Moral of the Story: Web Payment Portals Need Time-Barred Debt Disclosures if Applicable

Every now and then, a court decision will come out that serves as a good reminder to double-check what systems and processes a company has in place. Odneal v. Midwest Recovery Sys, LLC, No. 2:19-cv-431 (N.D. Ind. April 24, 2020) is one of them, at least if your company collects on time-barred accounts.

In Odneal, the plaintiff noticed an old debt on his credit report. Curious to get more info, he went to the debt buyer's website where he was directed to a payment portal. While the payment portal included the mini-Miranda disclosure, it did not include a disclosure that the plaintiff's debt was time-barred—which it was.

The plaintiff filed a lawsuit alleging FDCPA violations for lack of the disclosure and argued that while he did not make a payment, he had to retain counsel due to a fear that his credit will be damaged.

In its decision, the court starts off noting what we already know:

FDCPA cases have been prevalent lately, but they typically involve some kind of dunning letter sent from the debt collector to the debtor either threatening litigation or just trying to induce them to pay a portion or all of the debt.

The court notes, however, that this case is different. The defendant didn't send a letter to the plaintiff, rather it furnished information about the account to the credit bureaus and the plaintiff voluntarily visited the payment portal. And, apparently, there were three other cases decided in this jurisdiction on the same exact issue—which indicates this is something plaintiffs' counsel are looking for.

Editor's Note: You can track all FDCPA disclosure and/or time-barred debt court decisions through the iA Case Law Tracker.

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The court here ultimately looked at whether a payment portal can qualify as a "communication" under the FDCPA's definition—the conveying of information regarding a debt directly or indirectly to any person through any medium. The court gave this definition a broad reading, especially since it was deciding on a motion to dismiss that only requires it to determine whether the plaintiff stated a plausible claim in his complaint. The court found that it is plausible that a payment portal satisfies the definition of "communication."

Likewise, the court found that the communication was in connection with the payment of the debt due to the defendant's mini-Miranda disclosure.

The court cites one of those three decisions that were decided during the pendency of its decision on the motion to dismiss, where another judge stated:

Plaintiff has plausibly alleged Defendants carefully crafted a deceptive means to collect stale debts by reporting those debts to credit reporting agencies and creating a payment portal knowing unsuspecting debtors would find their way to its website. By doing so, Plaintiff alleges Defendant purposely skirted the disclosure requirements discussed in McMahon and Pantoja. These allegations are consistent with the Seventh Circuit's statement in Pantoja that "the FDCPA prohibits a debt collector from luring debtors away from the shelter of the statute of limitations without providing an unambiguous warning that an unsophisticated consumer would understand.

(Internal citations omitted.)

The court, however, also enters its decision with skepticism about the plaintiff's and his counsel's intent behind filing the FDCPA suit:

It is worth mentioning that this case presents an interesting set of circumstances. On the one hand, a fair minded person might view this as opportunistic litigation. After all, Mr. Odneal checked his credit, hired a lawyer and filed this lawsuit in record time all of which might cause one to wonder whether this is the kind of abusive collection effort that Congress had in mind when it passed the FDCPA.

(Emphasis added.)

All in all, the court decided that this matter could not be settled at the motion to dismiss stage, and therefore denied the motion.

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