United States District Court, W.D. Kentucky
For Tiffany Grace, Plaintiff: James H. Lawson, LEAD ATTORNEY, Lawson at Law, PLLC, Louisville, KY; James R. McKenzie, LEAD ATTORNEY, James R. McKenzie Attorney PLLC, Louisville, KY.
For NCO Financial Systems, Inc., Defendant: Christine A. Gilliam, Danielle Lewis, LEAD ATTORNEYS, Reminger Co., LPA - Louisville, Louisville, KY.
For PSI Louisville, Inc., Defendant: Stephen A. Brooks, LEAD ATTORNEY, Stephen Brooks PSC, Louisville, KY.
For PSI Louisville, Inc., Counter Claimant: Stephen A. Brooks, LEAD ATTORNEY, Stephen Brooks PSC, Louisville, KY.
For James McKenzie, Counter Defendant: James R. McKenzie, LEAD ATTORNEY, James R. McKenzie Attorney PLLC, Louisville, KY.
For Tiffany Grace, Counter Defendant: James H. Lawson, LEAD ATTORNEY, Lawson at Law, PLLC, Louisville, KY; James R. McKenzie, LEAD ATTORNEY, James R. McKenzie Attorney PLLC, Louisville, KY.
MEMORANDUM OPINION AND ORDER
John G. Heyburn II, Senior United States District Judge.
This case raises the interesting question of when a " service charge" might actually constitute interest under Kentucky law. Defendant PSI Louisville (" PSI" ) collects debts for an emergency room that Grace once visited. The emergency room charges what its intake contract deems an 18% " service charge" on past due accounts. Grace failed to pay her bill and PSI eventually reported to various credit agencies a past due amount that included the " service charge." Grace argues that this " service charge" is actually disguised interest. If so, it would be usurious under Kentucky law, and PSI's attempt to collect interest to which neither it nor the emergency room was entitled violates three separate provisions of the Fair Debt Collection Practices Act (" FDCPA" ). PSI has moved to dismiss Grace's claims and Grace has cross-motioned for summary judgment. These motions present questions concerning Kentucky's usury laws which the state's courts have yet to answer.
On June 5, 2010, Grace received medical services from Physicians in Emergency Medicine (" PEM" ), the emergency care group at Jewish Hospital, Louisville, Kentucky. Upon admission, Grace signed an agreement accepting responsibility for charges for services rendered by PEM, including " any balance due in excess of amounts paid by other persons or agencies." The agreement contained the following clause:
A service charge may be applied on all accounts which are 90 days or more past due at a rate of 1½ % per month.
Grace did not pay her medical bill. In February 2012, PEM engaged PSI to collect the debt. PSI is not an assignee; rather, after a certain period of time has passed, PEM engages PSI to take over collection activity on its behalf on a contingency fee basis. In May 2012, PSI reported
Grace's debt and the accumulated 18% per annum " service charge" to various credit agencies. The original debt was for $292, but with the accumulated service charge, the total amount PSI reported in arrears was $411.
In May 2013, Grace obtained a credit report showing PSI had reported her PEM debt. In September 2013, Grace filed suit in state court; Defendants removed the suit to federal court on October 18, 2013. Grace's complaint alleges that by reporting with her debt an amount she contends is disguised interest at a rate that violates Kentucky law, PSI has violated the FDCPA provisions that prohibit: (1) falsely representing the " character, amount, or legal status" of Grace's debt, 15 U.S.C. § 1692e(2)(A); (2) communicating credit information PSI knew or should have known to be false, 15 U.S.C. § 1692e(8); and (3) attempting to collect an ...