A District Court judge in Wisconsin has granted a defendant’s motion for partial summary judgment in a Fair Debt Collection Practices Act and Wisconsin Consumer Act case that accused the defendant of misrepresenting the level of attorney involvement and accelerating the debt and filing suit against the plaintiff without first giving him a right to cure as required under Wisconsin state law. The judge ruled that banks are pre-empted from having to follow the right-to-cure provisions of the state law in question and that debt buyers are assigned the same rights when purchasing accounts from national banks.
A copy of the ruling in the case of Lako v. Portfolio Recovery Associates can be accessed by clicking here.
The plaintiff opened a credit account with Synchrony Bank. He ran up $2,600 in charges, but never made a payment on the debt. The account was assessed late fees and the plaintiff was mailed a right-to-cure letter before the account was charged off and sold to the defendant. A collection law firm working on behalf of the defendant sent two letters to the plaintiff, one of which notified him of his right to cure the debt. The law firm subsequently filed a collection lawsuit against the plaintiff, which was ultimately dismissed.
The plaintiff then filed suit against the defendant, claiming that the defendant violated the FDCPA and WCA. The parties agreed to litigate the right-to-cure issue first, for which the defendant filed its motion for summary judgment.
After first going through a lengthy discussion to determine that the plaintiff had standing to sue, Judge William Conley of the District Court for the Western District of Wisconsin turned to the issue of whether the defendant violated the FDCPA by accelerating the debt and not offering a right to cure. Regardless of the arguments put forth by either side, Judge Conley determined that the National Bank Act preempts state law. Ultimately, the WCA addresses “the relationship between a lender and a borrower, affecting the terms of credit itself,” Judge Conley wrote. “…state laws affecting the terms of credit are preempted to the extent that they apply to national banks, including the repayment schedule, term to maturity, and the circumstances under which a loan may be called due.”
After ruling that national banks are preempted from the statue, Judge Conley then ruled that “a debt collector assigned a debt from a national bank is likewise exempt from those requirements.” An assignee “steps into the shoes of the assignor . . . whatever the shoe size,” he wrote.
