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Curtis v. Propel Property Tax Funding, LLC

United States Court of Appeals, Fourth Circuit

February 6, 2019

GARRY CURTIS, Plaintiff - Appellee,
v.
PROPEL PROPERTY TAX FUNDING, LLC; PROPEL FINANCIAL SERVICES, LLC, Defendants - Appellants.

          Argued: October 30, 2018

          Appeal from the United States District Court for the Eastern District of Virginia, at Richmond. John A. Gibney, Jr., District Judge. (3:16-cv-00731-JAG)

         ARGUED:

          Charles Kalman Seyfarth, O'HAGAN MEYER PLLC, Richmond, Virginia, for Appellants.

          Thomas Dean Domonoske, CONSUMER LITIGATION ASSOCIATES, P.C., Newport News, Virginia, for Appellee.

         ON BRIEF:

          Elizabeth Scott Turner, O'HAGAN MEYER PLLC, Richmond, Virginia, for Appellants.

          Dale W. Pittman, THE LAW OFFICE OF DALE W. PITTMAN, P.C., Petersburg, Virginia, for Appellee.

          Before DUNCAN, KEENAN, and DIAZ, Circuit Judges.

          DUNCAN, CIRCUIT JUDGE

         Appellants Propel Property Tax Funding, LLC and Propel Financial Services, LLC (collectively "Propel") entered into a Tax Payment Agreement (a "TPA") with Appellee Garry Curtis pursuant to Virginia Code section 58.1-3018. Curtis sued Propel on behalf of himself and other similarly situated individuals, alleging violations of the Truth in Lending Act (the "TILA"), 15 U.S.C. § 1601 et. seq., the Electronic Funds Transfer Act (the "EFTA"), id. § 1693 et. seq., and the Virginia Consumer Protection Act (the "VCPA"), Va. Code Ann. § 59.1-196 et. seq. Propel moved to dismiss Curtis's claims under TILA and EFTA, contending that the TPA is not a consumer credit transaction governed by those statutes. The district court denied Propel's motion and sua sponte certified two rulings for interlocutory review pursuant to 28 U.S.C. § 1292(b): (1) its determination that Curtis has standing to proceed on his EFTA claims against Propel and (2) its decision that these TPAs are consumer credit transactions for purposes of TILA and EFTA. For the reasons that follow, we affirm the district court on both issues.

         I.

         Virginia allows taxpayers to enter into agreements with third parties to finance payment of local taxes. Va. Code Ann. § 58.1-3018.[1] Under these agreements, a third party agrees to pay taxes owed to a locality on behalf of a taxpayer, and the taxpayer agrees to repay the third party in installments, with fees and interest. Id. The terms of the agreement, including repayment periods, interest rates, and other fees, are prescribed by statute. Id. For the period during which the taxpayer repays the third party, the locality tolls the enforcement period for the taxes owed. Id. § 58.1-3018(E). Nothing in the statute indicates that these agreements have any effect on tax liens that may be imposed by Virginia law.[2] If the taxpayer defaults on the agreement despite the third party's good-faith efforts to collect from him, the third party can ask the locality to reimburse the third party for any taxes paid and to reinstate the full tax obligation against the taxpayer (minus any principal payments made by the taxpayer to the third party). Id. § 58.1-3018(C). Upon reimbursement, "[a]ny right of the third party to payment" under the agreement terminates. Id. § 58.1-3018(C)(4).

         Curtis owed $13, 734.43 in residential property taxes to the city of Petersburg, Virginia and entered into a TPA with Propel to finance payment of them. The parties agree that the TPA at issue operates in conformity with Virginia's statutory framework, id. § 58.1-3018; see J.A. 32 (stating that under the terms of the TPA, "[o]ur financing of taxes on your behalf pursuant to this Agreement is made pursuant to Va. Code Section 58.1-3018"). For instance, the TPA requires Curtis to pay an origination fee equal to ten percent of his tax obligation, which is the maximum origination fee allowed under the statute. See Va. Code Ann. § 58.1-3018(B)(2); J.A. 30. The TPA also sets Curtis's interest rate at 10.95 percent, below the statutory maximum of sixteen percent, and specifies that no interest shall accrue during the first six months of the agreement, as the statute requires. See Va. Code Ann. § 58.1-3018(B)(2); J.A. 30. The TPA requires Curtis to repay Propel in monthly installments for ninety-six months, which is the maximum period allowed by the statute. See Va. Code Ann. § 58.1-3018(B)(2); J.A. 31.

         Curtis nevertheless challenges the TPA and its associated documents as violating TILA, EFTA, and VCPA on several grounds. For instance, he contends that many of the terms of the TPA included incorrect amounts, that Propel did not include an itemized list of closing costs in the documents, and that the TPA was missing certain allegedly required financial disclosures. He also alleges that, as a condition of the TPA, he was required to agree to repay Propel by preauthorized electronic fund transfers ("EFTs") and that the required authorization form does not contain a space that would allow him to indicate that he declined to do so.

         Curtis brought a proposed class action against Propel in federal district court, alleging violations of TILA, EFTA, and VCPA.[3] Propel moved to dismiss for failure to state a claim pursuant to Federal Rule of Civil Procedure 12(b)(6), contending that the TPA is not subject to TILA or EFTA because it is not a consumer credit transaction and that the TPA is exempt from the VCPA. The district court granted Propel's motion to dismiss as to the VCPA claim but denied its motion as to the TILA and EFTA claims.

         The district court determined that Curtis had standing under EFTA because the harm that he alleged--making the TPA contingent on Curtis agreeing to preauthorized EFTs--was "exactly the type of harm that Congress sought to prevent when it enacted the EFTA." Curtis v. Propel Prop. Tax Funding, LLC, 265 F.Supp.3d 647, 652 (E.D. Va. 2017). The district court also determined that the TPA is subject to TILA and EFTA because, as "third-party financing of a tax obligation" for "personal, family, or household purposes," the TPA is both a credit transaction and a consumer transaction and thus qualifies as a consumer credit transaction governed by those statutes. Id. at 652-53. However, the court certified for interlocutory review (1) its decision that Curtis has standing to proceed on his EFTA claims and (2) its determination that TPAs sanctioned by Virginia Code section 58.1-3018 are subject to TILA and EFTA as consumer credit transactions. This appeal followed.

         II.

         Propel makes two arguments on appeal. First, Propel contends that Curtis does not have standing to bring a claim under EFTA because he did not adequately allege that Propel required him to agree to EFTs or that he made or attempted to cancel any EFT payments. Second, Propel contends that Curtis's complaint does not state a claim for relief under either TILA or EFTA because the TPA is not a consumer credit transaction within the terms of those statutes. Before considering these issues, we first set forth the statutory framework to provide the necessary context for our analysis.

         TILA and EFTA are consumer protection statutes that regulate the terms of certain transactions. 15 U.S.C. §§ 1601 et. seq., 1693 et. seq. The purpose of TILA is "to assure a meaningful disclosure of credit terms" in order to improve consumer decisionmaking and "to protect the consumer against inaccurate and unfair" credit practices. Id. § 1601(a). Similarly, EFTA was enacted to establish "individual consumer rights" in the context of EFT transactions. Id. § 1693(b). Thus, both TILA and EFTA are "remedial consumer protection statute[s]" which we "read liberally to achieve [their] goals" of protecting consumers.[4] Phelps v. Robert Woodall Chevrolet, Inc., 306 F.Supp.2d 593, 596 (W.D. Va. 2003) (citation and internal quotation marks omitted) (referring to TILA); cf. Hoke v. Retail Credit Corp., 521 F.2d 1079, 1082 n.7 (4th Cir. 1975) (explaining that we interpret the Fair Credit Reporting Act liberally in light of "its broad remedial purposes"). At issue in this appeal are TILA's requirement that creditors disclose certain information in consumer credit transactions, 15 U.S.C. § 1638, EFTA's prohibition on "condition[ing] the extension of credit to a consumer on such consumer's repayment by means of preauthorized electronic fund transfers," id. § 1693k, and EFTA's requirement that no consumer agreement may operate as a waiver of one of EFTA's substantive rights, id. § 1693l.[5]

         Guided by the applicable statutes, we affirm the district court. First, we hold that Curtis has standing to bring claims under EFTA because the harm that he alleges is a substantive statutory violation that subjects him to the very risks that EFTA, a consumer protection statute, was designed to protect against. Second, we hold that the TPA is subject to TILA and EFTA because the TPA is a consumer credit transaction. Because the statutes define these terms separately, we consider them as such. We determine that the TPA is a credit transaction because it provides for third-party financing of a tax obligation and that it is a consumer transaction because, as financing of a real property tax debt, it is a voluntary transaction that Curtis entered into for personal or household purposes.

         III.

         Propel contends that Curtis lacks standing to bring claims under EFTA. "We review legal questions regarding standing de novo," and "[w]hen standing is challenged on the pleadings, we accept as true all material allegations of the complaint and construe the complaint in favor of the complaining party." David v. Alphin, 704 F.3d 327, 333 (4th Cir. 2013) (emphasis omitted). In a class action case, we look to the standing of the named plaintiff. Dreher v. Experian Info. Sols., Inc., 856 F.3d 337, 343 (4th Cir. 2017).

         To meet the constitutional minimum requirements for standing to sue, a "plaintiff must have . . . suffered an injury in fact, . . . that is fairly traceable to the challenged conduct of the defendant, and . . . that is likely to be redressed by a favorable judicial decision." Spokeo, Inc. v. Robins, 136 S.Ct. 1540, 1547 (2016). On appeal, Propel challenges the injury-in-fact requirement. A plaintiff meets this requirement if he alleges an injury that is "particularized," "concrete," and "actual or imminent, not ...


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