FYI: 6th Cir Reverses Judgment Against Debt Collector in "False Affidavit" Case

The U.S. Court of Appeals for the Sixth Circuit recently reversed an award of damages to a debtor under the Fair Debt Collection Practices Act, 15 U.S.C. § 1692 et seq. (FDCPA), and the Ohio Consumer Sales Practices Act, Ohio Rev. Code § 1345.01 et seq. (OSCPA), finding that debtor failed to establish that debt-collector should have conducted further investigation into debtor's bank account prior to seeking garnishment.  A copy of the opinion is attached.

 

Debt collector law firm Javitch, Block & Rathbone ("JBR") represented a client seeking to collect a debt from Plaintiff.  Upon default judgment, Attorney Javitch ("Javitch") had Plaintiff's bank account garnished and signed a statutorily required affidavit in support thereof stating he had a "reasonable basis to believe that…garnishee may have property…not exempt" from garnishment under state or federal law.  However, the garnished funds were in fact exempted Social Security payments. 

 

Plaintiff sued JBR, alleging that Javitch did not have a "reasonable basis" for the assertions in this affidavit, as then required under Ohio law, and therefore violated the Sections 1692e and 1692f of the FDCPA and Sections 1345.02 and 1345.03 of OCSPA by filing a false affidavit.  A jury found in favor of Plaintiff and awarded damages, and the District Court awarded attorneys' fees.  The Sixth Circuit reversed the judgment and remanded.

 

The Court began by stating that "any conclusion that Javitch's investigation was unreasonable…requires a conclusion that additional investigation was possible and, under the circumstances, compelled by that reasonableness standard."  At trial, it was shown that Javitch signed the affidavit on the basis of a JBR investigation which included calls to the Plaintiff, examination of public records, and ordering a credit report.  Plaintiff argued "only one additional investigative step that Javitch could have taken: subpoenaing [Plaintiff's] bank records from her bank."  However, there was "unanimous testimony that issuing a bank subpoena in the context of filing for a non-wage garnishment was of uncertain legality," and there was no "evidence that it had ever been done previously."  Based upon this, the Plaintiff "did not establish that a reasonable attorney would have conducted additional investigation" under both federal and state standards of reasonableness.  Accordingly, JBR was entitled to judgment as a matter of law.

 

Ohio Rev. Code § 2716.11, which addresses the affidavit requirement, has since been amended to remove the "reasonable basis" requirement.

 

Let me know if you have any questions.  Thanks.

 

 

Ralph T. Wutscher

Kahrl Wutscher LLP

The Loop Center Building

105 W. Madison Street, Suite 2100
Chicago, Illinois  60602
Direct:  (312) 551-9320 

Fax:  (866) 581-9302
Mobile:  (312) 493-0874

RWutscher@kw-llp.com

http://www.kw-llp.com

 

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FYI: Indiana Fed Ct Says Servicing Transfer Notice Did Not Trigger DVN Requirement

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From: Ralph T. Wutscher [mailto:rwutscher@krw-llp.com]
Sent: Tuesday, April 13, 2010 7:31 PM
To: 'Ralph Wutscher'
Cc: 'Chicago Office'; socaloffice@kahrlwutscherllp.com; dcoffice@kahrlwutscherllp.com
Subject: FYI: Indiana Fed Ct Says Servicing Transfer Notice Did Not Trigger DVN Requirement

The U.S. District Court for the Northern District of Indiana recently held that a notice of transfer of servicing letter to a borrower did not qualify as a debt collection demand and, therefore, the new servicer was not required to send a debt validation notice under Section 1692g of the Fair Debt Collection Practices Act (“FDCPA”).  A copy of the opinion is attached.

 

When the plaintiff borrower received the transfer of servicing notice from Defendant BAC Home Loans (“BAC”), plaintiff’s loan was in default and he had filed for Chapter 13 bankruptcy.  More than five days later, BAC sent Plaintiff a debt validation notice under Section 1692g of the FDCPA. 

 

Plaintiff brought suit against BAC, alleging that BAC violated Section 1692g of the FDCPA by failing to send Plaintiff the debt validation notice within five days after it first communicated to Plaintiff that the mortgage loan had been transferred.  BAC moved to dismiss the complaint, arguing that the first communication did not trigger the debt validation notice requirement and, even if it did, BAC was precluded from sending the debt validation notice because of Plaintiff’s pending bankruptcy.  The District Court for the Northern District of Indiana granted BAC’s motion.

 

As you may recall, under the FDCPA, an “‘initial communication with a consumer in connection with the collection’” of the consumer’s debt triggers the duty to provide a debt validation notice to the consumer.  However, the FDCPA does not define what “in connection with the collection” means.  In the Seventh Circuit, whether something is sent “‘in connection with’ an attempt to collect a debt is a question of objective fact,” and the “subjective purpose of the communication[‘s] [sender] does not control” the inquiry.  Rather, the “language used in the communication is important in determining” the inquiry.

 

The Court held that BAC did not undertake collection efforts.  The Court reasoned that, among other things, the letter did not “address the status of Plaintiff’s home mortgage loan, declare that it is in default, or demand payment pursuant to such default…[the notice] indicates [the] amount that is due for the next regular payment, and does so via a courtesy payment coupon that does not even contain a due date…[and] advises the borrower that if his previous servicer was automatically deducting monthly payments from a bank account, to disregard the attached coupon because BAC Home Loans would continue that service without interruption.” 

 

Moreover, the notice had “no mention of default, delinquency, or foreclosure.”  The “debt collector” boilerplate at the bottom of the notice, which is required by FDCPA, “did not alter the nature of the communication or the information provided in the letter” and “‘did not transform the letter into an unlawful demand for payment.’”

 

Based upon the language in the notice from BAC, the court concluded that a “reasonable person would not believe that the Notice…was a debt collection demand…and thus a communication in connection with the collection of the debt.”  Therefore, “it was not a communication which triggered the requirement to send a Validation Notice,” and BAC’s motion to dismiss was granted.  

 

Let me know if you have any questions.  Thanks.

 

 

Ralph T. Wutscher

Kahrl Wutscher LLP

The Loop Center Building

105 W. Madison Street, Suite 2100
Chicago, Illinois  60602
Direct:  (312) 551-9320 

Fax:  (866) 581-9302
Mobile:  (312) 493-0874

RWutscher@kw-llp.com

http://www.kw-llp.com

 

NOTICE:  We do not send unsolicited emails.  If you received this email in error, or if you wish to be removed from our update distribution list, please simply reply to this email and state your intention.  Thank you.

 

 

 

FYI: Indiana Fed Ct Says Servicing Transfer Notice Did Not Trigger DVN Requirement

The U.S. District Court for the Northern District of Indiana recently held that a notice of transfer of servicing letter to a borrower did not qualify as a debt collection demand and, therefore, the new servicer was not required to send a debt validation notice under Section 1692g of the Fair Debt Collection Practices Act (“FDCPA”).  A copy of the opinion is attached.

 

When the plaintiff borrower received the transfer of servicing notice from Defendant BAC Home Loans (“BAC”), plaintiff’s loan was in default and he had filed for Chapter 13 bankruptcy.  More than five days later, BAC sent Plaintiff a debt validation notice under Section 1692g of the FDCPA. 

 

Plaintiff brought suit against BAC, alleging that BAC violated Section 1692g of the FDCPA by failing to send Plaintiff the debt validation notice within five days after it first communicated to Plaintiff that the mortgage loan had been transferred.  BAC moved to dismiss the complaint, arguing that the first communication did not trigger the debt validation notice requirement and, even if it did, BAC was precluded from sending the debt validation notice because of Plaintiff’s pending bankruptcy.  The District Court for the Northern District of Indiana granted BAC’s motion.

 

As you may recall, under the FDCPA, an “‘initial communication with a consumer in connection with the collection’” of the consumer’s debt triggers the duty to provide a debt validation notice to the consumer.  However, the FDCPA does not define what “in connection with the collection” means.  In the Seventh Circuit, whether something is sent “‘in connection with’ an attempt to collect a debt is a question of objective fact,” and the “subjective purpose of the communication[‘s] [sender] does not control” the inquiry.  Rather, the “language used in the communication is important in determining” the inquiry.

 

The Court held that BAC did not undertake collection efforts.  The Court reasoned that, among other things, the letter did not “address the status of Plaintiff’s home mortgage loan, declare that it is in default, or demand payment pursuant to such default…[the notice] indicates [the] amount that is due for the next regular payment, and does so via a courtesy payment coupon that does not even contain a due date…[and] advises the borrower that if his previous servicer was automatically deducting monthly payments from a bank account, to disregard the attached coupon because BAC Home Loans would continue that service without interruption.” 

 

Moreover, the notice had “no mention of default, delinquency, or foreclosure.”  The “debt collector” boilerplate at the bottom of the notice, which is required by FDCPA, “did not alter the nature of the communication or the information provided in the letter” and “‘did not transform the letter into an unlawful demand for payment.’”

 

Based upon the language in the notice from BAC, the court concluded that a “reasonable person would not believe that the Notice…was a debt collection demand…and thus a communication in connection with the collection of the debt.”  Therefore, “it was not a communication which triggered the requirement to send a Validation Notice,” and BAC’s motion to dismiss was granted.  

 

Let me know if you have any questions.  Thanks.

 

 

Ralph T. Wutscher

Kahrl Wutscher LLP

The Loop Center Building

105 W. Madison Street, Suite 2100
Chicago, Illinois  60602
Direct:  (312) 551-9320 

Fax:  (866) 581-9302
Mobile:  (312) 493-0874

RWutscher@kw-llp.com

http://www.kw-llp.com

 

NOTICE:  We do not send unsolicited emails.  If you received this email in error, or if you wish to be removed from our update distribution list, please simply reply to this email and state your intention.  Thank you.

 

 

 

FYI: 11th Cir Says Failure to Register in State Not Per Se Violation of FDCPA

The U.S. Court of Appeals for the Eleventh Circuit recently held that a debt collector's failure to register under state law was not a per se violation of the FDCPA, but reversed and remanded for consideration by a jury a district court's summary judgment ruling in favor of a consumer on his claims against a debt collector under Sections 1692e(5) and 1692f of the FDCPA.  A copy of the opinion is attached.

Defendant, a partnership in the business of purchasing and collecting consumer debt, purchased Plaintiff's charged off credit card debt and subsequently sent Plaintiff a letter informing him that it had purchased the debt, gave details about the debt, and advised Plaintiff that he had thirty days to dispute the debt.  Plaintiff did not respond to the letter and Defendant filed suit in state court to collect the debt.  Plaintiff then initiated this federal cause of action alleging violations of the FDCPA and Florida's Consumer Collection Practices Act (the "Florida CCPA"). The district court granted Defendant's motion on all of the Florida CCPA claims and granted Plaintiff partial summary judgment under Sections 1692e(5) and 1692f of the FDCPA, finding that, because neither Defendant nor its general partners were registered as "consumer collection agencies" with the State of Florida, as required by the Florida CCPA, Defendant violated the Sections 1692e(5) and 1692f of the FDCPA.

In ultimately reversing and remanding the district court's decision, the 11^th Circuit as a matter of first impression affirmed the district court's holding that a violation of the Florida CCPA for failure to register may support a federal cause of action under the FDCPA.  The Court noted that a violation of the Florida CCPA was not a per se violation of the FDCPA, as the conduct or communication at issue must also violate the relevant provision of the FDCPA.  Accordingly, the Court then analyzed whether Defendant had violated either § 1692e(5) or § 1692(f) of the FDCPA, as claimed by Plaintiff.  Section 1692e(5) of the FDCPA prohibits a debt collector from "threatening to take action that cannot legally be taken or that is not intended to be taken."  The Court held that reasonable jurors applying the 'least-sophisticated consumer' standard could disagree as to whether Defendant's letter "threatened" Plaintiff, and therefore the issue was one for a finder of fact.

The Court next addressed Plaintiff's claims under § 1692f of the FDCPA which prohibits a debt collector from "using unfair or unconscionable means to collect or attempt to collect any debt." The Court found that these claims depended in part on a trier of fact's finding as to Plaintiff's §1692(e)(5) claims, and accordingly, that remand was required.

Let me know if you have any questions.  Thanks.

 

 

Ralph T. Wutscher

Kahrl Wutscher LLP

The Loop Center Building

105 W. Madison Street, Suite 2100
Chicago, Illinois  60602
Direct:  (312) 551-9320 

Fax:  (866) 581-9302
Mobile:  (312) 493-0874

RWutscher@kw-llp.com

http://www.kw-llp.com

 

NOTICE:  We do not send unsolicited emails.  If you received this email in error, or if you wish to be removed from our update distribution list, please simply reply to this email and state your intention.  Thank you.