Alert August 25, 2009

Federal Court of Appeals Reverses Dismissal of FDCPA Class Action Litigation and Grants Summary Judgment to Debtor Class

The Seventh Circuit recently overturned the dismissal of a class action alleging violations of the Fair Debt Collection Practices Act and ordered the district court to enter judgment in favor of the plaintiffs. Defendants allegedly sent a collection letter to plaintiffs accompanied by a notice stating that defendants could share information collected from plaintiffs with third parties, unless plaintiffs affirmatively opted-out. Plaintiffs argued that the notice was improper because it made a false and misleading statement in connection with the collection of a debt, as FDCPA prohibits debt collectors from sharing non-public information without explicit consent. The district court granted summary judgment for the defendants. The Seventh Circuit reversed, holding that whether a communication is sent “in connection with” an attempt to collect a debt is a question of objective fact. The Court determined that the notice was misleading on its face, thus mandating summary judgment in favor of plaintiffs. The Seventh Circuit also rejected the defendants’ bona fide error defense based on a misunderstanding of FDCPA. Since the defendants failed to obtain any opinion from an attorney or the appropriate governmental agency, the Court found that the defendants had failed to establish that they had sufficient procedures in place to prevent the occurrence of such errors. Click here for Ruth v. Triumph Partnerships, Case No. 08-3458 (7th Cir. August 17, 2009).