselves.” Levitin, supra at 826; see also J.A. 154–55 (Pooling & Servicing

Agr. § 2.01) (providing that Bank of America was selling only the receivables associated

with the credit card accounts, not ownership of the accounts). Thus, even after

securitization the card issuer retains an ownership interest in the account.

       The courts that have considered the effect of securitizing credit card receivables

are all in agreement that it does not divest the issuer of its ownership interest in the credit

1
  The District Court had jurisdiction under 28 U.S.C. §§ 1331 and 1332. We have
jurisdiction under 28 U.S.C. § 1291.
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card accounts. See, e.g., Tostado v. Citibank (South Dakota), N.A., No. 09-CV-549, 2010
WL 55976, at *3 (W.D. Tex. Jan. 4, 2010) (assignment of receivables does not prevent a

credit card issuer from recovering past-due credit card charges because, as the “real party

in interest,” the issuer retains “the right to enforce its interest on [its] accounts and

loans”); Shade v. Bank of America, No. 2:08-cv-1069, 2009 WL 5198176, at *4 (E.D.

Cal. Dec. 23, 2009) (“plaintiff has provided no binding legal authority for his theory that

because Bank of America securitized the account balances, it was no longer the real party

in interest and could not assign the debt for collection to the other defendants”).

       In addition, once Scott’s account fell into default, the Pooling and Servicing

Agreement provides that ownership of these “Ineligible Receivables” automatically

reverts to Bank of America. See J.A. 160-61 (Pooling & Servicing Agr. § 2.04(d)(ii)–

(iii)). At that point—and regardless whether as a general matter ownership of a credit

card account can be divorced from ownership of the account’s receivables—the Pooling

and Servicing Agreement placed ownership of the receivables squarely back in Bank of

America’s hands.

       For these reasons, we affirm.

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