A Magistrate judge in Texas has recommended that a defendant in a Texas Debt Collection Practices Act class-action lawsuit have its motion for summary judgment granted. The defendant, a company that provides software for property managers to allow tenants to pay their rent online via a payment portal, was sued for charging consumers a fee when paying via debit or credit cards. Among the arguments raised by the plaintiff was that the defendant was a collector because its portal software was a form used to collect consumer debts.
The Background: The plaintiff’s lease initially did not authorize any service fees for rent payments. However, when the property management company enabled online payments through the defendant’s platform, the plaintiff was informed of the available payment options, which included no fees if payment was made by ACH/e-Check and fee-based debit and credit card payments. Despite being aware of the free payment option, the tenant chose to pay by debit card multiple times, incurring a service fee each time. The plaintiff claimed he chose to pay by debt card because he did “even exactly know what that means, ACH/eCheck.”
The Ruling: Judge Dustin M. Howell of the District Court for the Western District of Texas ruled that the recurring monthly rent payments did not qualify as “consumer debt” under the TDCA. The judge emphasized that the TDCA is designed to regulate debt collection practices related to obligations arising from breaches of agreements or extensions of credit, not regular rent payments made in compliance with a lease.
- The plaintiff introduced a novel theory, arguing that the defendant should be considered a “debt collector” because it collected service fees for itself. However, the court found this interpretation inconsistent with the TDCA’s text, which requires an entity to be collecting consumer debts to qualify as a debt collector. The court emphasized that the service fees were not consumer debts but transaction charges disclosed to the tenant upfront.
- The plaintiff’s claim that the defendant’s payment portal was a “form” intended for debt collection was deemed too cursory and unsupported by precedent, Judge Howell ruled.
