Alert February 19, 2013

Federal Court Rejects Argument That the FDCPA Does Not Apply to State Collection Actions

The United States District Court for the Southern District of Alabama concluded that a debt collector that filed collection actions in state court with no knowledge of or ability to prove the debts’ validity may be liable under the Federal Debt Collection Practices Act. Plaintiff, whom the debt collector had unsuccessfully sued in a state court collection action, alleged that the debt collector’s lawsuit constituted a "false representation or deceptive means" of debt collection in violation of the FDCPA because defendant had no intent or ability to prove its claims

Citing Supreme Court and Eleventh Circuit precedent—that "initiation of legal proceedings by a creditor can constitute a debt collection activity" under the FDCPA—the Court distinguished between debt collectors that should have gathered "more of a paper trail" before filing suit, and those who deliberately fail to seek additional information because they know they will never be able to prove their claim, finding defendant fell within the latter group. The Court recognized a conflicting recent ruling within the same Division, Bandy v. Midland Funding, LLC, 2013 WL 210730 (S.D. Ala. 2013), but found Bandy’s reasoning unpersuasive.