United States District Court, D. Nevada
ORDER RE: ECF NO. 49
WILLIAM G. COBB UNITED STATES MAGISTRATE JUDGE.
the court is Plaintiff Mercedes Urbina's Motion for
Partial Summary Judgment. (ECF Nos. 49, 49-1, 49-2.)
Defendant National Business Factors, Inc. of Nevada (NBF)
filed a response. (ECF No. 50, errata at 54.) Urbina filed a
reply. (ECF No. 51.)
reasons stated below, Urbina's motion for partial summary
judgment is denied, and summary judgment is granted in
NBF's favor under Federal Rule of Civil Procedure 56(f)
because a preponderance of the evidence demonstrates that
NBF's violation of the Fair Dept Collection Practices
Act, 15 U.S.C. § 1692, et. seq., "was not
intentional and resulted from a bona fide error
notwithstanding the maintenance of procedures reasonably
adapted to avoid any such error." 15 U.S.C.
is proceeding on her first amended complaint (FAC). (ECF No.
41.) Urbina alleges that she signed an agreement for medical
services with Tahoe Fracture Clinic and received treatment
from Tahoe Fracture Clinic periodically. Urbina and her
insurance company made various payments for her medical
treatment. Eventually, Tahoe Fracture Clinic sent Urbina a
statement with a past due balance. Tahoe Fracture Clinic
assigned the debt for collection to NBF, and NBF sent Urbina
a collection letter requesting payment of principal and
interest. Urbina alleges NBF violated the FDCPA because it
was not permitted to charge interest under NRS 99.040, and
even if it was permitted to charge interest, NBF calculated
interest from the wrong starting date and did not have
procedures in place to avoid such an error. Urbina moves for
partial summary judgment as to NBF's liability under the
argues that it lawfully added interest to the account under
NRS 99.040(1)(b) because the debt was a settled book account
once all payments from the insurance company and Ubrina had
been deducted. NBF admits that there was an error in
calculating the amount of interest due, but argues that it
should benefit from the bona fide error defense because Tahoe
Fracture Clinic transmitted the wrong last date of payment to
NBF when the account was assigned.
purpose of summary judgment is to avoid unnecessary trials
when there is no dispute as to the facts before the
court.” Northwest Motorcycle Ass'n v. U.S.
Dep't of Agric., 18 F.3d 1468, 1471 (9th Cir. 1994)
(citation omitted). In considering a motion for summary
judgment, all reasonable inferences are drawn in favor of the
non-moving party. In re Slatkin, 525 F.3d 805, 810
(9th Cir. 2008) (citation omitted). “The court shall
grant summary judgment if the movant shows that there is no
genuine dispute as to any material fact and the movant is
entitled to judgment as a matter of law.” Fed.R.Civ.P.
56(a). On the other hand, where reasonable minds could differ
on the material facts at issue, summary judgment is not
appropriate. Anderson v. Liberty Lobby, Inc., 477
U.S. 242, 250 (1986).
material facts are not in dispute:
Urbina signed agreements for medical services with Tahoe
Fracture Clinic on December 17, 2013, and August 24, 2015,
where she agreed she was "financially responsible for
all charges whether or not paid by [ ] insurance." (ECF
No. 49-1 at 7, 9.) The agreements said "all
charges," but did not specifically mention interest.
received treatment from Tahoe Fracture Clinic periodically
between August 24, 2015 and June 14, 2016. (ECF No. 49-1 at
11-19.) Tahoe Fracture Clinic sent her a statement dated
September 23, 2016, showing that after insurance adjustments
and payments, as well as Urbina's payments of $30 on
February 26, 2016, March 31, 2016, April 29, 2016, and August
12, 2016, Urbina's had a past due balance of $614.52.
December 16, 2016, Tahoe Fracture Clinic sent Urbina a
"final notice" indicating a balance owed of
$614.52. (ECF No. 49-1 at 22; ECF No. 50 at 13.) This notice
advised Urbina that she had not paid the balance due on her
account and did not respond to notices. She was cautioned
that if payment in full was not made within 10 days, Tahoe
Fracture Clinic may turn her account over to legal
Fracture Clinic and NBF entered into a collection service
agreement where Tahoe Fracture Clinic agreed to exclusively
assign NBF its delinquent accounts for collection in exchange
for a fee of the collected amount. (ECF No. 50 at 11.) The
agreement contemplates that NBF could charge interest on the
principal debt, at the rate provided by law. (Id.)
The agreement states that Tahoe Fracture Clinic agreed to
assign accounts to NBF "with only accurate data and that
the balances reflect legitimate, enforceable obligations of
the consumer." (Id.)
Fracture Clinic assigned Urbina's debt to NBF for
collection on January 4, 2017.
obtains its collections files from Tahoe Fracture Clinic in a
folder with many accounts that is sent to NBF in an encrypted
email. The email goes to NBF's software and data is
loaded into an information sheet that includes the date the
account was assigned, the date of the last charge, the last
pay, and last activity. NBF relies on its clients to provide
the information, including the date of the last payment. The
system then generates an initial collection notice.
Fracture Clinic did not (and as a practice does not) add
interest to the account, and leaves it to NBF to decide
whether and how much interest is charged. NBF does not charge
interest if a client affirmatively asks that interest not be
charged. Tahoe Fracture Clinic does not prohibit NBF from
sent Urbina a collection notice on January 5, 2017, seeking
to collect $614.52 in principal, and $29.07 in interest. (ECF
No. 49-1 at 24; ECF No. 50 at 15.)
admits that the interest was calculated from February 26,
2016, through January 5, 2017. NBF contends that it received
an incorrect date of last payment of February 26, 2016, from
Tahoe Fracture Clinic when it assigned the debt to NBF for
collection. Urbina actually made her last payment on August
preliminary legal issue presented is whether NBF lawfully
added interest to Urbina's account. If NBF was lawfully
allowed to add interest, NBF admits that it calculated
interest from the wrong date (February 26, 2016, instead of
August 12, 2016). Therefore, the court must then consider
whether the error was material so as to be actionable under
the FDCPA, and if it is, whether NBF can take advantage of
the bona fide error defense under 15 U.S.C. § 1692k(c).
FDCPA aims to protect consumers from abusive, unfair, and
deceptive debt collection practices. See 15 U.S.C.
§ 1692; Gonzales v. Arrow Financial Services,
LLC, 660 F.3d 1055, 1060 (9th Cir. 2011). Congress has
authorized private individuals to bring suit for violations
of the FDCPA. 15 U.S.C. § 1692k. To succeed on a claim
made under the FDCPA, the plaintiff must establish: (1) he or
she is a consumer; (2) the defendant is a debt collector; and
(3) the defendant committed some act or omission in violation
of the FDCPA. See 15 U.S.C. § 1692a(3)-(6). A
prevailing plaintiff is entitled to actual damages, statutory
damages and attorney's fees and costs. 15 U.S.C. §
1692k(a). Conversely, if the court finds the action was
brought in bad faith or to harass, it may award the defendant
its attorney's fees and costs. 15 U.S.C. §
there is no dispute that Urbina is a consumer, and that NBF
is a debt collector; therefore, the issue is whether there
has been a violation of the FDCPA.
1692e of the FDCPA prohibits the use of "any false,
deceptive, or misleading representation or means in
connection with the collection of any debt," and
includes a non-exhaustive list of proscribed conduct. As is
relevant here, section 1692e prohibits a debt collector from:
falsely representing the character, amount or legal status of
a debt (§1692e(2)(A)); threatening to take action that
cannot legally be taken (§ 1692e(5)); and, using false
or deceptive means to collect or attempt to collect a debt
1692f of the FDCPA precludes a debt collector from engaging
in unfair or unconscionable conduct to collect a debt, and
also includes a non-exhaustive list of proscribed conduct.
For purposes of this case, section 1692(f) precludes a debt
collector from collecting interest "unless such amount
is expressly authorized by the agreement creating the debt
or [is] permitted by law." 15 U.S.C. §
1592(f)(1) (emphasis added).
Ninth Circuit has adopted the least sophisticated consumer
standard in evaluating these violations. See e.g.
Afewerki v. Anaya Law Grp., 868 F.3d 771, 775 (9th Cir.
2017); Tourgeman v. Collins Fin. Servs., 755 F.3d
1109, 1119 (9th Cir. 2014) (citation omitted). This
is an objective standard, and a violation of the FDCPA is
determined by the court as a matter of law. See
Afewerki, 868 F.3d at 775; Tourgeman, 755 F.3d
at 1118 (citation omitted). The standard asks "whether
the hypothetical least sophisticated debtor would likely have
been misled." Afewerki, 868 F.3d at 775.
Was NBF's Attempt to Collect Interest on the Debt
stated above, a debt collector may collect interest charges
on a debt if interest charges are "expressly authorized
by the agreement creating the debt" or interest
charges are "permitted by law." 15 U.S.C. §
1692(f)(1). A false representation regarding the amount of a
debt violates 15 U.S.C. § 1692e(2). If the debt
collector was not lawfully permitted to collect or attempt to
collect interest on a debt, the debt collector would also
violate 15 U.S.C. § 1692e(5). Finally, an interest
charges which violates section 1692f of the FDCPA also
necessarily violates section 1692e(10), which prohibits the
use of false representations or deceptive means to collect a
debt. See e.g. Valentin v. Grant Mercantile Agency,
Inc., No. 1:17-cv-01019-AWI-SKO, 2017 WL 6604410, at *6
(E.D. Cal., Dec. 27, 2017) (citing Newman v. Checkrite
Cal., Inc., 912 F.Supp. 1354, 1367 (E.D. Cal. 1995),
superseded by statute on other grounds).
argues that its contract with Tahoe Fracture Clinic
authorized it to collect interest on accounts assigned by
Tahoe Fracture Clinic to NBF; however, the language of
section 1692(f)(1) focuses on "the agreement creating
the debt" and not the agreement between the creditor and
the debt collector.
agreements Urbina signed with Tahoe Fracture Clinic did not
expressly authorize the collection of interest, but instead
generally refer to Urbina being responsible for "all
charges." The court finds that such broad language
cannot be construed as evidence of an intent to agree to
allow interest to be charged on a debt. As a result, the
court must determine whether Nevada law authorized NBF to
collect interest on the debt.
law allows the recovery of interest on debts under certain
circumstances. NRS 99.040 provides:
1. When there is no express contract in writing fixing a
different rate of interest, interest must be allowed at a
rate equal to the prime rate at the largest bank in Nevada,
as ascertained by the Commissioner of Financial Institutions,
on January 1 or July 1, as the case may be, immediately
preceding the date of the transaction, plus 2 percent, upon
all money from the time it becomes due, in the following
(a) Upon contracts, express or implied, other than book
(b) Upon the settlement of book or store accounts from the
day on which the balance is ascertained.
(c) Upon money received to the use and benefit of another and
detained without his or her consent.
(d) Upon wages or salary, if it is unpaid when due, after
demand therefor has been made.
The rate must be adjusted accordingly on each January 1 and
July 1 thereafter until the judgment is satisfied.
2. The provisions of this section do not apply to money owed
pursuant to chapter 624 of NRS which is governed by the