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August 5, 2004.

CHRISTIE LIMPERT and VIVIAN FONEBOA, individually and on behalf of others similarly situated, Plaintiffs,

The opinion of the court was delivered by: THOMAS PLATT, JR., Senior District Judge


Defendants the Cambridge Credit Counseling Corporation, et al., move under Federal Rules of Civil Procedure 12(b)(1) and (6) for dismissal of the claims brought against them by class action Plaintiffs Christie Limpert and Vivian Fonteboa. Plaintiffs sued Defendants under the Fair Debt Collection Practices Act, 15 U.S.C. § 1692 et seq., ["FDCPA"]; the Credit Repair Organization Act, 15 U.S.C. § 1679 et seq., ["CROA"]; and the Racketeering Influenced and Corrupt Organization Act, 18 U.S.C. § 1961 et seq., ["RICO"]. Oral argument was heard on July 15, 2004.

For the following reasons, Defendants' Rule 12(b)(1) motion is DENIED. Defendants' motion is GRANTED, pursuant to Rule 12(b)(6), as to Plaintiffs' FDCPA claims, and these claims are dismissed WITH PREJUDICE. Defendants' Rule 12(b)(6) motion is GRANTED as to Plaintiffs' CROA claims against Cambridge Brighton and Cambridge Credit Counseling, and these claims are also dismissed WITH PREJUDICE, but Defendants' motion is DENIED as to Plaintiffs' CROA claims against the remaining eight Defendants. Defendants' motion is GRANTED, under Rule 12(b)(6), as to Plaintiffs' RICO claims, yet these are dismissed WITHOUT PREJUDICE and with LEAVE TO RE-FILE.


  The class action Plaintiffs in this case are consumers alleged to be enrolled in debt management plans ["DMPs"]. These plans are alleged to have been "created and administered by . . . Defendants through unlawful, false, misleading, deceptive and unfair trading practices" in violation of the FDCPA, CROA and RICO. Defendants are eight credit counseling corporations and partnerships owned by individually-named Defendants Robert Henle and John and Richard Puccio. They offer indebted consumers DMPs in which "consumers agree to pay their unsecured debts to Defendants, who then disburse the payments to consumers' creditors." These payments are purportedly disbursed in exchange for sub rosa fees collected from both debtors and creditors, and with chimerical promises offered to debtors of, inter alia, lower credit card balances and interest rates, fewer late fees, and improved credit ratings. Plaintiffs' Memorandum of Law in Opposition to Defendants' Motion to Dismiss at 1-2.

  Plaintiffs offer evidence that the credit counseling industry is rife with abuse. They cite the records of congressional hearings held by the Senate's Governmental Affairs and the House of Representatives' Ways and Means Committees, testimony given to these bodies by Federal Trade Commission and Internal Revenue Service officials, and legal action taken by the Attorney General of the Commonwealth of Massachusetts, as illustrative of the problem. Indeed, Congress is presently considering legislation to deal with these problems — specifically, the Debt Counseling, Debt Consolidation, and Debt Settlement Practices Improvement Act of 2003. See id. at 5-6; see also Defendants's Memorandum of Law in Support of their Motion to Dismiss at 6 (citing H.R. 3331, 108th Congress, 1st Sess., available at

  Defendants argue in response to Plaintiffs' 42-page Complaint that two of the three statutes sued upon by Plaintiffs, the FDCPA and CROA, do not apply to credit counselors, as they themselves are neither debt collectors nor credit repairers, and that the predicates of the third statute, RICO, are insufficiently pleaded. See Defendants' Memorandum, passim.

  Defendants are mostly correct. Plaintiffs' citation of evidence that legislators and regulators are perhaps justifiably concerned with claimed abuses in the credit counseling industry shows that existing statutory remedies and administrative oversight are insufficient, and that current laws — the laws, such as the FDCPA and CROA, upon which Plaintiffs sue — do not offer relief for the alleged wrongs perpetrated against Plaintiffs by all of the named Defendants. The democratic process may soon provide Plaintiffs with mechanisms through which to address their possibly legitimate grievances against the credit counseling industry. Unless and until the Executive and the Legislature do so, however, Plaintiffs may not shoe-horn the facts of their Complaint into the FDCPA, which deals with debt collection. Plaintiffs may or may not be able to fit their claims against some Defendants within the parameters of the CROA, which deals with debt repair, if Defendants are in fact representing that they offer debt repair services and not solely credit counseling services. Plaintiffs may rely upon the RICO statute, but they must first allege its statutory predicates with sufficient particularity.

  Standard of Review

  On their motion to dismiss Plaintiffs' Complaint under Rule 12(b)(6), for failure to state a claim upon which relief may be granted, Defendants bear the burden of showing that even if the Complaint's allegations are accepted as true, and all reasonable inferences are drawn in Plaintiffs' favor, Plaintiffs are still not entitled to the relief they seek. Dismissal is proper only if no relief could be granted under any set of facts consistent with Plaintiffs' allegations.*fn1


  A. Fair Debt Collection Practices Act

  The Fair Debt Collection Practices Act, 15 U.S.C. § 1692 et seq., addresses abusive dunning conduct. The FDCPA defines a debt collector as any person who collects debts owed to another. See 15 U.S.C. § 1692(a)(6). The FDCPA does not apply to "any nonprofit organization which, at the request of consumers, performs bona fide consumer credit counseling and assists consumers in the liquidation of their debts by receiving payments from such consumers and distributing such amounts to creditors." Id.

  The FDCPA intends to restrain collection practices including:
obscene or profane language, threats of violence, telephone calls at unreasonable hours, misrepresentation of a consumer's legal rights, disclosing a consumer's personal affairs to friends neighbors or an employer, obtaining information about a consumer through false pretenses, impersonating public officials and attorneys, and simulating legal process.
S. Rep. No. ...

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