In a recent decision, the United States District Court for the Northern District of Illinois granted a debt collector’s motion to dismiss a debtor’s breach of contract claim in a putative class action, leaving for adjudication the debtor’s claims under the Fair Debt Collection Practices Act (“FDCPA”). The case is Burdette-Miller v. Williams & Fudge, Inc., No. 1:18-cv-02187 (N.D. Ill. Jan. 15, 2019).
The plaintiff, Crystal Burdette-Miller, is a former student of Lewis University, which contracted with Williams & Fudge, Inc. (“WFI”) to collect education-related loans from current and former students. WFI began contacting Burdette-Miller in August of 2014 to collect a $7,345.33 debt owed to Lewis University. After she refused to pay, WFI filed a collection action against Burdette-Miller in January of 2016. A statement attached to the collection complaint stated that WFI was seeking to collect $5,509.00 in tuition and $1,836.33 (33% of the tuition balance) as a collection fee. Burdette-Miller filed a motion to dismiss the complaint; however, the court struck WFI’s request for the 33% fee as an “unenforceable penalty.”
Two years later, Lewis University disclosed for the first time that the tuition agreement attached to the collection complaint was not the one to which Burdette-Miller agreed. Instead, her actual tuition agreement with Lewis University did not authorize a 33% collection fee. Shortly thereafter, Burdette-Lewis filed a putative class action against WFI, complaining that it imposed exorbitant collection fees and engaged in other unlawful collection activities. Her complaint contains claims for breach of contract, violations of the FDCPA and Illinois Consumer Fraud and Deceptive Business Practices Act, wrongful wage garnishment, and declaratory judgment. WFI moved to dismiss the complaint.
In adjudicating WFI’s motion to dismiss, the Court first considered WFI’s argument that Burdette-Miller lacks standing to challenge the collection contract between Lewis University and WFI. The Court ultimately held that she lacked standing to challenge the contract because she was only an incidental beneficiary to the collection contract. The Court based its holding on the fact that the contract lacked any express language indicating an intent to benefit Burdette-Miller or student debtors like her and that, although the contract required WFI to abide by state and federal consumer-protection laws, such provisions were intended to benefit WFI and Lewis University. Any benefit to Burdette-Miller was incidental.
After dismissing Burdette-Miller’s breach of contract claims, the Court evaluated WFI’s argument that her FDCPA claim is barred by the one-year statute of limitations. WFI argued that Burdette-Miller’s FDCPA claim was barred because the last act of which she complained occurred in March of 2016 and her allegation that WFI “continued making calls” and sending her correspondence beyond this date was too generalized to extend the period of wrongful conduct. The Court, however, disagreed because Burdette-Miller did not learn until April of 2018 that WFI had sued her on the wrong contract and lacked any contractual basis to demand a 33% collection fee.