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Gold’s Gym Debt Collector Escapes Chapter 93A Liability Where No ‘Separate’ and ‘Distinct’ Injury Alleged

Judge Salinger granted summary judgment in favor of a defendant that violated Massachusetts debt collection law where a plaintiff failed to show an injury “separate” and “distinct” from the regulatory violation.

The plaintiff, Matthew Perlow, signed a two-year contract with Gold’s Gym in South Boston. Before the two-year term expired, Perlow told the gym that he wanted to cancel his membership. The gym refused. Perlow responded by cancelling the credit card that the gym was charging monthly for his membership fee.

The matter went to debt collection. Seas & Associates, LLC, the second of two debt collection firms to pursue Perlow, contacted Perlow by leaving him a voicemail and sending him two letters. The letters stated that Perlow owed $1,176.77 for his gym membership. The letters also contained “validation of debt” language required by 940 C.M.R. § 7.08.

After Seas contacted Perlow, the Massachusetts Division of Banks ordered Seas to stop engaging in debt collection activities in Massachusetts until the company obtained a license to operate as a debt collector in the state. (It is unlawful to engage in “the business of a debt collector” in Massachusetts “without first obtaining” a debt collector’s license from the Commissioner of Banks. G.L. c. 93, § 24. By statute, any violation of this statute “shall constitute an unfair or deceptive act or practice” under G.L. c. 93A. See G.L. c. 93, § 28.) Seas made no further efforts to collect the debt from Perlow and Seas never reported Perlow’s debt to any credit rating agency.

Perlow sued Seas for alleged violations of G.L. c. 93A. Seas moved for summary judgment. Judge Salinger allowed the motion.

It was undisputed that Seas had engaged in a per se violation of G.L. c. 93A by trying to collect a debt from Perlow without being licensed to conduct debt collection in Massachusetts. It was also undisputed, Judge Salinger wrote, that “Perlow suffered the very injury that the statutory scheme was intended to prevent: he was repeatedly asked by Seas to pay a debt of $1,176.77, with Seas acting as a debt collector . . . even though it had no license to do so in Massachusetts.” Summary judgment was nevertheless appropriate, Judge Salinger ruled, because Perlow did not allege that he suffered any injury that was “separate” and “distinct” from the alleged regulatory violation itself.

Here is the core of Judge Salinger’s reasoning:

[T]he Supreme Judicial Court has repeatedly held that a consumer who sues a company for violating a consumer protection statute or regulation cannot prevail under c. 93A unless they have suffered an injury that is “separate” and “distinct” from the alleged regulatory violation itself. See [Bellermann v. Fitchburg Gas & Elec. Light Co., 475 Mass. 67, 73 (2016); Tyler v. Michaels Stores, Inc., 464 Mass. 492, 501-03 (2013)]. Here the communications by Seas to Perlow are the unlicensed debt collection activities that violate c. 93A. The communications by Seas did not result from a c. 93A violation; they are the alleged violation. Under Bellermann and Tyler, Perlow cannot seek even nominal damages without proving that he suffered some kind of injury separate and apart from Seas’ c. 93A violation. The summary judgment record makes clear that Perlow cannot make such a showing, as it is undisputed that nothing ever happened as a result of Seas’ attempts to collect Perlow’s alleged debt.

Perlow v. ABC Financial Services, Inc., et al.

June 15, 2018

Full decision here.

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