The New York district court dismissed some of the claims against the bad actors but gave the consumer an opportunity to file an amended complaint for other claims.
03/28/2023 3:10 P.M.
3.5 minute read
In a case filed in 2021, U.S. District Court Judge Lawrence J. Vilardo of the Western District of New York in Buffalo dismissed some of a consumer’s claims against an “illicit” group of debt collectors but gave her 30 days to file an amended complaint for others.
In the class-action lawsuit, Weitlauf v. Hopkins, No. 21-CV-1052-LJV, 2023 WL 2560831 (W.D.N.Y. Mar. 17, 2023), Jennifer Weitlauf alleges a group of individuals and business entities are part of an enterprise that illegally collects debt and have violated the Fair Debt Collection Practices Act, the Racketeer Influenced and Corrupt Organizations Act (RICO) and New York state law.
In 2014, Weitlauf took out a payday loan from a company called Check N’ Go. After she defaulted, Check N’ Go sold the debt to JTM Capital Management, LLC. In 2019, JTM either sold or “outsourced collection” of Weitlauf’s debt. She alleged that the debt then “began travel[]ing down the chain of legitimacy” until Weitlauf eventually was contacted by two debt collectors that she asserted were both operating under the false consumer-facing names Management Associates and Allied Management.
“Weitlauf now believes that Management Associates was defendant QRS [Quality Resolution Services LLC] because it used a ‘private UPS mailbox’ that ‘was then, according to UPS, rented out for use by only one entity,’” the court wrote. “Similarly, Weitlauf now believes that Allied Management was defendant SMA [Standard Management Associates LLC] because Allied Management ‘employed a private UPS mailbox that was used by [SMA].’”
Weitlauf alleged that the defendants, which comprise three individuals, two holding companies and multiple collection entities, “are part of an ‘illegal collections enterprise,” operating within the “vast and seedy underbelly of the American debt collection industry.” This locus of activity “largely is concentrated in the Buffalo-Rochester metropolitan area,” according to the court. “Unlike law-abiding debt collectors who ‘make significant efforts to comply’ with the FDCPA, illicit debt collectors operate pseudonymously and thus can ‘engage in the worst sort of debt collection abuses safe in the knowledge that their anonymity renders them nearly invulnerable.’”
The court’s description of the methods of shady debt collectors that attempt to operate under the radar of the legitimate ARM industry indicates the gulf between these two approaches.
Pseudonymous debt collectors target “debts for which the likelihood of repayment is extremely low,” such as “payday loans that have already been worked by other collectors [and] out-of-statute debts.” Because they “do not report debts to credit reporting agencies or file collection lawsuits,” these collectors are not concerned with proving that the debts they pursue are still owed, let alone that they have a legal right to collect those debts. In fact, they often do not have a legal right to the money they pursue because they source their “targets” from spreadsheets known as “bad paper.” Those spreadsheets contain “the personal information of purported debtors” and are “sold off after the debts they record have been paid” or are “stolen by [ ] employee[s] of one debt collector and fenced to another.” The players in the pseudonymous debt collection industry are “deeply interconnected;” they move “among an ever-changing stable of business entities that are created and discarded…in order to evade liability.” (Citations to docket omitted.)
The consumer claims the named companies tried to harass and shame her into payment, including by contacting her family, falsely threatening to serve her with “papers” at her workplace, and falsely threatening to repossess her property.
The defendants twice moved to dismiss. Weitlauf filed an amended complaint.
“Viewed as a whole, the amended complaint’s factual allegations draw a complex connection of relationships between and among the defendants,” according to the court.
The court dismissed Weitlauf’s FDCPA and RICO claims against the moving defendants. But it did not dismiss Weitlauf’s federal claims against the other defendants—two individuals and several collection entities—because those defendants had not yet appeared. The court said it lacks the discretion to decline to exercise supplemental jurisdiction over the state law claims against the moving defendants.
The court gave Weitlauf permission to amend so that she might salvage her claims against the moving defendants. If Weitlsheauf does not file an amended complaint within 30 days, starting March 17, 2023, her FDCPA and RICO claims will be dismissed.
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