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Vandehey v. Asset Recovery Solutions LLC

United States District Court, E.D. Wisconsin

March 24, 2019

JACQUELYN A. VANDEHEY and MICHELLE L. O'LAIRE, on behalf of themselves and all others similarly situated, Plaintiffs,
v.
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 Court

         Plaintiffs 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.

         BACKGROUND

         Plaintiffs 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.

         Plaintiffs 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 Plaintiffs' debts.

         The 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 ARBITRATION ACT).

ECF No. 19-1 at ¶ 18(h); ECF No. 19-2 at ¶ 18(h).

         The 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).

         In a 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.

         During 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.

         ANALYSIS

         A. Loan Application Process

         The 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 along the way, including Terms of Use and a Borrower 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 ΒΆ 10. Before applicants can view ...


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