Sunday, August 28, 2016

Seventh Circuit Holds Parking Tickets Are Subject to FDCPA

The Seventh Circuit has held that unpaid parking fees and penalties for failure to pay may constitute a “debt” subject to the FDCPA where the obligation arises as a matter of contract and not as a statutorily assessed fine.  Franklin v. Parking Revenue Recovery Services, Inc., 2016 U.S. App. Lexis 14737 (7th Cir. Aug. 10, 2016).  In Franklin, the collection agency sent demand letters seeking to collect an unpaid parking fee and a $45 penalty for failure to pay.  The lot, while owned by a local governmental agency was operated by a third party management company. 

The consumers filed suit alleging violations of the FDCPA.  The district court entered summary judgment for the company, holding that the money owed did not constitute a “debt” as defined by the FDCPA.  The district court found the money owed was actually a fine for the individuals’ failures to follow the lot’s rules.  As such, it was not a contract and could not be a debt under the FDCPA.

On appeal, the Seventh Circuit reversed. In doing so, the court relied upon the operative definition of a debt covered by the FDCPA. Under section 1692(a)(5),  a covered debt is “any obligation or alleged obligation of a consumer to pay money arising out of a transaction in which the money, property, insurance or services which are the subject of the transaction are primarily for personal, family, or household purposes.”   15 USC § 1692a(5).  The court noted that “the arising out of” language limits the FDCPA to obligations that are created by contract.  The critical issue before the court, therefore, was the legal source of the obligation.

Because there was no statute or ordinance requiring individuals to pay a penalty, the court concluded that the obligation to pay the penalty arose from the contract which was formed when the individuals chose to park in the lot.  “The signs at the parking lot offered a parking spot to all comers for $1.50 per day and noted a penalty for failing to pay…  [The Consumers] each accepted the offer – and thus formed a contract- when they parked in the lot.  Their obligation to pay the $46.50 is premised entirely on this contract.” Franklin at *8-9.

No comments:

Post a Comment