United States District Court, N.D. Alabama, Southern Division
VIRGINIA EMERSON HOPKINS, District Judge.
The defendant (Insight) has filed a Motion to Dismiss. It seeks to dismiss all claims the plaintiff (Ms. McCollough) filed in her original and Amended Complaint.
Insight is a "payday" lender that extended a series of short-term loans to Ms. McCullough over the course of 2011-12. Ms. McCullough claims that Insight's conduct during this period violated the federal Truth in Lending Act (TILA), the Alabama Deceptive Trade Practices Act (DTPA),  and an injunction filed by an Alabama state-court judge in a separate case against Insight. She also claims that Insight fraudulently suppressed and misrepresented certain material facts in its dealings with her. These claims target Insight's disclosures - or lack thereof - in several loan agreements she signed with the company over 2011-12.
In its present Motion, Insight argues that Ms. McCullough has failed to state any facts that - even if true - would secure her legal relief. The court disagrees in part. Ms. McCullough has plausibly alleged a misleading disclosure in violation of TILA. However, she has otherwise misconstrued the statute, and her other two allegations under it are invalid. She has also misinterpreted federal and Alabama law regarding injunctions and deferred presentment arrangements of the kind she voluntarily entered. Finally, she has not plausibly claimed that Insight defrauded her in any way. The court will therefore GRANT in part and DENY in part Insight's Motion to Dismiss the claims made in her original and Amended Complaint.
STANDARD OF REVIEW
Generally, the Federal Rules of Civil Procedure require only that the complaint provide "a short and plain statement of the claim showing that the pleader is entitled to relief." Fed.R.Civ.P. 8(a). However, to survive a motion to dismiss brought under Rule 12(b)(6), a complaint must "state a claim to relief that is plausible on its face." Bell Atl. Corp. v. Twombly (Twombly), 550 U.S. 544, 570 (2007).
A claim has facial plausibility "when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Ashcroft v. Iqbal (Iqbal), 556 U.S. 662, 678 (2009) (citing Twombly, 550 U.S. at 556). That is, the complaint must include enough facts "to raise a right to relief above the speculative level." Twombly, 550 U.S. at 555 (citation and footnote omitted). Pleadings that contain nothing more than "a formulaic recitation of the elements of a cause of action" do not meet Rule 8 standards, nor do pleadings suffice that are based merely upon "labels or conclusions" or "naked assertion[s]" without supporting factual allegations. Id. at 555, 557 (citation omitted).
Once a claim has been stated adequately, however, "it may be supported by showing any set of facts consistent with the allegations in the complaint." Id. at 563 (citation omitted). Further, when ruling on a motion to dismiss, a court must "take the factual allegations in the complaint as true and construe them in the light most favorable to the plaintiff." Pielage v. McConnell, 516 F.3d 1282, 1284 (11th Cir. 2008) (citing Glover v. Liggett Group, Inc., 459 F.3d 1304, 1308 (11th Cir. 2006)).
PRELIMINARY ISSUE: STATUTE OF LIMITATIONS
Before the court may consider Insight's Motion, it must first discern the scope of its analysis. Ms. McCullough claims that she entered into roughly 40 "Alabama Deferred Presentment Arrangements" with Insight between January 2011 and October 2012. See, e.g., Doc. 1 ¶ 13(b). She has attached a timeline to her Complaint that lists the dates on which these agreements were formed. Doc. 1-1 at 11. TILA has a statute of limitations provision that requires a plaintiff to file his or her case "within one year from the date of the occurrence of the violation." 15 U.S.C. § 1640(e) (emphasis added).
Ms. McCullough filed her Complaint on August 22, 2013. Doc. 1. She alleges that Insight violated TILA through the disclosures it made - or failed to make - on these agreements when she signed them. The court therefore finds as a matter of law that TILA bars consideration of any claims arising from contracts she signed with Insight before August 22, 2012. After reviewing her attached timeline, the court finds that it will thus only consider the agreements she formed with Insight on the following dates: August 24, 2012; September 7, 2012; September 21, 2012; and October 20, 2012. See Doc. 1-1 at 11. Ms. McCullough has also attached these four agreements (in their presumable entirety) to her Complaint. Doc. 1-1 at 7-10. So, the court will rely upon these reproductions in deciding the present Motion.
I. Ms. McCullough Has Plausibly Stated a Single TILA Claim.
In her Complaint, Ms. McCullough claims that Insight violated TILA in three respects: (1) by inaccurately stating in the loan agreements that it was holding her personal checks as security; (2) by misrepresenting its identity on these agreements; and (3) by disclosing excessive information in these agreements. The court finds that only the first claim is plausible.
A. Ms. McCullough has plausibly alleged that Insight's loan agreements inaccurately described how it would treat her checks.
TILA, 15 U.S.C. §§ 1601-67f, "is a consumer protection statute that seeks to avoid the uninformed use of credit' through the meaningful disclosure of credit terms, ' thereby enabling consumers to become informed about the cost of credit." Tribble v. Deutsche Bank Nat. Trust Co., No. 13-80938-CIV, 2014 WL 186126, at *2 (S.D. Fla. Jan. 6, 2014) (quoting 15 U.S.C. § 1601(a)); see also Mourning v. Family Publ'ns Serv., Inc., 411 U.S. 356, 377 (1973) ("The Truth in Lending Act reflects a transition in congressional policy from a philosophy of Let the buyer beware' to one of Let the seller disclose.'"). "Besides imposing criminal liability, TILA creates a private cause of action for actual and statutory damages for certain disclosure violations." Tribble, 2014 WL 186126, at *2 (citing 15 U.S.C. § 1640(a)). "In essence, a creditor is liable under TILA if the disclosure of the credit terms is inaccurate or misleading." Hahn v. McKenzie Check Advance of Ill., LLC, 61 F.Supp.2d 813, 815 (C.D. Ill. 1999). "[A]n objective standard is used in determining violations of TILA." Smith v. Chapman, 614 F.2d 968, 971 (5th Cir. 1980). In other words, "[i]t is not necessary that the plaintiff-consumer actually have been deceived in order for there to be a violation." Id. (citing McGowan v. King, Inc., 569 F.2d 845, 849 (5th Cir. 1978)). Moreover, "the applicable standard is strict compliance with the technical requirements of the Act." Id. "Only adherence to a strict compliance standard will promote the standardization of terms which will permit consumers readily to make meaningful comparisons of available credit alternatives." Id. (citations omitted); accord Parker v. DeKalb Chrysler Plymouth, 673 F.2d 1178, 1181 (11th Cir. 1982). To that end, courts should liberally construe TILA in the consumer's favor to best effect the legislation's goals. Williams v. Pub. Fin. Corp., 598 F.2d 349, 355 (5th Cir. 1979) (citation omitted).
Ms. McCullough claims that Insight violated TILA's disclosure requirements in the loan agreement forms the lender had her sign. In an outlined box at the top of each of the four relevant contracts, a line reads as follows:
SECURITY: Lender takes and holds the Customer's check under the Alabama Deferred Presentment Services Act.
Doc. 1-1 at 7-10. According to Ms. McCullough, because the Deferred Presentment Services Act (DPSA) forbids holding her check as security, this statement is a misleading disclosure in violation of TILA. Doc. 1 ¶ 13(a). Given the strict compliance standard outlined above, this claim is sufficiently plausible to survive Insight's dismissal motion.
The second part of the above loan statement is accurate: under Alabama law, Insight legally could have taken Ms. McCullough's check in return for extending her a loan. The plausible inaccuracy arises when that statement is juxtaposed next to the term "SECURITY." Why that is so requires a brief review of both federal and Alabama law on this subject. Regulation Z, 12 C.F.R. §§ 226.1-226.59, implements TILA's dictates. TILA, through Regulation Z, "requires creditors to disclose accurately any security interest taken by the lender and to describe accurately the property in which the interest is taken" Smith v. Cash Store Mgmt., Inc., 195 F.2d 325, 328 (7th Cir. 1999) (citing 15 U.S.C. § 1638; 12 C.F.R. § 226.18). Regulation Z defines a "security interest" as "an interest in property that secures performance of a consumer credit obligation and that is recognized by state or federal law." 12 C.F.R. § 226.2(a)(25). Alabama law, in turn, defines a "security interest" as:
an interest in personal property or fixtures which secures payment or performance of an obligation. "Security interest" includes any interest of a cosignor and a buyer of accounts, chattel paper, a payment intangible, or a promissory note in a transaction that is subject to Article 9A [which relates to secured transactions].
Ala. Code § 7-1-201(35).
While this language might encompass personal checks in certain situations, the DPSA apparently does not consider checks to be security interests in the context of deferred presentment transactions. One may infer this from its competing provisions. One section of the statute defines a deferred presentment transaction as
[a] transaction pursuant to a written agreement involving the following combination of activities in exchange for a fee:
a. Accepting a check or authorization to debit a checking account and, in connection with that acceptance, advancing funds to the checking account holder.
b. Holding the check or authorization to debit checking account for a period of time prior to payment or deposit.
Ala. Code § 5-18A-2(3). The statute sanctions this type of arrangement, which evidently depicts the one formed between Ms. McCullough and Insight. Yet, another provision prohibits a deferred presentment vendor from "requir[ing] a customer to provide security for the transaction or requir[ing] the customer to provide a guaranty from another person." Ala. Code § 5-18A-13(k). Reading these provisions together, the court concludes that the DPSA does not regard a personal check given in a deferred presentment transaction as a security interest.
This conclusion underscores the plausible inaccuracy in the contracts Insight offered to Ms. McCullough. Insight's statement that it was taking and holding her checks under the DPSA was itself a legally accurate statement. But, placing this statement next to the term "SECURITY" misleadingly suggested that Insight was taking a security interest in her checks when the company was not (and could not). Although this is a technical construction of the language at issue, TILA demands such a construction.
In its Motion to Dismiss, Insight confirms that it was not holding Ms. McCullough's checks as security for the loans it issued her. Doc. 6 at 3. It claims that its contracts did not state such but instead faithfully tracked the DPSA's language. Id. at 5-6. In its defense, Insight cites the district court's decision in Butler v. First Credit, Inc., No. 4:07-CV-01908-UWC (N.D. Ala. Nov. 13, 2008). However, Butler actually undermines Insight's argument. That case did involve a deferred presentment arrangement. But, the ...