The U.S. Court of Appeals for the Seventh Circuit recently held that unpaid municipal fines are not "debts" under the federal Fair Debt Collection Practices Act, and therefore cannot be the subject of an FDCPA claim against a debt collector. A copy of the opinion is attached.
The plaintiff individual ("Plaintiff") had been fined by the City of Chicago ("City") for municipal code violations on property he previously owned. The City retained the Defendant law firm ("Firm") to collect the unpaid fines.
Plaintiff filed suit, claiming he was a "consumer" entitled to the protection afforded by the Fair Debt Collection Practices Act, 15 U.S.C. §§1692-1692p ("FDCPA"), that the Firm violated the FDCPA by among other things harassing him and failing to validate the amount of the alleged debt. The Firm moved to dismiss for failure to state a claim, arguing that the FDCPA applies only to "consumers" and that "fines" are not "debts" within the purview of the FDCPA.
Agreeing with the Firm that fines are not covered by the FDCPA, the lower court dismissed Plaintiff's lawsuit for failure to state a claim. Plaintiff appealed, asserting that the trial court failed to address whether the Firm violated the FDCPA's debt validation provision, section 1692g.
The Seventh Circuit affirmed, based on the FDCPA's definition of "debt." The appellate court first noted that Plaintiff did not challenge the lower court's conclusion that municipal fines are not "debts" covered by the FDCPA but nevertheless relied on the FDCPA's provisions governing "debt" validation. The court then examined the FDCPA's definition of "debt" to determine whether the Firm's collection activity could possibly be covered by the FDCPA.
As you may recall, the FDCPA defines "debt" as a "transaction in which money, property, insurance, or services which are the subject of the transaction are primarily for personal, family or household purposes." 15 U.S.C. §1692a(5). In addition, section 1692g governs the method by which debt collectors must validate disputed debts. See 15 U.S.C. §1692g.
In ruling on the applicability of the FDCPA to the fines imposed by the City, the court noted that its interpretation of "debt" was consistent with that of the Federal Trade Commission. The appellate court also noted that precedential court opinions addressing the issue have consistently concluded that a fine is not a "debt" under the FDCPA, because a fine does not arise from a consensual consumer transaction.
The Seventh Circuit agreed and likewise concluded that the FDCPA's definition of "debt" excludes fines from its coverage. Accordingly, the Court ruled that Plaintiff's complaint failed to state a claim under the FDCPA, because the Plaintiff's entire argument regarding supposedly faulty debt validation hinged on the existence of a "debt" as defined by the FDCPA.
Ralph T. Wutscher
McGinnis Tessitore Wutscher LLP
The Loop Center Building
105 W. Madison Street, 18th Floor
Chicago, Illinois 60602
Direct: (312) 551-9320
Fax: (312) 284-4751
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Email: RWutscher@mtwllp.com
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