FDCPA Alert: Third Circuit Rules that Certain FDCPA Claims are Not Precluded by Bankruptcy Code
A new appellate decision is not only a reminder to debt collectors that the FDCPA may apply under certain circumstances to their in-court collection activities, but also a warning that courts may allow even minor procedural transgressions to be converted into civil claims for actual and statutory damages as well as for attorneys’ fees.
On October 7, 2013, the Third Circuit Court of Appeals partially reversed a lower court’s dismissal of a couple’s Fair Debt Collection Practices Act (FDCPA) claims on the grounds that they were not precluded by the United States Bankruptcy Code. The three-judge panel found that the plaintiffs’ FDCPA claims, against collection agency FIA Card Services N.A. (FIA) and its counsel, Weinstein & Riley P.S. (Weinstein), could apply in certain instances where a bankruptcy case was pending but no conflict exists between the bankruptcy code and the FDCPA. The opinion in Simon v. FIA Card Services NA can be found here.
The plaintiffs in Simon had filed a Chapter 7 bankruptcy petition in late 2010 which contained an unsecured, non-prioritized claim for credit card debt owed to Bank of America. In January of 2011, Weinstein sent a letter and subpoena on behalf of FIA that indicated it would file an adversary proceeding to contest the dischargeability of the credit card debt. The next month, the plaintiffs filed a motion to quash the subpoena and added FDCPA claims against Weinstein and FIA for failing to send a copy of the subpoena to their home address.
The trial court granted FIA and Weinstein’s motion to dismiss, but the Third Circuit overturned that decision. In its opinion, the appeals court ruled that the plaintiffs’ claims that the law firm failed to properly send the subpoena to their home address and failed to include the text of Civil Rule 45 in the subpoena were cognizable under the FDCPA and not precluded by the bankruptcy code. The opinion stated, “The fact that the bankruptcy court has other means to enforce compliance with the subpoena rules does no conflict with finding liability or awarding damages under the FDCPA for violations based on a debt collector’s failure to comply with the subpoena rules.”
What does this mean?
The Simon decision highlights the notion that at least some types of procedural litigation misconduct can potentially result in an FDCPA claim. Indeed, Simon represents an aggressive view of the extent to which the FDCPA applies in litigation – effectively allowing a consumer to turn minor procedural miscues into an FDCPA claim seeking damages (including, up to $1,000 in statutory damages per consumer) as well as attorneys’ fees.
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