Recently, the 7th Circuit Court of Appeals issued a ruling finding that penalties assessed by Metra for parking lot violations are subject to the debt collection procedures set out in the Fair Debt Collections Practice Act. Franklin v. Parking Revenue Recovery Services, Inc.
The case involved a challenge by two individuals who had parked their cars in a Metra-owned parking lot and were fined for failure to pay the daily parking fee of $1.50. The non-payment penalty was $45.00. When the individuals failed to pay the violation notices, the matter was referred for collection to Parking Revenue Recovery Services, Inc. The individuals filed a class action against Parking Revenue, alleging that it violated the Fair Debt Collection Practices Act. Parking Revenue argued that the FDCPA does not apply because the unpaid parking obligations were not "debt" as defined by that Act.
The 7th Circuit Court of Appeals disagreed with Parking Revenue, holding that the parking penalties are debts under the FDCPA. Specifically, the court determined that the violations were obligations "arising out of" consumer transactions - in this case, the transaction was the offer by Metra for customers to park in its lot for $1.50. The court rejected Parking Revenue's argument that the violations were more in the nature of fines, like a parking meter ticket. The court noted that the crucial issue is the legal source of the obligation - in this case, there was no municipal ordinance or regulation that obligated "park-and-dashers" to pay the $45; instead, the obligation came from the contract formed when the customer parks in the lot.
Municipalities and other government entities may want to make sure that parking fines and violations are expressly established in an ordinance or other formal regulation so that the "legal source of the obligation" to pay a fine or penalty is regulatory rather than contractual.
Post Authored by Julie Tappendorf