Do you still have copies of your policies and procedures lying around from 2005? One creditor is running into some legal trouble because it doesn’t. A District Court judge in Wisconsin has denied a defendant’s motion for summary judgment after it was sued for allegedly violating the Fair Debt Collection Practices Act because it attempted to collect on a debt that may have been forgiven more than 12 year ago.
A copy of the ruling in the case of Bampoky v. Daubert Law Firm can be accessed by clicking here.
The plaintiff defaulted on a credit card debt, was sued by the creditor, and had a default judgment entered against her back in 2005. In 2009, the plaintiff received a 1099-C form from the creditor, indicating that the debt had been canceled. Ten years later, the plaintiff’s account was assigned to the defendant to collect on the default judgment and the defendant sent a collection letter to the plaintiff. By then, the amount owed had more than doubled because of post-judgment interest. The plaintiff then filed suit, alleging the creditor and the defendant had violated Section 1692e(5) the FDCPA by threatening to take an action that can not legally be taken.
Among the issues creating problems for the creditor was that it does not have any copies of its policies and procedures back from 2005 to 2009 to indicate why the plaintiff’s debt was canceled and there is nobody working at the company that was there back then. Creditors are required to file 1099-C forms when it makes a decision to discontinue collection activity and discharge a debt or if a 36-month testing period expires, during which the creditor does not receive a payment from the individual.
The defendant tried to argue that the 1099-C form is not enough to prove that a debt was canceled and Judge J.P. Stadtmueller of the District Court for the Eastern District of Wisconsin admitted that he did not have a lot of case law to rely on with similar fact patterns as this one. The plaintiff argued that a 10-year gap in collection efforts should also serve as proof that the debt was canceled, but Judge Stadtmueller decided there were too many open questions about whether the debt was canceled and that he could not rely on inferences to make a decision.
