Consumer Finance Litigation

In Royal Fin. Grp., LLC v. Perkins, ED98991, 2013 WL 4419343 (Mo. Ct. App. Aug. 20, 2013), the Missouri Court of Appeals, Eastern District held, as a matter of first impression in Missouri state court, that a debt collector violates the Fair Debt Collection Practices Act ("FDCPA") by filing a debt collection lawsuit without the intention of ever obtaining evidence to prove the plaintiff's indebtedness. The debt collector in Royal had purchased a portfolio of charged-off debt, for which its assignor had expressly disclaimed any representations or warranties. Under the assignment agreement, the debt collector received a spreadsheet listing the name, account number, and amount owed on each account, and was permitted to purchase additional documentation related to the debts. The debt collector then filed suit against Perkins, one of the debtors listed in the spreadsheet. The debt collector did not purchase additional documentation from the assignor to support its claim, but rather, attached to its complaint a boilerplate cardholder agreement which did not name the debt collector, its assignor, or Perkins. Perkins filed a counterclaim alleging that the debt collector violated the FDCPA, in pertinent part, by filing suit without any evidence that she owed the debt. The debt collector admitted in its responses to Perkins' requests for admissions that it possessed no evidence of the chain of assignments, that its assignors disclaimed any representations and warranties, and that it possessed no documentation which could establish Perkins' indebtedness. The debt collector failed to produce the underlying account documentation which was theoretically available from the assignor, and failed to produce its corporate representative for deposition, which ultimately led to its own claims being dismissed. However, the trial court found in favor of the debt collector on Perkins' counterclaim, holding that there was insufficient evidence to support an FDCPA violation. Reversing the trial court, the court of appeals first opined that the debt collector falsely represented, from the perspective of the least sophisticated consumer, that it was an assignee of the original creditor because it possessed no evidence to establish the chain of title. Even if the debt collector was, in fact, an assignee of the original creditor, the court of appeals opined, the debt collector's lawsuit constituted an action that could not legally be taken. "Once Perkins hired counsel to defend the suit and took Royal to task, Royal demonstrated neither the intention or nor the ability to establish its assignee status or actually prove the claim it filed. . . . [T]he record clearly demonstrates that Royal could not legally prosecute its claim and never had any intention to do so." Id., at 4. Presumably, had the debt collector in Royal come forward with evidence to establish the chain of title during discovery, the result would have been different. Thus, Royal demonstrates the importance of a debt collector's having some means of proving the debtor's indebtedness, whether by direct proof or by representations of its assignor. 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.