A New Jersey Appeals Court has affirmed the certification of a Fair Debt Collection Practices Act case over an alleged attempt to collect improper fees while remanding the case back to state court to determine whether the plaintiff is able to represent both of the suit’s subclasses.
The background: The plaintiff received veterinary services from a provider that used a customer agreement including a provision for collection costs if an account went unpaid. When the plaintiff fell behind, a collection letter was sent listing a principal balance and a separate collection charge. The plaintiff alleged that the defendant violated the FDCPA by attempting to collect collection costs that had not yet been incurred, arguing that the inclusion of those charges in the initial letter was misleading.
- The lawsuit sought to include more than 10,000 New Jersey residents who received collection letters tied to debts owed to the same creditor between 2018 and 2021.
- Three versions of the creditor’s agreement existed during that period, including one with language stating that collection charges “may be added to the debt owing when the account is placed into collections.”
- Because only one of those versions contained this additional phrase, the trial court created two subclasses based on the contractual language while appointing a single representative.
- The plaintiff first attempted to pursue this action in federal court, but the case was dismissed because the plaintiff lacked standing.
The ruling: The Appeals Court agreed that class certification was appropriate, emphasizing that each class member received a standardized collection letter and that the core legal question was identical: whether adding collection fees before they were actually incurred violated the FDCPA. The panel noted that class actions exist to consolidate claims involving shared issues and found no error in creating subclasses tied to the agreement versions.
- However, the court held that the trial judge had not sufficiently explained why the plaintiff could represent both subclasses, particularly the one governed by a version of the agreement he did not sign. As the panel wrote, “the court, however, did not further explain why a single class representative could ‘fairly and adequately’ represent the interests of the entire class.”
- The opinion stressed that while subclasses can be created for case-management purposes, the representative plaintiff must be able to protect each subclass’s interests.
- The defendant also argued that subclass identification was impossible because the creditor allegedly lacked readily accessible data showing which version of the agreement applied to each consumer. The Appeals Court rejected this position, noting that although reviewing individual records “is undoubtedly time-consuming,” it does not prevent certification.
