The Court of Appeals for the Third Circuit yesterday upheld a lower court’s dismissal of a Fair Debt Collection Practices Act case, ruling that a debt buyer was not required to be licensed under a state law in Pennsylvania when it attempted to collect interest that had accrued at a rate of 23% under the original creditor.
A copy of the ruling in the case of Lutz v. Portfolio Recovery Associates can be accessed by clicking here.
Background: The plaintiff obtained a credit card from Capital One Bank. The card carried an interest rate of 22.9%. The plaintiff defaulted on the debt, which was sold to the defendant. In an amended complaint, the plaintiff accused the defendant of violating provisions of the FDCPA because it was not licensed under the Pennsylvania Consumer Discount Company Act (CDCA), and unlicensed entities are prohibited from charging interest at a rate higher than 6%.
A District Court judge granted a motion to dismiss filed by the defendant, ruling the defendant was entitled to collect interest above 6% because it held a license under a different state law.
The Appeal: The CDCA essentially applies to companies that arrange for or negotiate loans with certain parameters. And there is nothing in the plaintiff’s amended complaint to suggest that the defendant is in the business of negotiating loans, the Appeals Court noted.
The Last Word:
