In Certifying FDCPA Letter Class, Northern District of California Finds That Whether the Underlying Debt Was Incurred for Personal or Business Purposes Does Not Defeat Predominance

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A district court judge in California has certified a FDCPA letter class involving billing and collection letters sent by a collection company used by Hertz car rental agency. The plaintiff in DeNicolo v. Hertz Corp. alleges that the letters, sent to consumers after Hertz allegedly discovered damage to the returned rental cars, were attempts to collect a debt sent without the mini-Miranda notice. See Denicolo v. Hertz Corp., 2021 U.S. Dist. LEXIS 59859, Case No. 19-cv-00210 – YGR (N.D. Cal. March 29, 2021).

The named plaintiffs asserted that they rented vehicles and returned them without damage. Hertz, however, advised its vendor Viking Client Services LLC d/b/a Viking Billing Service that the rentals had sustained damage due to the plaintiffs’ fault. Upon receiving notice of a damage claim from Hertz, Viking used a letter vendor that sent a series of three letters to the plaintiffs. Id., at *3. These initial three letters were identified as from “Viking Billing Services” but did not contain the mini-Miranda notice required by the FDCPA. If the first three letters did not induce a payment, the account “rolls over” to collections through Viking Client Services, and Viking then directs its vendor to send a series of three additional letters, which do include the mini-Miranda warning. Id., at *4.

On summary judgment, the defendants argued that the first series of letters did not violate the FDCPA because the named plaintiff’s debt was not a consumer debt. See Denicolo v. Hertz Corp., 2020 U.S. Dist. LEXIS 181248, *17 (N.D. Cal. Sept. 30, 2020). The basis for this argument was that the car was rented for a business trip and the expense reimbursed by the employers The judge disagreed, concluding that there was evidence weighing both for and against a finding that the alleged debt arose out of a transaction in which the services were “primarily for personal family or household purposes.” Id. On the one hand, the trip was a business trip. On the other hand, the plaintiff used his personal credit card and booked his own travel. Id. Moreover, Viking treated all debts assigned by Hertz in a uniform manner, regardless of the underlying purpose of the trip. Id.

Arguing against class certification, the defendants asserted that common questions did not predominate because they could not “feasibly ascertain” whether a putative class member’s claim was based on a debt incurred for personal reasons. See Denicolo, 2021 U.S. Dist. LEXIS 59859, at *9-10. Specifically, the defendants argued that the question of whether the debts for car rental damage were consumer versus business debts would overwhelm any common questions. Id., at *11. Recognizing that courts have reached divergent conclusions as to whether the consumer debt question requires individualized inquiry, the court found that the fact that the defendants sought to collect the debt from the consumers, not their employers, was dispositive. Id., at *13-14. The fact that the plaintiff was reimbursed by his employer did not persuade the judge. The court held that “the fact that a consumer … receives some business-related credit on a debt he incurred, does not preclude the debt from being covered under the FDCPA. Id., at *14. Moreover, the issue of which class member debts were personal debts, as opposed to business debts, posed a class manageability issue, not a barrier to certification. Id., at *13.

This case illustrates the importance of including mini-Miranda notices in all collection letters sent to individual consumers to avoid potential exposure to FDCPA claims when the company has dealt directly with those individuals, and not with a business.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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