California District Court Holds that a Debt Collector’s Retention of a Portion of a Transactional Fee Voluntarily Paid by the Consumer for Purposes of Convenience Was a Violation of the Rosenthal Fair Debt Collections Practices Act

By:  Nadia D. Adams

In April Lindblom v. Santander Consumer USA Inc., No. 15-cv-0990 (E.D. Cal. January 22, 2018), the United States District Court for the Eastern District of California held that the plaintiffs’ voluntary payment of a transactional fee that was not expressly authorized in the contract between the parties or by California state law was concrete injury sufficient to confer Article III standing.

The Court also held that where the underlying contract between the parties was silent on the debt collector’s retention of a transactional fee for online and telephone payments, the parties could not subsequently orally modify that contract to allow for the fee; the fee must be contemplated at the time the debt is created. Therefore, the debt collector’s portion of the fee violated the Rosenthal Fair Debt Collection Practices Act (the “Rosenthal Act”).


Plaintiffs April and Timothy Lindblom (“Plaintiffs”) brought a proposed class action complaint against Defendant Santander Consumer USA, Inc. (“Santander”) in the United States District Court for the Eastern District of California alleging a violation of the Rosenthal Act (California Civil Code § 1788) for transaction fees they paid in connection with their use of Western Union’s Speedpay service to make payments online and by telephone.

In 2007, Plaintiffs financed an auto loan through Santander. The loan contract between Plaintiffs and Santander did not expressly provide for a Speedpay fee. However, Plaintiffs knew they were not required make the payments through Speedpay and could utilize other payment methods without incurring any fee. Plaintiffs admitted that they sometimes used Speedpay for convenience when they were behind on their payments, particularly to avoid repossession or added late charges. Each time Plaintiffs used Speedpay they incurred a $10.95 fee. Plaintiffs made over 65 loan payments, including 40 payments using Speedpay, before the car was repossessed in 2014.

Plaintiffs were unaware that each time they made a payment using Speedpay, Santander retained a portion of the fee. Plaintiffs alleged that the fee-sharing agreement between Santander and Western Union violated the Rosenthal Act because the fee was not expressly authorized in Plaintiffs’ contract with Santander and it was not allowed by California law.

Santander moved for summary judgment on Plaintiffs’ Rosenthal Act claim arguing that: (1) Plaintiffs lacked standing to assert the claim because they had suffered no injury; and (2) Plaintiffs expressly authorized the collection of Speedpay fees when they knowingly agreed to use the Speedpay service.

Although the Speedpay Payments were Voluntary, Plaintiffs Alleged a Sufficiently Concrete Injury to Establish Article III Standing

Before the Court analyzed Plaintiffs’ Rosenthal claim, it considered Santander’s argument that Plaintiffs lacked standing because they did not allege a sufficiently concrete injury to confer Article III standing as required by Spokeo, Inc. v. Robins (Spokeo I), 136 S. Ct. 1540, 194 L. Ed. 2d 635 (2016). Santander alleged that the Speedpay fee allowed Plaintiffs to avoid a higher late fee and therefore was not harmful, but helpful. Plaintiffs argued that despite the added convenience, they were harmed by repeatedly paying an unauthorized fee.

Under Spokeo I, to establish an injury in fact, a plaintiff must show that she suffered “‘an invasion of a legally protected interest’ that is ‘concrete and particularized’ and ‘actual and imminent.’” Id. at 1548. The concrete injury must affect the plaintiff in a personal and individual way. Id.

The Court held that Plaintiffs’ actual payment of the fee demonstrates that they have suffered a concrete harm; namely that Santander repeatedly collected an allegedly unlawful fee. Relying on Ninth Circuit Court of Appeals precedent in Doyle v. Chrysler Group, LLC, 663 Fed Appx. 56, 578, (9th Cir. 2016), the Court found it immaterial that the fee was optional, determining that “plaintiffs have standing when they spend money that, absent defendants’ actions, they would not [otherwise] have spent.” The Court noted that Plaintiffs paid the Speedpay fee over forty times and thus, alleged a concrete injury for purposes of Article III.

The Speedpay Payments Violated 15 U.S.C. 1692f(1) and the Rosenthal Act

The Rosenthal Act is California’s version of the federal Fair Debt Collections Practices Act (“FDCPA”) and, just like its federal counterpart, is meant to protect consumers from unfair and abusive debt collection practices. The Rosenthal Act incorporates by reference the FDCPA’s requirements. Thus, to state a claim under the Rosenthal Act, a plaintiff must establish four things: (1) she is a “consumer,” (2) who was the object of a collection activity arising from a “debt”; (3) the defendant is a “debt collector”; and (4) the defendant violated a provision of the FDCPA. Lindblom v. Santander Consumer USA, Inc., 1:15-CV-990-LJO-BAM, 2016 WL 2841495 (E.D. Cal. May 9, 2016). In this case, the parties agreed that the first three elements were met. The issue for summary judgment was whether Santander violated Section 1692f(1) of the FDCPA when retained it a portion of the Speedpay fee in connection with Plaintiffs’ debt payments to Santander.

Section 1692f(1) forbids a debt collector from collecting “any amount (including any interest, fee, charge, or expense incidental to the principal obligation) unless such amount is expressly authorized by the agreement creating the debt or permitted by law.” 15 U.S.C. §1692f(1). A fee does not violate the FDCPA (1) where it is expressly permitted under state law; or (2) if state law does not expressly authorize or prohibit the charge, where the customer expressly agrees to the fee in the contract creating the debt. Schwarm v. Craighead, 552 F. Supp. 2d 1056, 1080 (E.D. Cal. 2008).

The parties agreed that the Speedpay fee was not expressly authorized in their contract. Instead, the Court analyzed whether the Speedpay fee was authorized under a valid oral modification to the contract. Under California Civil Code §1698(b)-(c), a written contract can be modified by an oral agreement supported by new consideration or to the extent that the oral agreement is executed by the parties.

Santander argued that Plaintiffs’ consent to pay the Speedpay fee is a valid oral modification of their contract because they executed the payment. The Court disagreed holding that “an oral modification presupposes an existing term or provision in writing” and that “payment of the Speedpay fee did not alter the terms of the contract because there was no provision addressing the fee in the underlying contract,” i.e., there was “no term in the contract to modify.” Further, the Court held that if the payment of the Speedpay fee created a contract it was a new oral agreement to pay Western Union, not Santander.

The Court also held that an oral modification could not be valid because a modification must be fully executed by both parties. Santander gave Plaintiffs the wrong impression that the $10.95 Speedpay fee was based on the costly nature of processing the transaction, not because Santander was taking a portion of the fee. Further, the Court held that even if the parties fulfilled the requirements for an oral modification of the contract, an oral modification was contrary to Section 1692f(1) because the “expressly authorized” language of Section 1692f(1) requires some actual knowledge or consent by the consumer at the time the debt is created. For those reasons, the Court denied Santander’s motion for summary judgment.


This decision is significant because the Court emphasized the strict liability standard of the FDCPA and the Rosenthal Act. Plaintiffs’ voluntary payment of the $10.95 transactional fee—which conferred some benefit on Plaintiffs by allowing them to avoid late fees and, on some occasions, avoid repossession—was a concrete injury sufficient to confer Article III standing. Debt collectors should revisit their practices to ensure that they are not retaining any fees incidental to the collection of a debt unless the fee is expressly provided for in the underlying contract. Even in situations where the debt collector makes no-fee alternatives available to the debtor, the debtor’s election to pay by a method in which a transaction fee is charged, can place the debt collector in violation of both 15 U.S.C.1692f(1) and the Rosenthal Act.

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