A District Court judge in New Jersey has partly sided with a consumer in a Fair Debt Collection Practices Act lawsuit, ruling that a debt buyer and its law firm violated the Act by suing to collect a time-barred debt, while rejecting the consumer’s separate claim that the debt buyer’s lack of a state lending license also violated the statute.
The background: The case traces back to a mortgage default and short sale that left the plaintiff owing a deficiency balance under a promissory note.
- After a short sale resolved a mortgage default, the plaintiff executed a promissory note in 2010 for the remaining balance of $16,325, payable in monthly installments of about $136.
- The plaintiff made only sporadic payments in the years that followed, with a final payment coming in September 2014.
- The original lender eventually sold the note to a debt buyer for collection, and in 2023 the debt buyer, through its law firm, filed a breach of contract and unjust enrichment action against the plaintiff in New Jersey state court.
- After defending that suit, the plaintiff filed this federal lawsuit against the debt buyer and its law firm, arguing the state court suit was filed after the statute of limitations expired and that the debt buyer lacked a required state lending license.
- Both sides moved for summary judgment.
The ruling: Judge Evelyn Padin of the District Court for the District of New Jersey granted each side a partial win, splitting the two claims.
- On timeliness, Judge Padin first declined to enforce the promissory note’s clause selecting North Carolina law, finding nothing in the record tying the transaction to that state, and applied New Jersey law instead.
- The judge rejected the debt buyer’s argument that a pre-printed “(SEAL)” notation next to the plaintiff’s signature extended the limitations period to sixteen years, explaining that New Jersey requires a document to affirmatively state that it is sealed, not merely display the word near a signature line.
- Applying the ordinary six-year limitations period, and calculating from the most generous possible default date, Judge Padin found the state court suit was filed roughly three years too late, and held that filing a time-barred collection suit is an undisputed FDCPA violation.
- In explaining why she wouldn’t build the debt buyer’s choice-of-law argument for it, the judge wrote, “Judges are not like pigs, hunting for truffles buried in the record.”
- On the licensing claim, Judge Padin sided with the defendants, holding that recent New Jersey appellate rulings make clear that the state’s Consumer Finance Licensing Act empowers only the state banking commissioner, not private litigants, to enforce its licensing requirements.
- The judge noted the New Jersey Supreme Court currently has the private right of action question pending in a separate case, but applied existing law since neither side requested a stay.
