The folks at Greenpath, the non-profit debt management company, were recently sued. I wrote about that here.
Greenpath attempt to get one of the suits dismissed In the Pries-Daniels suit where it was alleged GreenPath was charging fees that did not comply with Georgia law, the Court denied the claim to dismiss the case.
I’m sure GreenPath would have preferred a different court ruling. The case continues.
Here are some insights from the Judge’s ruling that might be of interest to other non-profits.
The Judge said, “The parties dispute the meaning of the GDAA’s [Georgia Debt Adjustment Act] 7.5 percent fee cap. Specifically, the parties disagree on the amount upon which the fee is calculated. In other words, the question is 7.5 percent of what can GreenPath take as a fee. GreenPath believes it is the total amount paid from a debtor to a debt adjuster. Doc. 18 at 2. The plaintiffs believe it is only the amount paid from the debt adjuster to the debtor’s creditors. Doc. 17 at 1. The plaintiffs are correct.”
The Judge continues, “GreenPath argues that if the plaintiffs’ interpretation is what the Georgia General Assembly intended, then the General Assembly would have been more explicit when wording the statute. Doc. 18 of 3. But if the General Assembly wanted to enact GreenPath’s interpretation of the statute, and base the fee on the total amount paid to a debt adjuster, then it simply would have omitted the phrase “for distribution to creditors of such debtor,” so that the statute would allow a fee of “7.5 percent of the amount paid monthly by such debtor to such person.” But that is not what the General Assembly did. Instead, it added language defining the amount upon which the fee is to be calculated, and necessarily that language has some meaning.”
“Consider this scenario. A debt adjuster gets a debtor’s creditors to take $10,000 in settlement of all debts.2 When the debtor gives the debt adjuster $10,000 to give to her creditors, clearly the parties would calculate the adjuster’s fee to be $750, 7.5 percent of the $10,000 paid to the creditors, and the debtor would pay the adjuster $750 for a total of $10,750. But GreenPath would calculate the fee based on $10,000 plus the amount necessary to pay the fee because that is what the debtor must give the debt adjuster—$10,000 plus the fee. The rather stilted calculation would be this: $10,810.81 – ($10,810.81 X .075) = $10,000.00. In other words, GreenPath’s interpretation of the statute would require the plaintiffs to pay a fee based both on what they give the debt adjuster to give to the creditors and on what they give the debt adjuster as a fee. That makes no sense.”
While the amounts in dispute are small, the underlying issue is certainly something that could trip up many non-profit counseling agencies if they were not careful.
You can read the full ruling below.