Virginia Court Issues Nuanced Ruling in Case Involving Letters Referencing Wage Garnishment

A recent opinion issued by the U.S. District Court for the Eastern District of Virginia in Biber v. Pioneer Credit Recovery, Inc. (United States District Court, E.D. Virginia, Case No. 16-00804) granted in part and denied in part motions by defendant Pioneer Credit Recovery, Inc. (Pioneer) that the plaintiff in a putative class action did not have standing to claim a violation of the Fair Debt Collection Practices Act (FDCPA) and/or that the complaint failed to state a claim upon which relief may be granted. The complaint involved letters that referenced administrative wage garnishment.

A copy of the opinion can be found here.

Background

Plaintiff Attila Biber alleged that on April 1, 2016, Pioneer sent a letter to her and others, captioned in bold and capitalized letters - “Administrative Wage Garnishment Proceedings Notice.” The letter contained the following statements:

• “This may be your last opportunity to make satisfactory payment arrangements on your student loan(s)”;
• “If these arrangements are not made, we will begin or continue the process of verifying your employment for Administrative Wage Garnishment”;
• “The United States Congress has enacted a law . . . that allows guarantors . . . to offset the wages of student loan defaulters without filing a lawsuit”;
• “[A] guaranty agency . . . may garnish the disposable pay of an individual to collect the amount owed by the individual, if he or she is not currently making required repayment … [T]he amount deducted for any pay period may not exceed 15 percent of disposable pay”;
• “This [statutory] provision overrides all applicable state law, and allows for the garnishment of student loan defaulter’s wages”;
• “Before an administrative order is issued, defaulters are given notice and an opportunity for a hearing as part of this federal wage offset program”;
• “After the completion of this administrative offset process, your employer may be ordered to deduct 15% of your disposable income before you are paid. If your employer does not comply with this order, a lawsuit may be filed against your employer”;
• “Because the use of this federal wage offset law could reduce your take-home pay substantially, we are providing you with the chance to establish a satisfactory payment arrangement so you can voluntarily satisfy your obligation on more reasonable terms. We are hoping we can reach a satisfactory agreement before we proceed with further action”; and
• “This is an attempt, by a debt collector, to collect a debt, and any information obtained will be used for that purpose.”

The plaintiff alleged that by sending this letter, Pioneer violated the FDCPA (15 U.S.C. § 1692e) by using “any false, deceptive, or misleading representation or means in connection with the collection of any debt” in the following ways:

• Pioneer “falsely represent[ed] that it was going to perform an Administrative Wage Garnishment, without first providing the notices required by 20 U.S.C. § 1095a and 34 C.F.R. §§ 34.1-30”;
• Pioneer “falsely implied that [the Letter] was the Notice of Proposed Garnishment required under” federal law;
• Pioneer “falsely represented [that] it had the authority to garnish wages at the time of the letter, if payment arrangements were not made at that time”;
• Pioneer “falsely represented the character, amount or legal status of [plaintiff’s] debts”;
• Pioneer “falsely represented and implied that the [Letter] was legal process”;
• Pioneer “deprived [Biber] of statutory verification rights which [Biber] would otherwise have under 20 U.S.C. § 1095a and 34 C.F.R. §§ 34.1-30 [such that] Plaintiff suffered an informational injury as a result of being deprived of information to which he was legally entitled”; and
• Pioneer “used unfair and unconscionable means to collect and attempt to collect from Plaintiff and the class members.”

In bringing their motion Pioneer argued that dismissal was required on two grounds. First, Pioneer argued that dismissal was required pursuant to Rule 12(b)(1), Fed. R. Civ. P., on the ground that Biber lacked standing to raise any of his FDCPA claims. Second, Pioneer argued that pursuant to Rule 12(b)(6) the complaint should be dismissed because it “lacked adequate factual allegations to support Biber’s claims for relief.”

Opinion

Judge T.S. Ellis III first considered the 12(b)(1) standing argument. The court considered the precedent set by Spokeo, Inc. v. Robins, 136 S. Ct. 1540, 1547 (2016) and whether the plaintiff in this case sufficiently established an injury with respect to their claims. Judge Ellis determined the following:

“Not surprisingly, in the wake of Spokeo, the overwhelming majority of courts have held that FDCPA claims similar to Biber’s are sufficient to satisfy Article III’s requirement that a plaintiff establish an injury in fact. The underlying logic in these opinions is (i) that Congress, in the FDCPA, created a right to accurate debt-related information and non-abusive collection practices, and (ii) that a debt collector’s false, misleading, deceptive, or abusive conduct concretely harms a debtor by detrimentally affecting that debtor’s decisions regarding his debt.

1692e provides certain debtors a right to be free from false, deceptive, or misleading conduct or representations by debt collectors, precisely because such conduct or representations may cause harm or a material risk of harm. Thus, in many instances, violations of § 1692e differ significantly from the innocuous, bare “procedural violations” described by the Supreme Court in Spokeo. Applied here, the principles announced by the Supreme Court in Spokeo, and elucidated in the chorus of FDCPA cases decided following Spokeo, point persuasively to the conclusion that Biber has standing to raise most—but not all—of the FDCPA claims”

Judge Ellis then looked at each of Biber’s individual FDCPA claims and ruled that the plaintiff had standing to allege the following:

• A false representation over Pioneer’s conduct in sending a threat of Administrative Wage Garnishment. The Court rejected Pioneer’s argument that the plaintiff had failed to prove they had read the letter as irrelevant to the fact that the plaintiff could reasonably interpret the letter as implying imminent garnishment, which would potentially affect the plaintiff’s behavior.
• Whether Pioneer allegedly “falsely implied that [the Letter] was the Notice of Proposed Garnishment” required by law for similar reasons as above.
• That Pioneer “falsely represented” their authority to garnish wages at the time the letter was sent.
• The ability to question the representation of “the character, amount, or legal status of the debts” because “Biber has plausibly alleged that the Letter falsely, deceptively, or misleadingly represents that debt collection through garnishment was imminent, whereas, in reality, garnishment could not occur until after Pioneer had provided Biber the requisite notice of debtor rights and initiated garnishment proceedings.”
• That Pioneer “used unfair and unconscionable means to collect and attempt to collect from Biber and the class members,” although the claim was dismissed pursuant to Rule 12(b)(6).

However, Judge Ellis ruled the plaintiff did not have standing to allege the following:

• That Pioneer falsely represented and implied that the letter was legal process “for the simple reason that the Letter does not purport to be legal process.”
• That Pioneer “deprived [plaintiff] of statutory verification rights” that the plaintiff would otherwise have such that Biber “suffered an informational injury” because “Biber was not yet entitled to disclosure of debtors’ rights” when the letter was sent, “and thus there was no injury in fact.”

Judge Ellis then turned to Pioneer’s 12(b)(6) arguments. With respect to Pioneer’s motion to dismiss for failure to state a claim, he ruled as follows:

• Denied the motion with respect to the claim about Pioneer having “falsely represented that defendant was going to perform an Administrative Wage Garnishment.”
• Denied the motion over Biber’s claim the Pioneer “falsely implied” that the letter was sent was the required Notice of Proposed Garnishment.
• Denied the motion with respect to Pioneer’s alleged authority to garnish wages at the time the letter was sent to the plaintiff.
• Denied the motion over whether Pioneer “falsely represented the character, amount, or legal status of the debts.”
• Granted the motion due to Biber lacking standing to raise the claim that the letter was legal process.
• Granted the motion due to lack of standing regarding Biber’s claim of a “deprivation of statutory verification rights.”
• Granted the motion over whether Pioneer “used unfair and unconscionable means to collect and attempt to collect from Biber and the class members.”

insideARM Perspective

This case is particularly interesting for any agency that collects guaranteed student loans. As noted above, the case is a putative class action involving language in a letter that advises a consumer of a potential administrative wage garnishment and advises the consumer of certain rights. It is possible that many agencies use a similar letter.

The Spokeo analysis and reasoning is consistent with the majority of FDCPA cases we have seen where Spokeo has been raised as a defense, though there have been differing results depending on the court hearing the case. insideARM has written about other similar cases on this issue. See the insideARM FDCPA Resources page and the FDCPA Case law grid (updated on a monthly basis thanks to Joann Needleman of the Clark Hill law firm) for links to other cases and insideARM articles about this issue.

The discussion and analysis of the 12(b)(6) Motion to dismiss for failure to state of claim should be reviewed closely. Judge Ellis goes into considerable detail regarding each of the FDCPA claims and whether they should or should not survive a motion to dismiss.

Finally, readers should be reminded that this opinion is merely in response to a motion to dismiss. There has been no final determination of the merits of the claims that survived the motion to dismiss.