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a claim with respect to which its liability had become reasonably clear and refused to pay a claim without conducting a reasonable investigation.

Moreover, the jury was entitled to believe that Culbert’s subsequent investigation into any preexisting injury suffered by Ruttiger was merely an attempt to justify Culbert’s prior dispute of Ruttiger’s claim. In fact, Culbert conceded that, according to TMI’s own standards, TMI needed “extremely persuasive

medical opinions” to deny coverage based on a preexisting medical condition. He further agreed that, as of the date of trial, TMI did not have any extremely persuasive medical opinions establishing this defense. Accordingly, the court held that the evidence was legally sufficient to support the jury’s finding that TMI “knowingly” violated the Texas Insurance Code.



it was unnecessary for the debtor to actually receive the demand letter in order for AGF’s charge to be usurious.

Allen v. Am. Gen. Fin., ____ S.W.3d ____ (Tex. App.—San Antonio 2007).


fACTS: Kyle Allen was served a citation for delinquent taxes on a San Antonio property deeded to him by his father. Upon learning of the citation, Allen came to Texas from his home in Oregon and sought a home equity loan from American General Finance (“AGF”) for the purpose of paying the property taxes. AGF assured Allen that it routinely paid customers’ delinquent taxes, and that it would “pay the taxes and handle the suit.” AGF loaned Allen the minimum loan amount of $15,000 and agreed to pay Bexar County for the delinquent taxes and the remainder to Allen. However, AGF underpaid Bexar County. As a result, Bexar County continued its tax suit and eventually foreclosed on the San Antonio property in late July. After the foreclosure sale, Allen filed a redemption action and recovered approximately $30,000, the excess proceeds of the foreclosure sale.

AGF filed suit against Allen seeking a constructive trust against Allen’s redeemed proceeds for his failure to pay the home equity loan. In response to the suit, one of the issues raised by Allen was AGF’s usurious interest rate. e trial court found, inter alia, that AGF’s interest rate was indeed usurious, as it was in excess of the 18% allowable by law. e trial court awarded Allen the difference between the proceeds obtained from the foreclosure sale and the amount due for delinquent taxes. Allen and AGF appealed. HOLDING: Affirmed. REASONING: e Court of Appeals disagreed with AGF’s contention that it was not liable for usury as a matter of law, because there was no evidence it “charged” a usurious rate of interest because Allen never received the letter demanding the rate.

In George A. Fuller Co. v. Carpet Servs., Inc., the Supreme Court of Texas held that a claim for prejudgment interest in a pleading is not a “charge” within the meaning of the usury statute because a charge must be communicated to the debtor and a pleading was not a communication to the debtor. 823 S.W.2d 603 (Tex.1992). In Fulle , the supreme court explained that the required communication to the debtor need not be direct, as long as the charge is ultimately demanded from the debtor. In the present case, the usurious charge was “demanded from the debtor” by and through AGF’s August 1998 letter. e letter constitutes a “communication outside the organization making the charge” and

Journal of Texas Consumer Law

F.T.C. v. Check Investors, Inc., 502 F.3d 159 (3rd Cir. 2007).

fACTS: Check Investors purchased $348 million worth of checks written on accounts with insufficient funds (“NSF checks”). Check Investors purchased the NSF checks from Telecheck and other businesses that guaranteed checks tendered to pay for consumer transactions. In collecting the checks, Check Investors added a fee that exceeded the legal limit for such fees under the laws of most states. Check Investors then aggressively demanded payment from defaulting payors without disclosing the original face amount and the addition of the fee.

Check Investors’ collection practices included letters and phone calls accusing the payors of being criminals and threatening criminal or civil prosecution. It also mailed phony letters purporting that an attorney had been retained in pursuit of a criminal or civil action. Check Investors never notified law enforcement authorities nor took any steps towards civil actions. Check Investors also contacted payors’ family members, inundated payors with phone calls, and used abusive language.

  • e Federal Trade Commission (“FTC”) filed a seven-

part complaint against Check Investors alleging violations of the Federal Trade Commission Act (“FTCA”), the Fair Debt Collection Practices Act (“FDCPA”), and sought injunctive relief and restitution for injured consumers. Specifically, the FTC alleged use of abusive language, calling consumers repeatedly, falsely representing that communications came from an attorney, falsely representing that the consumers would be arrested or imprisoned, falsely threatening legal action, and adding impermissible charges to the face amounts of the debts it was collecting. e district court granted the FTC’s motion for summary judgment, denied Check Investors’ motion for summary judgment, permanently enjoined Check Investors and charged it with restitution damages of over $10 million. Check Investors appealed. HOLDING: Affirmed. REASONING: Check Investors did not dispute that it engaged in the practices listed in the FTC complaint. It instead argued that the FDCPA and the FTCA did not apply because it was not a “debt collector” as defined in the FDCPA. Check Investors argued it was a “creditor” because it bought the obligations outright and that they were neither transferred nor assigned. Additionally, it


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