United States District Court, E.D. Wisconsin
JACQUELYN A. VANDEHEY and MICHELLE L. O'LAIRE, on behalf of themselves and all others similarly situated, Plaintiffs,
ASSET RECOVERY SOLUTIONS, LLC, VELOCITY INVESTMENTS LLC, and JOHN AND JANE DOES 1 THROUGH 25, Defendants.
DECISION AND ORDER
William C. Griesbach, Chief Judge United States District
Jacquelyn A. Vandehey and Michelle L. O'Laire, on behalf
of themselves and all others similarly situated, filed a
complaint against Defendants Asset Recovery Solutions, LLC
(ARS), Velocity Investments LLC (Velocity), and John and Jane
Does Numbers 1 through 25, alleging that the defendants
violated the Fair Debt Collection Practices Act (FDCPA), 15
U.S.C. § 1692, et seq., by sending debt
collection letters to Plaintiffs that sought to collect the
balance of consumer loans on which they had defaulted.
Because the loans were charged off by the original creditor
and were no longer accruing interest, Plaintiffs claim that
the letters' statement that the “[t]he account
balance may periodically increase due to the addition of
accrued interest, ” ECF Nos. 1-1, 1-2, is false,
deceptive, and misleading and fails to state the amount of
the debt in violation of §§ 1692e and
1692(g)(a)(1). Before the court are the defendants'
motion to compel arbitration and Plaintiffs' motion for
class certification. In a previous order and subsequent
telephone conference, the court withheld ruling on these
motions, directed the defendants to supplement the record,
and allowed Plaintiffs thirty days to respond to the
supplement. Plaintiffs did not file a response. In light of
the supplemented record and this court's past order, and
for the reasons that follow, the defendants' motion to
compel arbitration will be granted and Plaintiffs' motion
for class certification will be denied.
allege that they received letters from ARS that sought to
collect a debt on behalf of Velocity. The letters, which are
attached as exhibits to the complaint, list a total balance
due and state in part: “[t]he account balance may
periodically increase due to the addition of accrued
interest.” ECF Nos. 1-1, 1-2. Plaintiffs claim that
these letters are false, deceptive, and misleading and fail
to state the amount of the debt in violation of the FDCPA
because the balances are static and Velocity has not added
and does not intend to add interest to the debts.
have moved for class certification, and they seek to
represent Wisconsin residents who received similar letters
from ARS mailed between January 29, 2017, and February 19,
2018, that contained the phrase: “[t]he account balance
may periodically increase due to the addition of accrued
interest.” Shortly after Plaintiffs filed a motion for
class certification, ARS and Velocity filed a motion to
compel arbitration, claiming that Plaintiffs executed
promissory notes that contain arbitration and class-waiver
provisions. The notes were for personal loans from WebBank, a
Utah-chartered industrial bank, who transferred them to
Prosper Funding, LLC (Prosper), who then sold the debts to
Velocity. Galaxy Capital Recoveries, LLC, a company that
serviced Velocity's debts, authorized ARS to service
notes provide that all claims “arising from or related
to [the notes] . . . shall be resolved, upon the election of
you or me, by binding arbitration, ” ECF No. 19-1 at
¶ 18(a)(iii), (b); ECF No. 19-2 at ¶ 18(a)(iii),
(b), that “arbitration under this arbitration agreement
will take place on an individual basis; class arbitrations
and class actions are not permitted, ” and that
“YOU AND I AGREE THAT EACH MAY BRING CLAIMS AGAINST THE
OTHER ONLY IN OUR INDIVIDUAL CAPACITY, AND NOT AS A PLAINTIFF
OR CLASS MEMBER IN ANY PURPORTED CLASS OR REPRESENTATIVE
PROCEEDING.” ECF No. 19-1 at ¶ 18(b), (f); ECF No.
19-2 at ¶ 18(b), (f). The notes also provide:
YOU AND I AGREE THAT, BY ENTERING INTO THIS NOTE, THE
PARTIES ARE EACH WAIVING THE RIGHT TO A TRIAL BY JURY OR TO
PARTICIPATE IN A CLASS ACTION. YOU AND I ACKNOWLEDGE THAT
ARBITRATION WILL LIMIT OUR LEGAL RIGHTS, INCLUDING THE RIGHT
TO PARTICIPATE IN A CLASS ACTION, THE RIGHT TO A JURY TRIAL,
THE RIGHT TO CONDUCT FULL DISCOVERY, AND THE RIGHT TO APPEAL
(EXCEPT AS PERMITTED IN PARAGRAPH(e) OR UNDER THE FEDERAL
ECF No. 19-1 at ¶ 18(h); ECF No. 19-2 at ¶ 18(h).
notes define “WebBank” as itself, any person
servicing the notes, any subsequent holders of the notes or
any interest in the notes, any person servicing the notes for
a subsequent holder of the notes, and each of their
respective parents, subsidiaries, affiliates, predecessors,
successors, and assigns, as well as the officers, directors,
and employees of each of them. ECF No. 19-1 at ¶
18(a)(ii); ECF No. 19-2 at ¶ 18(a)(ii). Neither
plaintiff exercised the option of rejecting the arbitration
and class-waiver provisions that was available under the
notes. See ECF No. 19-1 at ¶ 18(i); ECF No.
19-2 at ¶ 18(i).
Decision and Order dated December 27, 2018, the court found
that the record was insufficiently developed to allow the
court to definitively conclude that Plaintiffs are bound by
the terms of the notes they allegedly executed or that the
defendants are entitled to enforce those provisions. See
Vandehey v. Asset Recovery Solutions, LLC, No. 18-C-144,
2018 WL 6804806, at *1 (E.D. Wis. Dec. 27, 2018). More
specifically, the court noted that the record is unclear as
to whether Plaintiffs assented to the terms of the notes
either directly or by authorizing Prosper Marketplace, Inc.
(PMI), which acts as Prosper's agent in servicing loans
obtained through Prosper's online credit platform, to
sign on their behalf as attorney-in-fact. Id. at *8.
The court also noted that the evidence was insufficient to
establish that WebBank assigned the notes to Prosper, which
in turn transferred them to Velocity. Id. The court
therefore withheld ruling on the defendants' motion to
compel and indicated that the parties would have the
opportunity to supplement the record. Id.
a January 7, 2019 hearing, O'Laire agreed to arbitrate
her claims and the court stayed the case as to her claims
pending arbitration. Also during the hearing, the court
directed the defendants to supplement the record with respect
to the issues identified in its December 27, 2019 order, and
Plaintiffs were given thirty days to respond after the filing
of the supplement. On February 15, 2019, the defendants
supplemented the record. Plaintiffs did not file a response.
Loan Application Process
defendants' supplement includes an affidavit from Keith
Walch, Director of Recovery at PMI, who explains the process
by which individuals can apply for a loan through Prosper
Marketplace, which is an online credit platform (Platform)
that Prosper operates to offer access to, among other things,
unsecured personal loans in the form of promissory notes.
See ECF No. 40-1. When applying for a loan using the
Platform, an individual is guided through a series of
webpages and is required to agree to various legal contracts
Registration Agreement. Id. at ¶ 7. The
applicant begins by identifying the desired loan amount, the
purpose of the loan, and the applicant's credit quality.
Id. at ¶ 8. The next step is to enter various
personal and financial information, including employment
status and income. Id. at ¶ 10. Before
applicants can view ...