U.S Court of Appeals Affirms Cach, LLC Decision

In May 2016, the United States Court of Appeals for the Seventh Circuit affirmed that the FDCPA does not contain a requirement that a debt collect must intend to proceed to trial when it files a lawsuit to collect a debt. The case was appealed from the United States District Court for the Northern District of Illinois. The defendants in this case are debt collectors who filed suit in the Illinois state court to recover on the plaintiff’s delinquent credit card accounts. The debt collectors voluntarily moved to dismiss without prejudice and the actions were dismissed prior to trial. The plaintiffs then sued the debt collectors in federal court alleging violation of the FDCPA.

The issue on appeal is whether the debt collectors violated §1692e(5) of the FDCPA by initiating the state court proceedings with no intention of going to trial. The FDCPA prohibits debt collectors from using “any false, deceptive, or misleading representation or means in connection with the collection of any debt.” The plaintiff’s argued on appeal that by filing a collection lawsuit without intending to go to trial violates the FDCPA because the debt collectors “threatened” to take an action it did not intend to take.

The Seventh Circuit concluded that the plaintiffs failed to state a viable claim under §1692e(5). The Court rejected the plaintiffs’ claim that the filing of a lawsuit was an implied representation that trial was imminent. A threat has been defined as a declaration of intention to take some action. Here, the mere filing of a civil action was not found to include a declaration that debt collectors intended to advance the action to trial. The Court stated, “Litigation is inherently a process [and] recovery through that process may be achieved in many ways, and at different stages, of which trial is often not the most cost-effective or desirable.” The Court held that debt collectors are no different than any other plaintiff and similarly must weigh out the costs of litigation when deciding whether to pursue a trial. A decision not to proceed to trial was found to be a legitimate exercise of discretion.

Ultimately, the Seventh Circuit held that “an unsophisticated consumer could not reasonably conclude that a debt collector implicitly threatens to proceed to trial simply by filing a lawsuit to recover a debt.” The Seventh Circuit’s decision will have an effect on both debt collectors, borrowers, and consumer attorneys. It has been a commonplace for consumer attorneys to urge courts to treat debt collector litigants differently in regards to the way they litigate claims. This case confirms that the FDCPA was not intended to and does not serve to bar a debt collector from recourse to the courts. Debt collectors are entitled to the “typical and customary cost-benefit analysis when conducting litigation” as other non-debt collector litigants without the fear of FDCPA litigation.


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