    19-244cv
    Bryan v. Credit Control, LLC


                                        In the
                            United States Court of Appeals
                                for the Second Circuit
                                                ______________


                                            AUGUST TERM 2019
                                           Docket No. 19-244-cv



                              MICHAEL BRYAN, on behalf of himself and
                                   all others similarly situated,

                                             Plaintiff-Appellant,

                                                        v.

                                          CREDIT CONTROL, LLC,

                                            Defendant-Appellee.*
1

                                                ______________

                                      ARGUED: November 20, 2019
                                        DECIDED: April 3, 2020
                                                ______________


            Before:          WALKER, LYNCH, AND SULLIVAN, Circuit Judges.

                                                ______________


         Plaintiff-Appellant Michael Bryan, individually and on behalf of a class,
    appeals from an order of the United States District Court for the Eastern District

    * The Clerk of Court is respectfully requested to amend the caption as stated above.
of New York (Sandra J. Feuerstein, J.) granting judgment on the pleadings in favor
of Defendant-Appellee Credit Control LLC (“Credit Control”) in this action
brought under the Fair Debt Collection Practices Act, 15 U.S.C. § 1692 et seq. Bryan
alleged that Credit Control, in an effort to collect the outstanding debt on Bryan’s
Kohl’s Department Stores, Inc. private label credit card account, sent him a letter
that did not list the “creditor to whom the debt is owed,” in violation of 15 U.S.C.
§ 1692g; he also alleged that Credit Control’s letter constituted a false or
misleading representation, in violation of 15 U.S.C. § 1692e. We conclude that the
district court erred in finding that Credit Control disclosed the “name of the
creditor to whom the debt is owed” by listing Kohl’s, the servicer of the account,
as the “client.” Because the district court relied on this erroneous finding in further
holding that the letter did not constitute a false or misleading representation, we
do not reach the question of whether the letter violated Section 1692e.
Accordingly, the judgment of the district court is REVERSED as to the Section
1692g claim and VACATED as to the Section 1692e claim. The case is
REMANDED to the district court for further proceedings consistent with this
Opinion.
                                    ______________


                                              TIFFANY N. HARDY (Daniel A.
                                              Edelman, on the brief) Edelman,
                                              Combs, Latturner & Goodwin, LLC,
                                              Chicago, IL, for Appellant.

                                              PATRICK A. WATTS, Watts Law
                                              Group, LLC, St. Louis, MO (Donald
                                              S. Maurice, Jr., Thomas R.
                                              Dominczyk, Maurice Wutscher, LLP,
                                              Flemington, NJ, on the brief), for
                                              Appellee.

RICHARD J. SULLIVAN, Circuit Judge:

      Section 1692g of the Fair Debt Collection Practices Act (“FDCPA”), 15 U.S.C.

§ 1692 et seq., mandates that a debt collector disclose to a consumer “the creditor


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to whom the debt is owed,” id. § 1692g(a)(1). This appeal requires us to consider

whether a debt collector violates Section 1692g when, in a collection letter

concerning private label credit card debt, it discloses the name of the retailer that

services the credit card but not the financial institution that owns the debt.

      Plaintiff-Appellant Michael Bryan, individually and on behalf of a class,

brought suit alleging that Defendant-Appellee Credit Control, LLC (“Credit

Control”), a debt collector, violated Section 1692g when it sent him a collection

letter related to his Kohl’s Department Stores, Inc. private label credit card debt.

The letter listed Kohl’s Department Stores, Inc., which services the credit card, as

Credit Control’s “client,” but made no mention of Capital One, which owns the

debt. Bryan also alleged that, because the letter failed to mention Capital One, it

constituted a false or misleading communication in connection with a debt, in

violation of 15 U.S.C. § 1692e. The district court (Sandra J. Feuerstein, J.) granted

Credit Control’s motion for judgment on the pleadings pursuant to Rule 12(c) of

the Federal Rules of Civil Procedure.

      On appeal, Bryan argues that the district court erred in holding that Credit

Control did not violate Section 1692g – and therefore did not violate Section 1692e

– because Kohl’s was the “creditor to whom the debt is owed.” We agree.



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                                            BACKGROUND 1

        The Kohl’s private label credit card allows consumers to purchase goods at

Kohl’s online and brick-and-mortar stores. Until 2011, Kohl’s issued its private

label credit cards in partnership with Chase Bank; since then, it has issued the

cards in partnership with Capital One. Various public documents make clear that

Capital One, not Kohl’s, owns the debt on these cards. Kohl’s SEC Form 10-K

states that “[t]he proprietary Kohl’s credit card accounts are owned by an

unrelated third-party, but [Kohl’s] share[s] in the net risk-adjusted revenue of the

portfolio.”      App’x 37.         The Kohl’s Cardmember Agreement (“Cardmember

Agreement”), which is posted online, expressly states that Capital One is the

“creditor and issuer” of the accounts. Id. at 117. The Private Label Credit Card

Program Agreement between Kohl’s and Capital One (“Program Agreement”)

further states that Capital One “offer[s] Private Label Credit Cards to qualified

customers,” id. at 63, “extend[s] credit on newly originated and existing

Accounts,” id. at 68, “own[s] . . . all [a]ccounts,” id. at 69, and has the exclusive

right to “effect collection” of amounts owed, id. The Cardmember Agreement


1The following facts are taken from the amended complaint, the documents attached thereto, and SEC
public filings, of which we are taking judicial notice, which both the magistrate judge and district court
relied on without objection from the parties. See Bryan v. Credit Control, LLC, No. 18-CV-865 (SJF)(SIL), 2019
WL 166100, at *1 n.1 (E.D.N.Y. Jan. 9, 2019).

                                                      4
states that Kohl’s services the accounts, and the Program Agreement specifies that

Kohl’s is responsible for, among other things, processing credit applications,

establishing and monitoring accounts, handling collection and recovery efforts,

and preparing and mailing billing statements.

      After Bryan defaulted on his Kohl’s private label credit card account debt,

Credit Control, a debt collector as defined by the FDCPA, see 15 U.S.C. § 1692a(6),

sent Bryan a debt collection letter.    See App’x 46.    The letter listed “Kohl’s

Department Stores Inc.” as “Our Client” and “Chase Bank Usa N.A.” as the

“Original Credit Grantor.”     It further listed the “Client Account #” and the

“Balance Due," but did not disclose that Capital One owned the debt.

      Bryan filed this action on February 8, 2018, alleging that Credit Control

violated the FDCPA because that letter did not list Capital One as “the creditor to

whom the debt is owed.” 15 U.S.C. § 1692g(a)(2). He further alleged that, because

Credit Control did not disclose Capital One, the letter was misleading, in violation

of 15 U.S.C. § 1692e. Credit Control filed its answer on March 23, 2018, and moved

for judgment on the pleadings on July 18, 2018. In response, Bryan sought leave

to amend his complaint to add an allegation that Kohl’s was not the current




                                         5
creditor, and attached a proposed amended complaint and a number of exhibits,

including the Cardmember Agreement and the Program Agreement.

      The district court referred the motions to Magistrate Judge Locke, who

considered the substance of the amended complaint and recommended judgment

on the pleadings in favor of Defendant. Magistrate Judge Locke opined that Kohl’s

is the “creditor to whom the debt is owed,” and the failure to disclose the owner

of the debt was not misleading because it would not have materially affected a

consumer’s decision-making process. He thus recommended that the motion to

amend the complaint be denied as futile. The district court considered Bryan’s

objections, but ultimately adopted the report and recommendation in its entirety.

It therefore granted Credit Control’s motion for judgment on the pleadings, denied

Bryan’s motion to amend the complaint, and dismissed the case.

                              STANDARD OF REVIEW

      We review the district court’s decision to grant judgment on the pleadings

de novo. See Hayden v. Paterson, 594 F.3d 150, 160 (2d Cir. 2010). We must “accept

all factual allegations in the complaint as true and draw all reasonable inferences

in plaintiff[’s] favor,” and affirm the district court’s decision only if plaintiff’s




                                         6
complaint fails “to state a claim to relief that is plausible on its face.” Id. (internal

quotation marks omitted).

                                     DISCUSSION

         Bryan argues that the district court erred in holding that (1) by identifying

Kohl’s as the “client,” Credit Control identified the “name of the creditor to whom

the debt is owed,” and (2) because the letter identified the “creditor to whom the

debt is owed,” it made no material misstatement in violation of Section 1692e.

Because we conclude that the district court erred in finding that Credit Control

identified the “name of the creditor to whom the debt is owed,” we do not reach

the question of whether there was a material misstatement in violation of Section

1692e.

                                      I. Section 1692g

         The FDCPA requires that a debt collector attempting to collect a debt must,

within five days after its initial communication, send the consumer a written notice

containing, among other things, “the name of the creditor to whom the debt is

owed,” unless it provided that information in the initial communication. 15 U.S.C.

§ 1692g(a)(2). “A debt collector violates the [FDCPA] if it fails to convey the

information required by the [FDCPA].” DeSantis v. Comput. Credit, Inc., 269 F.3d



                                           7
159, 161 (2d Cir. 2001). “Even if a debt collector conveys the required information,

the collector nonetheless violates [Section 1692g] if it conveys that information in

a confusing or contradictory fashion so as to cloud the required message with

uncertainty.” Id. A collection letter is misleading if the “least sophisticated

consumer – one not having the astuteness of a Philadelphia lawyer or even the

sophistication of the average, everyday, common consumer,” Taylor v. Fin.

Recovery Servs., Inc., 886 F.3d 212, 214 (2d Cir. 2018) (internal quotation marks

omitted) – is left “uncertain as to the meaning of the message,” DeSantis, 269 F.3d

at 161 (internal quotation marks and citation omitted).

      In arguing that Credit Control violated Section 1692g, Bryan insists that “the

creditor to whom the debt is owed” is synonymous with the “owner” of the debt,

and that Credit Control was therefore required to list Capital One – not Kohl’s –

as the creditor to whom Bryan’s credit card debt was owed. The FDCPA provides

that a “creditor” is “any person who offers or extends credit creating a debt or to

whom a debt is owed,” except if that person “receives an assignment or transfer

of a debt in default solely for the purpose of facilitating collection of such debt for

another.” 15 U.S.C. § 1692a(4). Relying on the Program Agreement, the district

court found that Kohl’s qualified as a creditor because “Kohl’s is the entity offering



                                          8
credit accounts to its customers . . . and, in turn, facilitating the incurrence of

monetary obligations through transactions by consumers exclusively at its stores.”

Bryan v. Credit Control, LLC, No. 18-CV-0865 (SJF)(SIL), 2018 WL 6520730, at *4

(E.D.N.Y. Dec. 11, 2018), report and recommendation adopted, 2019 WL 166100

(E.D.N.Y. Jan. 9, 2019).

      But the mere fact that Kohl’s participated in the credit card program with

Capital One and played an active role in the servicing of accounts does not

necessarily convert Kohl’s into a creditor, and certainly not into the creditor to

whom the debt is owed. Indeed, the Cardmember Agreement clarifies that Capital

One is “the creditor and issuer of the Account,” and that Kohl’s is merely an

“agent” responsible for “servicing [the] Account . . . on [Capital One’s] behalf.”

App’x 117 ¶ 1. Put simply, the terms of both Kohl’s agreement with Capital One

and Capital One’s agreement with the cardholder make clear that Kohl’s was not

a creditor under the FDCPA at all. The collection letter appears to reflect as much,

since it identified Chase as the “original credit grantor” and merely identified

Kohl’s as Credit Control’s “client” – a term that says nothing about the department

store’s status as a creditor. By 2017, Capital One had replaced Chase as the “credit

grantor,” making Capital One, not Chase and certainly not Kohl’s, the creditor to



                                         9
whom the debt was owed. Thus, since the collection letter did not identify Capital

One at all, it did not comply with Section 1692g. Accordingly, the district court

erred when it granted judgment on the pleadings in favor of Credit Control.

Because Bryan has plausibly pleaded a cause of action pursuant to Section 1692g,

we reverse the judgment of the district court and remand for further proceedings

consistent with this opinion.


                                     II. Section 1692e


      In his amended complaint, Bryan also alleged that Credit Control’s

collection letter constituted a “false, deceptive, or misleading representation . . . in

connection with the collection of any debt,” in violation of 15 U.S.C. § 1692e. As

with Section 1692g, “[w]hether a communication is ‘false, deceptive, or

misleading’ under [Section] 1692e ‘is determined from the perspective of the

objective least sophisticated consumer.’” Cohen v. Rosicki, Rosicki & Assocs., P.C.,

897 F.3d 75, 85 (2d Cir. 2018) (quoting Easterling v. Collecto, Inc., 692 F.3d 229, 233

(2d Cir. 2012)). However, “not every technically false representation by a debt

collector amounts to a violation of the FDCPA.” Id. (internal quotation marks

omitted).   Instead, we have held that, as a natural “corollary” to the least

sophisticated consumer test, only material errors violate Section 1692e. Id. That

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is, “a false statement is only actionable under the FDCPA if it has the potential to

affect the decision-making process of the least sophisticated [consumer].” Id.

(internal quotation marks omitted).

      Although it is far from clear that Credit Control’s failure to identify Capital

One constituted a materially misleading statement under Section 1692e – indeed

it might be argued that if Credit Control had identified Capital One and not Kohl’s,

such an action “likely would have caused confusion,” id. at 86 – the fact remains

that the district court dismissed Bryan’s Section 1692e claim on the grounds that

Kohl’s was the creditor to whom the debt was owed. Since that finding was

incorrect, and since the district court did not address the issue of materiality under

Section 1692e, we vacate the district court’s judgment and remand to the district

court for further proceedings.


                                   CONCLUSION

      For the foregoing reasons, the judgment of the district court is REVERSED

as to the Section 1692g claim and VACATED as to the Section 1692e claim. The

case is REMANDED to the district court for further proceedings consistent with

this Opinion.




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