According to the Seventh Circuit Court of Appeals, the Fair Debt Collections Practices Act and its protections do not extend to representations or statements in court pleadings. Specifically, in O’Rourke v. Palisades Acquisition XVI, LLC, the court held that a debt collector’s communications to an Illinois state court judge in an action against a debtor to collect a debt are not actionable under the FDCPA. In O’Rourke, the plaintiff claimed that Palisades violated the FDCPA by submitting as part of its complaint an exhibit that purported to be a credit card statement evidencing the debt. Despite looking authentic, it was not a copy of an actual credit card statement. The plaintiff claimed that the exhibit violated the FDCPA because the statement was materially false, deceptive and misleading to the state court judge who was viewing it in the context of granting a default judgment.
Tag Archives: FDCPA
Fifth Circuit Affirms Dismissal FDCPA Claims
Posted in Class Actions; Fair Debt Collection Practices Act; PreemptionIn Castro v. Collecto, Inc., No. 09-50975, 2011 WL 651921 (5th Cir. Feb. 24, 2011), the Fifth Circuit affirmed the dismissal of the plaintiffs’ Fair Debt Collections Practices Act (“FDCPA”) claims, holding that the two year statute of limitations under the Federal Communications Act (“FCA”) did not preempt the four year Texas statue of limitations period for the collection of mobile services debts.
Castro filed suit against the defendants, Collecto, Inc. and U.S. Asset Management, Inc. alleging violations of the FDCPA due to defendants’ attempt to collect an approximately three year old debt owed to Sprint PCS. Castro alleged that the letters sent by the defendants could be interpreted as threatening litigation, despite the fact that the claims were time-barred under the FCA.
Eleventh Circuit Recognizes Individual Sale of Item over the Internet as Both a Commercial and a Consumer Transaction
Posted in Fair Debt Collection Practices ActIn a recent case before the Eleventh Circuit (Oppenheim v. I.C. System, Inc.), the court upheld a jury award of $1,000 in statutory damages and $20,986.21 in attorneys fees and costs against the defendant – a debt collector hired by PayPal to collect monies owed by plaintiff pursuant to PayPal’s contract for services.
Plaintiff used PayPal to process payment for the sale of his laptop to another party over the Internet. After PayPal deposited the payment amount into plaintiff’s personal checking account, it was discovered that the payment was fraudulent. Pursuant to the User Agreement between PayPal and plaintiff, plaintiff assumed the risk for any bad payments. PayPal attempted to exercise its contractual right to reverse the transaction. When plaintiff refused to repay the funds, PayPal hired the defendant, I.C. System, Inc., to collect. Later, plaintiff sued I.C. System, Inc. under the Fair Debt Collection Practices Act (FDCPA) and the Florida Consumer Collection Practices Act (FCCPA) for alleged illegal debt collection practices.
Seventh Circuit Says No Express Demand for Repayment Required For A Communication To Be In Connection With Collecting A Debt
Posted in Fair Debt Collection Practices ActIn the recently-decided Gburek v. Litton Loan Servicing LP, the Seventh Circuit had occasion to add color to what communications will be deemed “in connection with the collection of any debt” under the Fair Debt Collection Practices Act (FDCPA). Gburek was in default on a mortgage loan serviced by Litton. In December 2007, she received two letters relating to her mortgage loan. The first, from Litton, offered Gburek the opportunity to discuss “foreclosure alternatives” and requested certain financial information from her. The second was from Titanium Solutions, a company that partners with mortgage servicers such as Litton to facilitate communication between servicers and homeowners on the brink of foreclosure. The Titanium letter indicated that it was being sent at the request of Litton. It similarly sought certain financial information from Gburek so that it could work with her to avoid continuing arrearages on her mortgage and avoid foreclosure. Gburek responded to the letters by filing a complaint against Litton for violations of the FDCPA. The district court dismissed the complaint, concluding that the letters were not sent “in connection with the collection of” Gburek’s debt because they did not expressly demand payment of Gburek’s debt.
Seventh Circuit Affirms Summary Judgment in FDCPA Action, Criticizes Survey Evidence, and Suggests District Courts Appoint Neutral Survey Experts
Posted in Fair Debt Collection Practices ActThe Seventh Circuit Court of Appeals recently issued an opinion in two related class action suits involving the Fair Debt Collection Practices Act (FDCPA) (15 U.S.C. §§ 1692-1692p) – DeKoven v. Plaza Assoc. and Kubert v. Aid Assoc. Plaintiffs complain about “dunning letters” sent to them by debt collectors. The letters state in relevant part: (1) that the debt collectors are authorized to offer the debtor the opportunity to settle the account for 65% of the balance due and that the offer is valid for a period of 35 days, and (2) if the debtor disputes the validity of the debt, the debtor may provide “satisfactory proof” that the account is in error. Plaintiffs claim that the statement that “the offer is valid for 35 days” would be understood by many consumers to mean that it is their last chance to settle, i.e., that it is final offer.
As to the second statement, Plaintiffs claim that it is misleading because it implies that to “dispute” a claim, a debtor must furnish “proof” which is not required under the FDCPA. The district court granted summary judgment to the Defendants after having rejected the survey evidence of Plaintiffs and the Seventh Circuit affirmed. Specifically, the “survey evidence” was confusing, unclear and in some instances, did not have enough persons in the control group from which a reliable extrapolation could be made. The Seventh Circuit reiterated the “vital” importance of control groups in surveys to determine whether a debt collector is confusing debtors and noted that FDCPA suits “repeatedly come to grief” due to flaws in the surveys conducted by plaintiff’s experts. Therefore, the Seventh Circuit suggested that district courts consider exercising their authority to appoint a neutral expert to conduct FDCPA surveys, but also stated that it was not suggesting that defendants should be made to contribute to the cost of such a survey.
Exercise Care When Suing Debtors During the FDCPA Validation Period
Posted in Fair Debt Collection Practices ActFiling a collection lawsuit during the 30-day debt validation period can get a collector in hot water unless he is really careful. The United States Court of Appeals for the Second Circuit recently decided a case where Citibank hired a law firm to collect Janet Ellis’s alleged credit card debt. The law firm, Solomon & Solomon, promptly sent the FDCPA required notice advising her of the debt and informing her that she had 30 days in which to dispute its validity. Otherwise the firm would assume the debt was valid. So far, so good.
The Fair Debt Collection Practices Act requires that within five days of its initial communication with a consumer, a debt collector must send a written “validation notice” setting forth the consumer’s right to dispute the debt. The consumer then has 30 days in which to send a notice to the debt collector that he disputes. During this 30-day period, the debt collector generally is free to continue collection activities so long as they do not “overshadow” or are not “inconsistent” with the disclosures in the validation notice.
Seventh Circuit Affirms District Court’s Reduced Fee Award in FDCPA Case
Posted in Fair Debt Collection Practices ActRobert Duff began representing James and Christy Gastineau approximately three years after they filed suit in the Southern District of Indiana raising Fair Debt Collection Practices Act (“FDCPA”) claims. Duff was the third attorney to represent the Gastineaus in the case. Although Duff claimed that he had thirteen years of litigation and consumer law experience, his only other FDCPA case resulted in a default judgment. In the Gastineaus’ case, Duff’s representation began after substantial discovery and motion practice had already been completed. Nonetheless, Duff successfully negotiated a $45,000 settlement on the first scheduled day of trial. Duff requested a fee award in excess of $140,000, based in part on his hourly rate of $250 per hour. Citing Duff’s lack of experience and late entry into the case, the District Court reduced Duff’s hourly rate to $150 per hour and cut the number of hours he was allowed to recover. Duff appealed.
The Seventh Circuit observed that the calculation of attorney’s fees is driven by the ”lodestar method,” which is simply the mutliplication of a reasonable hourly rate by the number of hours reasonably expended by the attorney. Further, the Seventh Circuit noted that the federal district court’s have the discretion to adjust the result of the lodestar method based on factors such as the complexity of the legal issues, the degree of success, and the public interest advanced by the litigation.
In affirming the District Court, the Seventh Circuit noted that, particularly because of Duff’s late entry into the proceedings, the case “should have been a relatively straightforward FDCPA action.” Further, the Seventh Circuit held that the District Court did not commit clear error when it concluded that a substantial portion of the hours Duff billed on the case — over 500 total — were for learing the law. In closing, the Seventh Circuit found that “[t]his is clearly the case of an experienced district judge that considered the various factors in setting a reasonable attorney’s fee and provided a sufficient explanation.” Based on this, the Seventh Circuit found no abuse of discretion.
Ninth Circuit Interprets the FDCPA
Posted in Fair Debt Collection Practices ActIn Donohue v. Quick Collect, Inc., Case No. 09-35183 (9th Cir. Jan. 13, 2010), the Ninth Circuit interpreted two sections of the Fair Debt Collection Practices Act (“FDCPA”) and held that a collections agency did not violate the FDCPA because the original payment terms between the appellant and her dental practice did not constitute a forbearance agreement under Washington State law. Additionally, the court held that the collections agency did not violate the FDCPA when it mislabeled the interest owed on the debt. The court found that the overall amount owed by the appellant was correct and, therefore, the mislabeled interest was not “materially false.”
Second Circuit: Lawsuit During FDCPA Validation Period Overshadows Notice
Posted in Fair Debt Collection Practices ActA recent case out of Connecticut waves a yellow flag at debt collectors who file lawsuits within 30 days of sending a consumer a validation notice under the Fair Debt Collections Practices Act (“FDCPA”). On January 13, 2010, the Second Circuit Court of Appeals held that a law firm and two of its lawyers violated the FDCPA, 15 U.S.C. § 1692 et. seq., when it filed suit against a debtor during the 30-day validation period without providing additional explanation to the debtor about how the lawsuit affected the notice. Ellis v. Solomon and Solomon, P.C., et. al., No. 09-1247-cv (2d Cir. Jan. 13, 2010).