Each year, many seemingly frivolous FDCPA lawsuits are filed by consumer attorneys who are looking to cash in. The calculation is that most creditors or third-party collectors will settle quickly, rather than risk the high cost of litigation.
In one recent case involving a collection agency, after the parties agreed to a global settlement, a federal district judge stunningly dismissed a FDCPA complaint for lack of subject matter jurisdiction, finding that no FDCPA violation occurred. The appellate court agreed that the debtor’s FDCPA claims were without merit, but sent the matter back to the federal district judge to rule on the plaintiff’s claims.
In Gallego v. Northland Group, Inc., a debtor filed a class action lawsuit in the Southern District of New York against Northland Group, Inc. (“Northland”), a collection agency, alleging that Northland violated the Fair Debt Collections Practices Act consisting of “all New York consumers who were sent letters and/or notices from Northland, attempting to collect a debt owed to Department Stores National Bank, which did not contain the name of the person to call back.” 814. F. 3d 123, 124 (2nd Cir. 2016).
The debtor alleged that Northland violated two (2) provisions of the FDCPA: 15 U.SC. §1692e(1), “which prohibits the ‘the use of any false representation or deceptive means to collect or attempt to collect any debt or to obtain information concerning a consumer,”’ and 15 U.S.C. §1692(f), “which prohibits the use of ‘unfair or conscionable means to collect any debt.”’ Id.
My guess is that in order to avoid the high cost of litigation, the parties quickly settled the class action lawsuit and sought approval of the settlement from the federal district judge. Id. at 126. The federal district judge denied the settlement and instead, without a hearing, dismissed the lawsuit for lack of subject matter jurisdiction, finding the court did not have subject matter jurisdiction since no FDCPA violation occurred. Id.
While the Second Circuit Court of Appeals agreed with the federal district judge that the debtor’s claims lacked merit, finding that failure to include a call-back name on a collection letter was not a deceptive means to collect a debt and unfair and unconscionable, the Court found it inappropriate to dismiss the lawsuit and sent the case back to the federal district judge to address the plaintiff’s claims. Id. at 127-128. Of course, based on the Court’s ruling, it is highly likely that Northland will now prevail in this case.
There are times (such as this case) when it makes sense for creditors to fight back against perceived frivolous FDCPA claims. There are many consumer law firms that assume that collection agencies and creditors will immediately settle FDCPA lawsuits, such as what initially occurred in this case, even if there is no merit to the claims. Litigating and winning on these issues sends a clear, unequivocal message that attorneys and plaintiffs who file these claims must think twice or watch their claims get booted.
Founded in 1997, Gill Law Firm represents small, medium and large corporations in commercial debt recovery, small business and nonprofit startups throughout the state of Florida. To find out how the firm may help your company, please contact A. Wayne Gill, Esq. via email at firstname.lastname@example.org or by phone at (561) 454-0301.