Illinois District Court Calls out “Manufactured” FDCPA Lawsuit

The case represents a lesson learned the hard way and a warning to heed in the future.

9/18/2019 3:00 PM

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Illinois District Court Calls out “Manufactured” FDCPA Lawsuit

At least one consumer’s attorney group will think twice before filing a manufactured lawsuit alleging violations of the Fair Debt Collection Practices Act (“FDCPA”).

In a consolidated complaint, the plaintiffs alleged that ACA International member agency Nationwide Credit and Collection Inc. violated Section 1692e(8) of the FDCPA by failing to update its tradelines to reflect plaintiffs’ disputes to the credit information being reported to the credit reporting agencies.

Oddly, and despite several collection notices to the consumers providing the agency’s fax number, the plaintiffs’ attorneys searched the internet for an alternate number to send the dispute letters.

How was the collection agency to know about the disputes if the dispute letters the plaintiffs’ attorneys allegedly faxed were intentionally faxed to a number other than the one indicated in the collection notices?

Well, the agency wouldn’t know, thus leading to the district court’s conclusion that the agency couldn’t be held liable under the FDCPA where there is no evidence that the agency ever received the faxes sent. “In the instant case plaintiffs (more specifically their attorneys) were the ‘principal author of the harm of which they complain,’” the court concluded.

“The judge rightly concluded that there was no evidence that my client, Nationwide Credit and Collection, Inc., knew the debts were disputed,” said David Schultz of Hinshaw & Culbertson LLP, who represented the collection agency along with Brandon Stein. Schultz notes that the judge opined that even if an error had occurred, it was an unintentional bona fide error.

The district court pointed out that the collection agency had procedures in place that were reasonably adapted to respond appropriately to consumer disputes including providing a fax number for recipients to use if they wish to dispute their debts. Notably, the judge pointed out that plaintiffs’ counsel had previously used the correct fax number and unsurprisingly received a prompt and proper response. “In the instant case, it appears to this court that plaintiffs’ attorneys’ actions were designed to avoid defendant’s procedures reasonably adapted to avoid errors, for the purpose of manufacturing a lawsuit,” the judge’s opinion stated.

“We especially appreciate that the judge specifically said he did not condone the actions of the plaintiff’s attorneys and warned them to be more careful in the manner in which they conduct their practice,” Schultz said. The district court warned that its strict liability provision has “turned FDCPA cases into a profitable vein of litigation upon which entire firms focus their practices, provided, of course, the firms can keep finding plaintiffs.”

“We are very grateful to David Schultz, Brandon Stein and the Hinshaw & Culbertson team for the excellent legal work committed to this case,” said Paul Falvey, vice president of operations at Nationwide Credit and Collection Inc. “We view the court’s decision as a victory for the collection industry and hope this result discourages and even deters consumer attorneys from manufacturing frivolous lawsuits in a similar manner in the future.”


Follow ACA International on Twitter @ACAIntl and @acacollector, Facebook and request to join our LinkedIn group for news and event updates. ACA International members are welcome to submit news items for possible publication to comm@acainternational.org. Visit our publications page for news submission guidelines and subscriptions to ACA Daily, Collector magazine and Pulse.

Advertising is available for companies wishing to promote their products or services. Be sure to visit the ACA Events Calendar on the Education and Training page to view our listing of upcoming CORE Curriculum and Hot Topic seminars featuring critical educational opportunities for your company.


Subscribe to ACA Daily NEWSROOM

Illinois District Court Calls out “Manufactured” FDCPA Lawsuit

At least one consumer’s attorney group will think twice before filing a manufactured lawsuit alleging violations of the Fair Debt Collection Practices Act (“FDCPA”).

In a consolidated complaint, the plaintiffs alleged that ACA International member agency Nationwide Credit and Collection Inc. violated Section 1692e(8) of the FDCPA by failing to update its tradelines to reflect plaintiffs’ disputes to the credit information being reported to the credit reporting agencies.

Oddly, and despite several collection notices to the consumers providing the agency’s fax number, the plaintiffs’ attorneys searched the internet for an alternate number to send the dispute letters.

How was the collection agency to know about the disputes if the dispute letters the plaintiffs’ attorneys allegedly faxed were intentionally faxed to a number other than the one indicated in the collection notices?

Well, the agency wouldn’t know, thus leading to the district court’s conclusion that the agency couldn’t be held liable under the FDCPA where there is no evidence that the agency ever received the faxes sent. “In the instant case plaintiffs (more specifically their attorneys) were the ‘principal author of the harm of which they complain,’” the court concluded.

“The judge rightly concluded that there was no evidence that my client, Nationwide Credit and Collection, Inc., knew the debts were disputed,” said David Schultz of Hinshaw & Culbertson LLP, who represented the collection agency along with Brandon Stein. Schultz notes that the judge opined that even if an error had occurred, it was an unintentional bona fide error.

The district court pointed out that the collection agency had procedures in place that were reasonably adapted to respond appropriately to consumer disputes including providing a fax number for recipients to use if they wish to dispute their debts. Notably, the judge pointed out that plaintiffs’ counsel had previously used the correct fax number and unsurprisingly received a prompt and proper response. “In the instant case, it appears to this court that plaintiffs’ attorneys’ actions were designed to avoid defendant’s procedures reasonably adapted to avoid errors, for the purpose of manufacturing a lawsuit,” the judge’s opinion stated.

“We especially appreciate that the judge specifically said he did not condone the actions of the plaintiff’s attorneys and warned them to be more careful in the manner in which they conduct their practice,” Schultz said. The district court warned that its strict liability provision has “turned FDCPA cases into a profitable vein of litigation upon which entire firms focus their practices, provided, of course, the firms can keep finding plaintiffs.”

“We are very grateful to David Schultz, Brandon Stein and the Hinshaw & Culbertson team for the excellent legal work committed to this case,” said Paul Falvey, vice president of operations at Nationwide Credit and Collection Inc. “We view the court’s decision as a victory for the collection industry and hope this result discourages and even deters consumer attorneys from manufacturing frivolous lawsuits in a similar manner in the future.”


Follow ACA International on Twitter @ACAIntl and @acacollector, Facebook and request to join our LinkedIn group for news and event updates. ACA International members are welcome to submit news items for possible publication to comm@acainternational.org. Visit our publications page for news submission guidelines and subscriptions to ACA Daily, Collector magazine and Pulse.

Advertising is available for companies wishing to promote their products or services. Be sure to visit the ACA Events Calendar on the Education and Training page to view our listing of upcoming CORE Curriculum and Hot Topic seminars featuring critical educational opportunities for your company.


Subscribe to ACA Daily NEWSROOM

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