Consumer Finance Litigation

The FTC and CFPB recently filed an amici curae brief supporting the U.S. District Court for the Central District of Illinois's decision denying defendants' motion to dismiss Plaintiff Juanita Delgado's Fair Debt Collection Practices Act ("FDCPA") claims. The brief was filed in connection with the CFPB's amicus program, which was announced in August 2012. In Delgado v. Capital Management Services, LP, Case No. 13-2030 (7th Cir. Aug. 14, 2013), Delgado filed a putative class action against a defendant debt collector and its affiliated companies alleging violations of the FDCPA after the debt collector sent her a dunning letter attempting to collect a debt upon which the statute of limitations had expired. Defendants moved to dismiss arguing that the dunning letter did not contain a threat to sue and, thus, Delgado's FDCPA claim failed as a matter of law. Defendants also argued that they were not required to disclose that the debt was time-barred. Rejecting the defendants' argument, the district court relied on an FTC report, The Structure and Practices of the Debt Buying Industry (Jan. 2013), which found that failing to disclose that a debt is time-barred may be deceiving and encourage consumers to make a payment, which would revive the debt. Based on its findings, the FTC determined that a debt collector who knows that a debt is time-barred must tell the consumer that the debt collector cannot sue to collect the debt and that making a partial payment would allow the collector to sue to collect the balance. Relying on the FTC report, the district court found that the failure to disclose that a debt is time-barred and that a partial payment would revive the debt collector's ability to sue may mislead consumers. Because the debt collector's dunning letter did not contain these disclosures and contained an offer for "settlement," the court denied the defendants' motions to dismiss. The FTC and CFPB's amici curae brief argues that the district court properly denied the defendants' motion to dismiss. Specifically, the FTC and CFPB argue that the "settlement" offer has the potential for deception as it could lead the consumer to believe that litigation would follow after the expiration of the settlement offer. For more information on consumer finance litigation topics, please contact one of the Burr & Forman team members for assistance. We are happy to answer any questions or concerns you may have.