A collection agency in Nevada has taken the interesting step of buying the medical debt of an individual that it was trying to collect, in order to have a lawsuit filed by the individual dismissed.
The case has been appealed to the U.S. Court of Appeals for the Ninth Circuit. The plaintiff, Patricia Arellano, is now being represented by Deepak Gupta.
Early last year, Clark County Collection Service attempted to collect a $370 medical debt from Arellano. When she did not respond to the collection attempts, the collection agency filed a lawsuit against her and obtained a default judgment. By now, the unpaid debt had increased to $800.
Arellano turned around and sued the collection agency, saying it had misrepresented how long she had to fight the collection effort, and claimed that the name of the collection agency implied it was affiliated with Clark County, Nevada, which it is not.
Seeking to obtain the payment, Clark County Collection Service obtained a “writ of execution” from the local sheriff’s office, which obligated the sheriff to sell off Arellano’s possessions to cover the unpaid debt. In an auction held last November, not only were Arellano’s possessions sold, but the unpaid debt as well. Clark County Collection Service paid $250 to buy the debt.
From there, the collection agency filed to have the lawsuit against it dismissed, because, it told the judge, it did not want to sue itself. The judge agreed, but the case has been appealed. In his brief appealing the District Court’s ruling, Gupta writes:
“Allowing the purchase-and-dismiss tactic at issue here would undermine the FDCPA in exactly these ways. The FDCPA is meant to accomplish its goals through a nationwide scheme of private enforcement; victims of debt-collection abuses may bring suit, and win statutory damages, to deter future violations. But if CCCS gets its way, that system would crumble. In states allowing the purchaseand- dismiss maneuver, debtors would have no incentive to sue, since debt collectors could simply arrange to have consumers’ claims sold in a sheriff’s sale and then buy them for pennies on the dollar. The FDCPA would become a stateby- state patchwork. And the economics of sheriff’s sales like the one in this case show why: because no serious bidder would compete against the debt collector in the auction, the debt collector could name its own price to evade liability.”
A copy of Gupta’s brief can be downloaded here
