In early March, several banks and debt collectors filed a brief in the Second Circuit that asked the court to dismiss a case brought by consumers in a debt collection proposed class action on the grounds that the plaintiffs did not go to arbitration as mandated by the District Court. The case was dismissed by United States District Court previously. The consumers appealed the District Courts Decision seeking to overturn orders that were entered against them before the arbitration order was put in place. The defendants argue that allowing the plaintiffs to continue their appeal would set a bad precedent and send a bad message to the debt collection market.
The case began in September 2012, when claims from 15 named plaintiffs were brought in the United States District Court for the Southern District of New York. These claims were brought against banks including American Express Co., GE Capital Consumer Lending Inc., JPMorgan Chase, and Citibank. The plaintiffs alleged that these banks had worked with several debt collection firms and debt buyers, including Midland Funding LLC, Asset Acceptance LLC, and Portfolio Recovery Associates LLC, to unlawfully obtain thousands of judgments. The plaintiffs also alleged that the debt buyers used false affidavits, misleading evidence, and improper litigation tactics while attempting to collect on these delinquent debts.
The plaintiffs alleged that these banks and debt collection firms violated the Fair Debt Collection Practices Act, the Racketeer Influenced and Corrupt Organizations Act, and their due process rights. The plaintiffs’ claims were rejected in 2013 because the claims asserted were disallowed under law, time-barred, insufficiently backed, or unclear. The plaintiffs were permitted to refile their case. However, the parties were ordered to attend arbitration and the plaintiffs refused to attend. The defendants defense to the appeal is that this refusal of arbitration should be enough to warrant a dismissal.