A District Court judge in Alabama has dismissed a lawsuit accusing a debt buyer of violating the Fair Debt Collection Practices Act by filing a state court collection lawsuit instead of pursuing arbitration under a credit card agreement. The ruling is notable because the court found that merely filing a collection lawsuit, even where an arbitration clause allegedly applies, does not by itself amount to false, deceptive, unfair, or unconscionable conduct under the FDCPA.
The background: The plaintiff alleged a debt buyer acquired his charged-off credit card debt originally issued by a credit union and then filed collection lawsuits in Alabama state court to recover the balances.
- The underlying credit card agreement contained a mandatory arbitration provision requiring disputes related to the debt to be resolved through arbitration rather than litigation.
- The plaintiff claimed the debt buyer violated the FDCPA by filing and prosecuting collection lawsuits in court instead of initiating arbitration proceedings. He argued the litigation constituted “false, deceptive, misleading, unfair, and unconscionable conduct” under Sections 1692e and 1692f of the FDCPA.
- The lawsuit also included claims under the Federal Arbitration Act and asked the judge to compel arbitration and block further litigation efforts.
The ruling: Judge R. Austin Huffaker Jr. of the District Court for the Middle District of Alabama dismissed the case, finding the plaintiff failed to plausibly allege conduct that is prohibited by the FDCPA.
- The judge explained that while the FDCPA prohibits false, deceptive, misleading, unfair, or unconscionable collection conduct, the plaintiff’s allegations amounted to nothing more than a claim that the debt buyer filed a lawsuit instead of initiating arbitration.
- Importantly, the judge noted the plaintiff did not dispute owing the debt and did not allege the debt buyer misstated the balance, fabricated documents, misidentified the creditor, or otherwise made materially false statements during the litigation.
- Judge Huffaker also pointed to prior decisions holding that pursuing judicial remedies to collect a debt does not automatically create FDCPA liability.
- Another important component of the ruling involved the judge’s discussion of the Federal Arbitration Act. The judge emphasized that the FAA itself does not create independent federal jurisdiction, meaning allegations that a party violated an arbitration agreement are not enough by themselves to keep a case in federal court.
