CLARKSBURG, W.V.–A judge has ruled against Pentagon Federal Credit Union (PenFed) in a case involving a $5 fee for any member who makes an auto loan payment over the phone, ruling the credit union—because it accepts payments on the auto loan—qualifies as a “debt collector” under state law.
Judge Thomas S. Kleeh of the United States District Court for the Northern District of West Virginia denied PenFed’s motion to dismiss the suit in which Joseph Boczek is the plaintiff.
Boczek filed the class action suit in May of 2023. PenFed filed its motion for dismissal in September of 2023.
Boczek alleges that he was charged a $5 “pay-to-pay” fee when making his monthly car payment over the phone.
‘Profits’ From Payment
“However, neither the promissory note nor a statute authorizes PenFed to impose the $5 fee. Moreover, PenFed charged Plaintiff $5 to make his monthly payment over the phone, but Plaintiff alleges that the pay to pay transaction costs $0.30 per transaction. Thus, Plaintiff alleges that PenFed profits off the pay to pay fees,” the complaint reads.
Boczek is alleging PenFed has engaged in repeated violations of Article 2 of the West Virginia Credit and Protection Act.
Judge Kleeh ruled that the Plaintiff has sufficiently pled that PenFed is a debt collector under the WVCCPA.
PenFed has argued it is not a debt collector and did “not engage in debt collection.” The complaint alleges that PenFed does engage in debt collection through its collection of monthly loan payments.
Court Shoots Down Arguments
“The Court agrees,” wrote Kleeh. “As pled, PenFed is the lender and servicer of Plaintiff’s automobile loan; thus, PenFed is clearly engaged directly in debt collection.”
PenFed had also argued the $5 fee is not a “claim owed” or a “collection,” but the court again disagreed. It found the collection of the $5 fee while receiving the auto loan payment amounts to a “collection” under the WVCCPA.
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