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The Third Circuit Holds that Highway Tolls are Not “Debts” Under the FDCPA

On August 10, 2018 by Schnader in Finance

By Stephen J Shapiro

Drivers who use New Jersey’s toll roads can pat themselves on the back because the tolls they pay help fund a public benefit. But, as the Third Circuit recently held, that fact also means that tolls are not “debts” under the Fair Debt Collection Practices Act (“FDCPA”) and, therefore, debt collectors seeking to collect unpaid tolls need not comply with the FDCPA’s regulations governing debt collection.

In St. Pierre v. Retrieval-Masters Creditors Bureau, Inc., the plaintiff signed up for an E-ZPass account, which he used to pay tolls he incurred while travelling on toll roads in New Jersey. When the plaintiff’s E-ZPass account fell into arrears, E-ZPass assigned the debt to a private debt collection agency. The agency sent the plaintiff a letter demanding payment of the debt. The plaintiff’s E-ZPass account number and a “quick response” code was visible through a window in the envelope containing the collection letter.

The plaintiff brought a putative class action against the agency, alleging that it violated a provision of the FDCPA that prohibits debt collectors from including on an envelope containing a collection letter “any language or symbol, other than the debt collector’s address . . . .” 15 U.S.C. § 1692f(8). However, the prohibitions in the FDCPA only apply to the collection of a “debt,” which the Act defines as an “obligation . . . of a consumer to pay money arising out of a transaction in which the money, property, insurance, or services which are the subject of the transaction are primarily for personal, family, or household purposes.” 15 U.S.C. § 1692a(5). The district court concluded that a highway toll is not a “debt” within the meaning of the FDCPA. Therefore, the district court held that the FDCPA’s prohibitions did not apply to the agency’s collection efforts and dismissed the plaintiff’s complaint.

The Third Circuit affirmed the dismissal. After reviewing previous decisions analyzing the issue, the Third Circuit announced a three-part test for determining whether an obligation is a “debt” under the FDCPA:

First, ascertain “whether the underlying obligation ‘aris[es] out of a transaction,’ – that is, a consensual exchange involving an affirmative ‘request,’ and ‘the rendition of a service or purchase of property or other item of value, such as a contract—or whether, instead, it arises by virtue of a legal status—that is, an involuntary obligation attendant to the fact of having a specific legal status . . . .”

Second, if the obligation arises out of a transaction, “identify what ‘money, property, insurance, or services . . . [] are the subject of the transaction, i.e., what it is that is being rendered in exchange for the monetary payment.”

Third, “consider the characteristics of that ‘money, property, insurance, or services’ to ascertain whether they are ‘primarily for personal, family, or household purposes.’”

Applying this test to the facts before it, the Court first held that the obligation to pay tolls does arise out of a “transaction” because a driver can voluntarily choose whether to incur the obligation: “[Plaintiff] would have no obligation to pay highway tolls had he chosen to use alternative routes or to keep his car parked . . . .” The Court next observed that the purpose of tolls is to “‘compensate the state for the cost, maintenance and repair of its highways,’” and that, in exchange for tolls, “all drivers benefit from ‘safer, faster, and more convenient travel in and through the State.’” As such, the Court explained that “what [plaintiff] receives in exchange for the payment of highway tolls is not the private benefit of a ‘personal, family, or household’ service or good but the very public benefit of highway maintenance and repair.”

Having concluded that tolls are not “primarily for personal, family, or household purposes,” the Court held that tolls are not “debts” within the meaning of the FDCPA: “[T]he FDCPA is not implicated where, as here, the bulk, if not all of the services rendered, are made ‘without reference to peculiar benefits to particular individuals or property.’”

In light of the Third Circuit’s decision, debt collectors may want to consider factoring into their operational practices and pricing models the reduced risk of facing FDCPA claims when collecting obligations that debtors did not voluntarily choose to incur or obligations that primarily benefit the public over individual debtors.

Category: Finance