When FDCPA and FCRA Collide: Stand Up

Bad Credit Loans

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The Fair Debt Collection Practices Act (“FDCPA”) is an important law. It has regulated “debt collectors”, as defined by law, for over 40 years. Recently, the Consumer Financial Protection Bureau released a new rule implementing law enforcement (for past CPW coverage, see here and here). Despite these significant developments, however, a recent opinion reminds us of an important shortcoming concerning the FDCPA: the Supreme Court never addressed standing under the law. In the absence of a precedent from the highest court in the country, this recent opinion highlights an ongoing quality analysis carried out by courts facing ongoing problems in connection with FDCPA claims. Read on to find out more.

In Salerno vs. Watters, n ° 19-cv-02791, 2021 US Dist. LEXIS 16169 (SD Tex. January 28, 2021), the court partially allowed and partially dismissed a motion to dismiss several FDCPA claims. The plaintiff received a loan from a credit union which she intended to use to pay off the credit card debt. The defendant, a law firm allegedly retained by the credit union to collect the loan, sent the plaintiff a signed debt collection letter (the “Letter”) on its letterhead. The defendant’s signature and letterhead were at the heart of the plaintiff’s two main arguments.

First, the complainant argued that the letterhead and signature violated the FDCPA because it implied that a lawyer had reviewed her file and drafted the letter. The plaintiff argued that this violated the FDCPA’s restriction on debt collectors to use “any false, misleading or deceptive representation”. This included the misrepresentation of any communication from a lawyer or the use of “false representations or deceptive means” to collect or attempt to collect a debt. The complainant alleged that the letterhead and signature “shocked and frightened” her because it implied that a lawyer had reviewed her file and drafted the letter.

Second, the plaintiff also argued that the letter misled her regarding the validity of her debt. The letter stated that the debt “will be presumed valid” if the plaintiff does not dispute it within a certain time frame. With reference to who or what would consider the debt “valid”, the plaintiff alleged that the letter deliberately omitted the words “by the debt collector”. This omission led her to believe that her inability to dispute the debt would confirm the validity of the debt to parties other than the debt collector e.g. creditors, courts, etc. or misrepresentation ”and using“ a misrepresentation or deceptive means ”. The plaintiff also introduced a new argument that the omission violated the FDCPA’s requirement that a debt collector notify a consumer that a failure to dispute a debt will result in the validity of the debt. by the debt collector.

Salerno is a good exercise for availing FDCPA claims. The court reminded us that the Supreme Court did not address standing under the FDCPA. In the absence of a precedent from the country’s highest court, the court applied the Supreme Court’s decision in Spokeo Inc vs. Robins, 136 S. Ct. 1540 (2016), where quality under the Fair Credit Reporting Act (“FCRA”) was assessed. the Salerno court noted that Speak, alleging a violation of the law was not sufficient under the FCRA. Standing under Article III was also required. Application Speak In the case before it, the court determined that the plaintiff had standing for his allegations of misrepresentation, but found that the plaintiff did not have standing for his argument of validity of the debt.

For the first argument, the court concluded that the plaintiff’s claims showed that an “unsuspecting consumer reading the [L]etter. . . could reasonably conclude that a lawyer had prepared and sent it ”. In other words, the court said, receiving a communication such as the letter “by its very nature increases the fear and apprehension that a trial is imminent (or that litigation will be involved) while it is in existence. might not be “. As a result, “this same fear will exist even in situations where the consumer knows the debt is valid”.

On the second argument, the court said that the plaintiff did not plead that the debt was not valid and noted that the plaintiff’s lawyer accepted the validity of the debt. The court said the FDCPA does not grant a consumer the right to make others assume that a debt is not valid when it is in fact.

The court also highlighted the defendant’s failure to challenge the plaintiff’s plea for his request for the involvement of a lawyer. The court noted that the defendant’s failure was “curious because the complaint appears to be completely unfounded in this regard.” The court focused specifically on the plaintiff’s use of “on information and belief”. The court observed that “pleading information and beliefs is permissible in a general sense” was not a license to turn an otherwise insufficiently pleaded claim into a grateful claim. The court said such allegations must always be supported by “related information or facts” which “will establish this belief.” The court further compared the complainant’s allegation “on information and belief” with the “typical sentence” that “”[p]the claimant is informed and believes and on this information and beliefs alleges ”.

So this is it-Salerno is a reminder of how FDCPA and FCRA analyzes can become interconnected. For more developments in the area of ​​FDCPA and FCRA litigation, stay tuned. CPW will be there.

© Copyright 2021 Squire Patton Boggs (US) LLPRevue nationale de droit, volume XI, number 42

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