Saturday, March 15, 2014

FYI: Ill App Ct Holds Filing Suit on Behalf of Unlicensed Debt Collector Does Not Violate FDCPA

The Illinois Court of Appeals, First District, recently affirmed the dismissal of a complaint alleging violations of the federal Fair Debt Collection Practices Act, 15 U.S.C. § 1692, et seq. (“FDCPA”) against a law firm that had filed a complaint on behalf of a debt collector which was not properly licensed in Illinois.


A copy of the opinion can be found at:


A debt collector retained the defendant law firm to file suit in Illinois on its behalf to collect against the debtor plaintiff.  At the time the collection action was filed, the debt collector was not licensed as required by Illinois Collection Agency Act, 225 ILCS 425/1, et seq. (“ICAA”).  The debtor filed a motion to dismiss in the debt collection action, and subsequently, the debtor and debt collector entered into a settlement agreement dismissing the debt collection action with prejudice. 


Following the dismissal of the debt collection action, the debtor filed a putative class action against the law firm alleging that the filing of the collection suit on behalf of the unlicensed debt collection agency violated the FDCPA.  Specifically, the debtor alleged that the law firm violated section 1692e, which provides in part that “ [a] debt collector may not use any false, deceptive, or misleading representation or means in connection with the collection of any debt.”  15 U.S.C. § 1692e. 


The lower court granted the law firm’s motion to dismiss, ruling that the debtor’s FDCPA claims were premised solely upon the law firm’s alleged violation of the ICAA, but that the law firm was explicitly exempt from the ICAA.  The debtor appealed the dismissal, arguing that a law firm may be held liable under the FDCPA even though they are excluded under the ICAA.


In affirming the lower court’s dismissal, the Appellate Court rejected the debtor’s reliance upon LVNV Funding, LLC v. Trice, 2011 IL App (1st) 092773, in support of her claims that the law firm engaged in false or unfair debt collection practices.  In Trice, the Illinois First District Court of Appeals, found that “a complaint filed by an unregistered collection agency is … a nullity, and any judgment entered on such a complaint is void.  The subsequent registration of the collection agency does not absolve the agency of the crime of debt collection by an unregistered collection agency, and it does not validate judgment entered on the void complaint.”  Trice, at ¶ 19.  The decision in Trice is currently on appeal with the Illinois Supreme Court. 


The Appellate Court further held that the law firm did not violate the ICAA by filing the complaint on behalf of the unlicensed debt collector.  The Court explained that the ICAA defines “collection agency” or a “debt collector” as “any person who, in the ordinary course of business, regularly, on behalf of himself or herself or others, engages in debt collection.”  225 ILCS 425/2.  However, as noted by the Court, the ICAA specifically excludes from its definition “licensed attorneys at law”.  225 ILCS 425/2.03.  Because the law firm was exempt, the Court found that it committed no violation of the ICAA. 


The issue of whether the filing of a complaint could constitute a violation of the FDCPA was a matter of first impression for Illinois courts, and the Appellate Court looked for guidance on that issue from the federal courts. 


In doing so, the Appellate Court noted that the “FDCPA was designed to provide basic, overarching rules for debt collection activities; it was not meant to convert every violation of a state debt collection law into a federal violation.”  Carlson v. First Revenue Assurance, 359 F.3d 1015, 1018 (8th Cir. 2004). 


The Appellate Court found the U.S. District Court for the Northern District of Indiana’s decision in Fick v. American Acceptance Co., No. 3illCV299 2012 WL 1074288 (N.D. Inc. Mar. 28, 2012) to be particularly instructive.  In Fick, a debtor sued both the unlicensed debt collector and the law firm representing the debt collector, alleging that in filing the underlying collection suit the law firm was also a debt collector whose actions violated the FDCPA.  Id. at *1.  As the Appellate Court noted, the Fick court dismissed the debtor’s section 1692e claim against the law firm, holding that the section applies “to threats to take action that cannot legally be taken, but not illegal actions actually taken.”  Id. at *4.  Applying these same principals to the case at hand, the Appellate Court determined that the debtor’s FDCPA claims against the law firm cannot stand. 


The Appellate Court also noted with approval that federal cases have held that the act of filing a debt collection suit under various circumstances, without more, is not sufficient to state a claim under the FDCPA. 


Accordingly, the Appellate Court affirmed the lower court’s order dismissing the debtor’s complaint. 






Ralph T. Wutscher
McGinnis Wutscher Beiramee LLP
The Loop Center Building
105 W. Madison Street, 18th Floor
Chicago, Illinois 60602
(312) 551-9320
(312) 284-4751
(312) 493-0874


Admitted to practice law in Illinois



          McGinnis Wutscher Beiramee LLP





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