A California state Appeals Court has reversed a summary judgment ruling in favor of a debt buyer accused of violating California’s Fair Debt Buying Practices Act, holding that a generic borrower agreement bearing no link to the consumer or to any specific debt did not satisfy the law’s requirement that documentation of the debt be attached to a collection complaint.
The background: The plaintiff, a debt buyer, sued in 2019 to collect $5,158.61 on an installment loan the defendant obtained through an online lending platform, which the plaintiff said it had purchased.
- The complaint said Exhibit A was a billing statement or loan file provided while the account was active. What was actually attached was a standard borrower agreement between “the borrower” and the originating bank, several pages of terms explaining how a borrower could request a loan, plus a blank loan agreement and promissory note.
- The complaint also referred to an Exhibit B, described as the final billing statement or transaction history. No Exhibit B was attached.
- The defendant answered and filed a class-action cross-complaint alleging the plaintiff violated both the Act’s access requirement and its attachment requirement, and that misrepresenting compliance also violated the Fair Debt Collection Practices Act and the Rosenthal Fair Debt Collection Practices Act.
- Nearly four years later, the plaintiff filed an amended complaint attaching an executed loan agreement and promissory note for $8,000 along with a six-page transaction history, then won summary judgment on the theory that the original error had been corrected.
The ruling: The Appeals Court wrote that the documents in the plaintiff’s files before the suit was filed, a loan summary, a Truth in Lending disclosure, and a payment history covering 20 payments, were together enough to evidence the defendant’s agreement to the debt, affirmed on the access requirement and reversed on everything else.
- The document actually attached to the complaint showed nothing. It carried no signature, did not identify the defendant as the borrower, and did not say when or how much he agreed to owe. The terms themselves “make clear that the borrower agreement is a precursor to a debt,” the court wrote, since the bank did not guarantee any loan would issue.
- Filing a better complaint later does not undo the violation, the court determined. The Rosenthal Act gives collectors a chance to cure; the Debt Buyers Act does not, and the court read that omission as deliberate. “A debt buyer who violates the complaint requirements of the Act cannot avoid liability by simply amending the complaint to correct the violation,” the court wrote.
- The bona fide error defense goes to a jury. The plaintiff pointed to its law firm’s automated attachment process and an attorney’s checklist review. The judge listed the open questions: “Was it reasonable for [the debt buyer] to completely rely on a law firm for compliance with the Act’s pleading requirements? How did the firm’s automation procedures work? Is reliance on one person to check a complaint for completeness reasonably adopted to avoid the error?”
