A District Court judge in Florida has granted a defendant’s motion to dismiss claims it violated the Fair Debt Collection Practices Act, the Fair Credit Reporting Act, and several other state laws on the grounds that the complaint, which invoked a number of sovereign citizen claims, was “predicated on the ‘patently frivolous’ vapor money theory.”
The background: The plaintiff obtained a $10,000 unsecured personal loan through the defendant’s digital lending platform. After receiving the funds, the plaintiff claimed the debt was legally extinguished because he endorsed the loan agreement with the words “W/O Recourse,” which he argued created a counteroffer that the lender accepted by disbursing the proceeds.
- Based on that interpretation, the plaintiff alleged violations of the FDCPA, FCRA, the Uniform Commercial Code, breach of contract, fraud, and invasion of privacy, claiming the lender had no right to collect or report the debt.
- The defendant argued that the case was entirely based on the “profoundly flawed” vapor money theory, a concept often associated with the sovereign citizen movement, which asserts that individuals can discharge debts simply by signing documents in a certain way or by claiming that loans are backed by nonexistent funds.
The ruling: Judge Amanda Arnold Sansone of the District Court for the Middle District of Florida agreed with the defendant, calling the claims “patently frivolous” and dismissing all counts with prejudice.
- She found that the defendant was not a “debt collector” under the FDCPA because it serviced the loan from inception, and the plaintiff failed to allege that any credit reporting agency had notified the defendant of a dispute, a required element under the FCRA.
- The judge also rejected the breach of contract and UCC claims, explaining that the plaintiff “cannot accept the benefits of a loan and reject the obligations by relying on inapplicable UCC provisions.” The ruling noted that the “without recourse” language did not appear in the actual loan document and that the plaintiff misunderstood how negotiable instruments operate.
- As for the remaining claims under the Florida Deceptive and Unfair Trade Practices Act and invasion of privacy, the court said debt collection is not “trade or commerce” under state law, and the plaintiff’s “state of vexation, irritation, and agitation” did not meet the legal threshold for a privacy violation.
