A District Court judge in New Jersey has denied a motion to dismiss filed by the defendants in a Fair Debt Collection Practices Act class action, ruling the plaintiff plausibly alleged concrete injuries and misrepresentations after being sued to collect a debt whose supporting paperwork traced back to the wrong bank.
The background: The plaintiff allegedly incurred a credit card debt with a bank, which one of the defendants, a debt buyer, acquired after the plaintiff defaulted. The debt buyer hired the other defendant, a collection law firm, to recover the obligation.
- In May of last year, the law firm filed a collection lawsuit in state court, alleging the plaintiff owed $385.83 to the original creditor after failing to make agreed-upon payments.
- The bill of sale attached to that complaint, however, never mentioned the original creditor. Its chain of title showed an entirely different bank had owned the debt and sold it to another company, which then sold it to the debt buyer.
- The plaintiff could not recall ever having a defaulted account with that other bank and grew suspicious of the lawsuit. She called the defendants multiple times seeking an explanation, but alleged they were generally unresponsive, and a representative who finally answered could not explain the chain of title and told her, in sum and substance, “Pay or we’ll continue the lawsuit.”
- The collection suit was dismissed without prejudice last August after the defendants filed a stipulation of dismissal.
- The plaintiff then filed suit in federal court, alleging the defendants’ pursuit of the collection action violated the FDCPA, and the defendants moved to dismiss, arguing she lacked standing and failed to state a claim.
The ruling: Judge Georgette Castner of the District Court for the District of New Jersey denied the motion.
- Judge Castner wrote that the plaintiff alleged far more than mere confusion, the fatal flaw in many FDCPA standing cases. The plaintiff claimed the public lawsuit lowered her credit score, that the hours spent untangling the mess interfered with her work and her ability to care for her family, that she delayed paying other bills to keep funds available, and that she suffered anxiety affecting her sleep and focus. Those harms were analogous to the injuries flowing from fraudulent misrepresentation and intrusion upon seclusion, giving her standing on all three claims.
- The defendants argued the plaintiff could not challenge the bill of sale because she was not a party to it. Judge Castner turned that argument on its head: “The lack of tether to the debt is grounds for suit, not grounds for dismissal.”
- The judge also rejected the argument that the plaintiff needed to present evidence the debt buyer was not the true assignee, noting that pointing to specific falsities in the collection paperwork is enough at this stage, and that the plaintiff’s win in the underlying collection suit only made her allegations more plausible.
