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."
Padilla alleges that $7,955.36 in collection fees were charged on her
account (see Pltf. Br. Ex. C Oct. 3, 1997 account statement), and that
this amount violates § 1692f(1), because it translates into an
unreasonable hourly rate of approximately $933. Payco argues that the
collection amount was authorized by Padilla's contract with USA Group and
regulations enacted under the HEA because she defaulted, and that even if
it wasn't so authorized, Payco had no duty to conduct an independent
investigation of the debt referred from USA Group before attempting
The assessment of collection fees against defaulted federal loans are
authorized by federal regulations enacted pursu ant to the HEA.
Specifically, 34 C.F.R. § 682.410(b) generally allows for the
imposition of collection charges,*fn17 except for cases like Padilla's,
involving the consolidation of a defaulted federal loan, which is
governed by 34 C.F.R. § 401(b)(27).*fn18 The relevant inquiry under
this provision is not whether the fee is reasonable when broken into an
hourly rate, as the parties suggest, but rather whether the fee is at or
below 18% of the outstanding debt — including principal and
interest. 34 C.F.R. § 682.410(b)(27)(i).*fn19
The account statement that reflected $7,955.34 in collection fees
reflects principal plus interest due in the amount of $32,776.56.
Eighteen percent of this amount, or $5,899.78, was authorized to be
assessed as a collection fee pursuant to 34 C.F.R. §
Therefore, Payco violated § 1692f by attempting to collect an
excess of $2,055.56 in collection fees. Payco's argument that it merely
collected these fees pursuant to USA Group's instruction is unavailing,
because § 1692f(1) applies specifically to a "debt collector" that
engages in the "collection of" debt, not the creditor who will be made
whole as a result of the debt collector's efforts.
Padilla's motion for summary judgment is granted on this ground.
7. Damages for the § 1692f Violation Shall Be Determined by the
Court, not a Jury
Although Padilla seeks to reserve the question of damages for the
§ 1692k provides that judges, not juries, determine damages for
violations of the FDCPA. Under that section, an individual plaintiff that
has proven a violation of any provision of the FDCPA may be awarded civil
damages of the sum of (1) her actual damages resulting from the
violation; and (2)(A) additional damages of up to $1,000 in the Court's
discretion, plus (3) the costs of the action and reasonable attorneys'
fees, as determined by the Court. As such, Padilla's motion to reserve
damages for a jury, and for punitive damages under the FDCPA is denied.
Damages shall be resolved by the Court in future proceedings.
In addition, the Court will determine reasonable attorneys' fees for
Payco on its successful claims upon the filing of a motion on notice,
pursuant to § 1629k(a)a)(3).*fn20
B. New York and Massachusetts Statutes
Although Massachusetts G.L. ch. 93A allows debtors to file actions in
the district courts for violations of its consumer protection
provisions, see id. § 9(3A), a prerequisite to any such action is the
filing of a written demand for relief at least thirty days prior to
filing, see id. § 9(3). The only such demand that has been placed
before the Court is a "Rule 68 F.R.C.P. Offer of Judgment" Padilla sent
to Payco on August 29, 2000, some two years after filing this action. As
she failed to meet the prerequisites for seeking relief under the
Massachusetts statute for "Regulation of Business Practices For Consumers
Protection," defendants' motion for summary judgment on Massachusetts law
grounds is granted.
New York G.B.L. § 349 allows consumers to file civil damages
actions to recover for "[d]eceptive acts or practices in the conduct of
any business, trade or commerce or in the furnishing service in this
state," and for violations of N Y G.B.L. § 601, which pertains
specifically to unfair debt collection practices.*fn21 N.Y.G.B.L. §
349(a). As all of Padilla's claims pertain to debt collection actions
taken prior to July 2000, when she moved from Massachusetts to New York,
the acts she alleges took place in Massachusetts, not "in this state."
Payco's motion for summary judgment on the claims under the New York
consumer protection statute is therefore granted.
C. Common Law Fraud
Finally, Payco moves to dismiss any common law fraud claims that the
amended complaint could be construed as raising, both for failure to
state a claim and for failure to plead fraud with particularity pursuant
to Rule 9(b). As none of Padilla's numerous submissions contest this
aspect of Payco's summary judgment motion, the common law fraud claim is
For the foregoing reasons, the motions for summary judgment are hereby
granted in part and denied in part. Payco is to submit an accounting of
reasonable attorneys' fees, on notice, within twenty (20) days of the
date of this opinion.
It is so ordered.