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Mares v. Outsource Receivables Management, Inc.

United States District Court, D. Utah, Northern Division

May 24, 2019

VALERIE MARES and IAN TREW, On behalf of Plaintiff and Class,


          Dee Benson, District Judge.

         Before the court is Defendant Outsource Receivables Management's Motion to Dismiss for Failure to State a Claim. (Dkt. No. 5.) The Motion has been fully briefed by the parties and the court has considered the arguments in those filings. Pursuant to Civil Rule 7-1(f) of the U.S. District Court for the District of Utah Rules of Practice, the court elects to determine the motion on the basis of the written memoranda and finds that oral argument would not be helpful or necessary. DUCivR 7-1(f).


         Plaintiffs Valerie Mares and Ian Trew reside in the State of Utah. (Dkt. No. 2-2 at 4.) Defendant Outsource is a Utah corporation that purchases consumer debts in default to pursue collection of the debts. (Id.) This action arises out of Defendant's September 5, 2018 state court collection action against Plaintiffs to collect on a debt incurred by Ms. Mares for dental services she received at Hillfield Pediatric & Family Dentistry. (Dkt. No. 14 at 2.) After Hillfield assigned Ms. Mares' account to Defendant for collection, Defendant filed suit against Ms. Mares, as well as Mr. Trew pursuant to Utah's family expense doctrine, Utah Code Ann. § 30-2- 9, [1] based on Defendant's belief that Trew was Mares' husband. (See Dkt. No. 5 at 1; Dkt. No. 14 at 3.)[2] After Defendant initiated the collection action, Mares paid the debt. (Dkt. No. 5 at 1.) Plaintiffs then brought this action claiming that by seeking to collect the debt from Mr. Trew, Defendant violated the Equal Credit Opportunity Act, 15 U.S.C. § 1691 et seq. (“ECOA”), and the Fair Debt Collection Practices Act, 15 U.S.C. § 1692 et seq. (“FDCPA”).

         In their Opposition brief, Plaintiffs assert that “Mr. Trew has never been legally married to Ms. Mares and was never a party to the credit agreement” but rather that they “are in a long-term relationship . . . .” (Dkt. No. 14 at 1, 16.) While this statement conflicts with numerous allegations found in Plaintiffs' Complaint, [3] the court accepts it as true for purposes of this motion.


         Under Rule 12(b)(6), the court must accept all well-pleaded allegations in the Complaint as true and construe those allegations in the light most favorable to the nonmoving party. Stidham v. Peace Officer Standards Training, 265 F.3d 1144, 1149 (10th Cir. 2001). “To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.'” Ashcroft v. Iqbal, 554 U.S. 662, 678 (2009) (citing Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007)). “A claim has facial plausibility when pleaded factual content allows the court to draw the reasonable inference that defendant is liable for the misconduct alleged.” Id.

         I. Equal Credit Opportunity Act Claim

         The ECOA prohibits creditors from discriminating against any credit applicant “with respect to any aspect of a credit transaction . . . on the basis of race, color, religion, national origin, sex, or marital status.” 15 U.S.C. § 1691(a)(1). The ECOA defines an “applicant” as “any person who applies to a creditor directly for an extension, renewal, or continuation of credit, or applies to a creditor indirectly by use of an existing credit plan for an amount exceeding a previously established credit limit.” Id. § 1691a(b). Accordingly, “the plain language of the ECOA unmistakably provides that a person is an applicant only if she requests credit.” Alexander v. AmericPro Funding, Inc., 848 F.3d 698, 707 (5th Cir. 2017). Furthermore, a “creditor” is “any person who regularly extends, renews, or continues credit; any person who regularly arranges for the extension, renewal, or continuation of credit; or any assignee of an original creditor who participates in the decision to extend, renew, or continue credit.” 15 U.S.C. § 1691a(e).

         In accordance with the ECOA's authorization for the Federal Reserve Board to prescribe regulations “to carry out the purposes” of the ECOA, the Federal Reserve implemented Regulation B to help interpret and apply the ECOA, and to clarify which specific discriminatory conduct falls within its scope. 15 U.S.C. § 1691b; 12 C.F.R. §§ 202.1, et seq.; RL BB Acquisition v. Bridgemill Commons Dev. Grp., 754 F.3d 380, 383 (6th Cir. 2014). Regulation B accordingly aims in part “to promote the availability of credit to all creditworthy applicants without regard to . . . sex [or] marital status . . . [and] prohibits creditor practices that discriminate on the basis of any of these factors.” 12 C.F.R. § 202.1(b). In addition to this general prohibition of discrimination in creditor practices based on marital status, Regulation B also includes a “Spouse-Guarantor Rule” which states that “a creditor shall not require the signature of an applicant's spouse or other person, other than a joint applicant, on any credit instrument if the applicant qualifies under the creditor's standards of creditworthiness for the amount and terms of the credit requested.” 12 C.F.R. § 202.7(d)(1).

         To survive a motion to dismiss regarding the alleged violation of the ECOA's general discrimination prohibition, Plaintiffs must plead allegations of fact that (1) they are members of a protected class; (2) they applied for and were qualified for a loan; (3) the loan application(s) was rejected despite their qualifications; and (4) the creditor continued to approve loans for applicants with qualifications similar to those of Plaintiffs. See Hood v. Midwest Sav. Bank, 95 Fed.Appx. 768, 778 (6th Cir. 2004). Accordingly, Plaintiffs must plead allegations of fact that Outsource took an “adverse action” against them, defined as “a denial or revocation of credit, a change in the terms of an existing credit arrangement, or a refusal to grant credit in substantially the amount or on substantially the terms requested.” 15 U.S.C. § 1691(d)(6).[4] On the other hand, “[t]o prove a violation of the spouse-guarantor rule, [a plaintiff] need only prove that [he or she] applied for credit, and [that] the creditor ‘require[d] the signature of [the] applicant's spouse' if the applicant was individually creditworthy.” RL BB Acquisition, 754 F.3d at 389 (quoting 12 C.F.R. § 202.7(d)(1)).

         Plaintiffs argue that by suing Trew to collect Mares' debt because he was believed to be Mares' spouse, Defendant discriminated on the basis of marital status in violation of the ECOA. The court finds that Plaintiffs' ECOA claim fails as a matter of law for several reasons.

         First, Plaintiffs have failed to allege any facts to establish that Defendant is a creditor under the plain meaning of the ECOA. Plaintiffs have not alleged that either Mares or Trew ever applied for credit with Defendant, or that their loan application was ever rejected by Defendant, or that Defendant “regularly extends, renews, or continues” credit to consumers, or that Defendant regularly arranges for the same transactions. Instead, Defendant is an ordinary debt collector that was “simply attempting collect on a debt that resulted from [Hillsdale's] decision to extend credit”, which numerous courts have determined is excluded from the ECOA's definition of creditor. See, e.g., Lewis v. ACB Business Services, Inc., 135 F.3d 389, 408 (6th Cir. 1998); Anglin v. Merchants Credit Corp., No. C18-0507, 2018 WL 4584013, *7 (W.D. Wash. Sept. 25, 2018). Because Mares was never an applicant for credit from Defendant, either directly or indirectly, and Defendant was not an “assignee” who “participates in the decision to extend, renew, or continue credit, ” Defendant's conduct falls clearly outside the scope of the ECOA's protections. 15 U.S.C. § 1691a(e).

         Second, Plaintiffs have failed to allege facts that would establish Trew's standing to sue under the ECOA. As an initial matter, Trew did not apply for credit from Defendant, nor was he discriminated against on the basis of his supposed marital status as an applicant. Plaintiffs nevertheless argue that Trew was treated as a spousal “guarantor” under Regulation B, qualifying him as an applicant for credit under the ECOA. (Dkt. No. 14 at 12.) However, Trew cannot qualify as a guarantor under the word's plain meaning; a guarantor is “one who makes a guarantee [by] promis[ing] to answer for a debt, default or miscarriage of another”. Black's Law Dictionary (6th Ed. 1990). Plaintiffs have not plead that Trew ever signed a guaranty agreement, made an oral guaranty, or engaged in any conduct that would qualify him as a guarantor. As Defendant persuasively points out, “according to [P]laintiffs' own theory, Mr. Trew never promised to do anything.” (Dkt. No. 15 at 8.) Furthermore, even under Defendant's original assumption that Utah's family expense doctrine applied to Plaintiffs, Trew would ...

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