Appellate court rules toll debts not protected under Fair Debt Collections Practice Act

The U.S. Third Circuit Court of Appeals upheld a lower court’s decision that ruled unpaid highway toll debt cannot support a consumer claim under the Fair Debt Collections Practices Act. Essentially, toll debt collectors are not bound to the same consumer protection laws as other debt collectors, such as credit card debt, auto loans, student loans and mortgages.

On Tuesday, Aug. 7, Judge Cheryl Ann Krause affirmed a district court’s ruling dismissing New Jersey motorist Thomas E. St. Pierre’s class action complaint. Both courts concluded that unpaid highway tolls do not constitute the type of debt that could support a consumer claim under the Fair Debt Collection Practices Act.

At the time of the lawsuit, St. Pierre was a New Jersey resident and owned a car that he sometimes drove on New Jersey highways. St. Pierre also signed up for New Jersey’s E-ZPass payment program. As with all E-ZPass customers, St. Pierre had to maintain a positive balance on his prepaid account or face additional penalties.

However, St. Pierre did not maintain a positive balance in his account. Consequently, E-ZPass assigned his account to Retrieval-Masters Credit Bureau, a private debt collector. The collector sent a letter to St. Pierre notifying him of outstanding violations in the amount of $1,200.75. St. Pierre sued the collector not because of the letter itself but because the letter was sent in an envelope with a “glassine window” where his name, address, account number and “quick response” code were all visible, violating the Fair Debt Collections Practices Act.

The Fair Debt Collections Practices Act prohibits the use of any “unfair or unconscionable means to collect or attempt to collect any debt,” including “any language or symbol, other than the debt collector’s address, on any envelope when communicating with a consumer by use of the mails.” However, “debt” is defined 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.”

Do toll debts arise from transactions for personal/family/household purposes or are tolls a legal obligation in the nature of a tax that falls outside the scope of the act? According to both a district court and appellate court, tolls are taxes.

Passed by Congress in 1977, the Fair Debt Collections Practices Act attempts to “eliminate abusive debt collection practices by debt collectors, to insure that those debt collectors who refrain from using abusive debt collection practices are not competitively disadvantaged, and to promote consistent state action to protect consumers against debt collection abuses.”

The act establishes what types of debts are covered and how they can be collected. For example, the act prohibits collectors from contacting debtors before 8 a.m. or after 9 p.m. and cannot call a place of work if told not to. Rights to debt disputes are also within the act.

In this case, the court only looked into whether or not the tolls fell under the type of debt defined in the act. Since the terms “transaction” and “personal, family, or household purposes” were not further defined in the act, the appellate court explored the definition of “debt.”

Judge Krause referred to a three-prong test to determine what kind of debt is covered under the debt collections act:

• Did the debt arise out of a transaction?
• What is the subject of the transaction?
• Is the subject considered “primarily for personal, family, or household purposes?”

Krause determined that the obligation to pay tolls does arise out of a transaction. However, the service rendered in exchange for the tolls is to “compensate the state for the cost, maintenance and repair of its highways,” rather than access to the highways as St. Pierre argued. Krause determined access to highways is incidental to the payment of tolls.

As for the third question:

“Having identified the services rendered in exchange for highway tolls, it is clear that what St. Pierre 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,” Krause wrote in her opinion.

Even if access to the roads was considered a personal purpose to get from Point A to Point B, the primary purpose of the toll is for the public good regarding roads. Therefore, toll debts are not protected under the Fair Debt Collections Practices Act.