A District Court judge in Wisconsin has granted a defendant’s motion to dismiss claims it violated the Fair Credit Reporting Act and the Fair Debt Collection Practices Act by attempting to collect a business debt as a personal debt.
The background: The plaintiff alleged that the defendant attempted to collect on a commercial lease tied to a limited liability company by sending collection letters to the plaintiff’s home and furnishing the account to a consumer credit bureau as an individual obligation. The plaintiff maintained she was not a personal guarantor on the lease and that the obligation belonged to the business, not to her personally.
- The collection letters identified the plaintiff as the debtor and the tradeline appeared on her consumer credit report.
- The plaintiff claimed this conduct violated multiple provisions of the FDCPA and the FCRA, including continuing collection activity after a dispute and furnishing inaccurate credit information.
The ruling: Judge Pamela Pepper of the District Court for the Eastern District of Wisconsin dismissed the FDCPA claim with prejudice, holding that the statute only applies to consumer debts that arise from transactions primarily for personal, family, or household purposes.
- The plaintiff’s own allegations established that the underlying obligation stemmed from a commercial lease. The court emphasized that it looks to the nature of the transaction, not how the collector characterized it. As the judge put it, courts focus on “the transaction out of which the obligation to repay arose,” and a commercial lease does not convert into consumer debt simply because collection efforts were directed at an individual.
- On the FCRA side, the court dismissed the claim without prejudice because the complaint did not adequately allege that the plaintiff first disputed the tradeline with the credit reporting agency, which is a prerequisite to triggering a furnisher’s duties to investigate. Judge Pepper allowed the plaintiff an opportunity to amend the complaint to cure that defect.
