A District Court judge in Massachusetts has granted a motion to dismiss claims that a pair of auto lenders violated the Fair Debt Collection Practices Act, while also calling out the plaintiffs for citing nonexistent cases in what may be a case of hallucinating artificial intelligence. The decision offers a clear reminder for companies across credit and collections that creditor status still matters under the FDCPA, while also highlighting a growing issue courts are beginning to confront: unreliable AI-generated legal filings.
The background: The case stems from two vehicle loans the plaintiff entered into in 2021, serviced by the defendant lenders. After making payments for several years, the plaintiff requested information about the ownership and chain of title of the loans but alleged those requests went unanswered. Shortly thereafter, both vehicles were repossessed through third-party recovery companies.
- The plaintiffs claimed the repossessions were improper and that the defendants reported inaccurate information to credit reporting agencies, including balances and repossession activity. They also alleged difficulty communicating with one of the lenders, including being provided non-functioning fax numbers and losing access to an online account.
- Based on these events, the plaintiff brought claims under the FDCPA, the Fair Credit Reporting Act, and state consumer protection law, along with claims tied to wrongful repossession and conversion.
The ruling: Judge Angel Kelley of the District Court for the District of Massachusetts dismissed the FDCPA claim, emphasizing that the FDCPA applies to debt collectors, not creditors collecting their own debts. Because the defendant lenders were collecting on loans they originated or owned, they did not meet the statutory definition of a debt collector.
- The judge also dismissed the credit reporting claims. The state law claim was found to be preempted by the FCRA, while the federal claim failed because the section cited by the plaintiff does not provide a private right of action.
- However, Judge Kelley allowed the wrongful repossession and conversion claims to proceed. At this stage, the plaintiff’s allegation that they were current on payments was enough to plausibly suggest the repossession may have been improper, since repossession generally requires a default.
- Perhaps the most notable aspect of the ruling came outside the core legal analysis. The judge directly addressed the plaintiff’s legal citations, stating that several cases cited in their filings did not exist. The judge wrote that the filings were “rife with miscitations and AI hallucinations” and warned that future filings must be certified as accurate or risk sanctions.
