In a case that was defended by Rick Perr and the team at Kaufman Dolowich & Voluck, a District Court judge in Pennsylvania has granted a defendant’s motion to dismiss a Fair Debt Collection Practices Act case, ruling that insurance subrogation obligations do not meet the definition of “debt” under the statute.
A copy of the ruling in the case of Brady v. Vengroff Williams Inc., and VWI Subrogation, Inc., can be accessed by clicking here.
The plaintiff rear-ended another vehicle and the insurance company that covered the other driver determined the plaintiff was responsible for the debt and could either pay the balance or provide details about his liability coverage. Rather than respond to the letter sent by the defendant, the plaintiff filed a complaint with the Consumer Financial Protection Bureau, claiming the defendant was attempting to collect a debt he did not owe. The defendant responded to the complaint by informing the plaintiff that subrogation claims were not covered by the FDCPA.
The defendant sent another letter to the plaintiff, including a disclosure that the FDCPA does not apply to the collection of subrogation interests arising out of motor vehicle accidents, but the plaintiff filed suite nonetheless, accusing the defendant of violating Sections 1692c(a), 1692c(a)(1), 1692b(1), 1692b(2), 1692d(1), 1692d(2), 1692e(2)(A), 1692e(5), 1692e(7), 1692f, and 1692b(5) of the FDCPA by communicating with him about the debt at an inconvenient time, using obscene or profane language, making false or deceptive representations, threatening to take action that could not be taken, and using unfair or unconscionable means to collect a debt.
Under the FDCPA, a debt is defined as “any obligation or alleged obligation of a consumer to pay money arising out of a transaction in which the money, property, insurance, or services that are the subject of the transaction are primarily for personal, family, or household purposes, whether or not the obligation has been reduced to judgment.”
Looking at the FDCPA’s definition of debt, as well as precedent from other cases within the Third Circuit, Judge Kai N. Scott of the District Court for the Eastern District of Pennsylvania ruled that the subrogation claim did not arise out of a “consumer debt transaction.”
“It is not the result of a consumer purchase — or any purchase at all,” Judge Scott wrote. “Nor was any extension of credit offered. Instead, the subrogation claim flows directly from Brady’s alleged tort liability arising out of his negligence in causing the accident to State Farm’s client.”
