Category Archives: Fair Debt Collection Practices Act

Is it a violation of the Fair Debt Collection Practices Act to sue a debtor in the wrong city?

The United States Court of Appeals for the Second Circuit recently held that a debt collector violated the Fair Debt Collection Practices Act (“FDCPA”) when it instituted a Syracuse City Court action in New York State against a debtor in a city where the debtor did not reside.  Hess v. Cohen & Slamowitz, LLP, No. 10-424, 2011 WL 612887 (C.A.2 (N.Y.) 2011).

The FDCPA establishes the proper venue where a debt collector may sue to collect on a debt.  The FDCPA requires that the lawsuit be brought “only in the judicial district or similar legal entity … in which [the] consumer resides at the commencement of the action.”  15 U.S.C. §1692i(a)(2)(B).  Debt collector Cohen & Slamowitz (“C&S”) brought a debt collection lawsuit against debtor Jonathan Hess in Syracuse City Court.  Hess’ motion to dismiss C&S’s complaint was granted by the trial court on the grounds that Hess did not reside in the City of Syracuse, nor in an adjacent town as required by the FDCPA.

Following dismissal of C&S’s complaint, Hess sued C&S in the United States District Court for the Northern District of New York on the ground that C&S violated the venue provisions of the FDCPA by suing him in Syracuse City Court.  The District Court dismissed Hess’ complaint for failure to state a cause of action.  Hess appealed that decision to the United States Court of Appeals for the Second Circuit.

The Second Circuit noted at the outset that the matter presented a question of first impression, “whether a debt collector violates the FDCPA’s venue provisions by suing a consumer in a city court in the State of New York when that court lacks power to hear the action because the consumer does not reside in that city or a town contiguous thereto.”  Id. at *1.  The evidence revealed that Hess lived in the Town of Clay and never lived, worked, or maintained a place of business in Syracuse.  Also, Syracuse and Clay are not adjacent to one another.

Per the Second Circuit, the FDCPA was enacted “to eliminate abusive debt collection practices by debt collectors, to insure that those debt collectors who refrain from using abusive debt collection practices are not competitively disadvantaged, and to promote consistent State action to protect consumers against debt collection abuses.”  Id. at *2.  Among those abuses is “the problem of ‘forum abuse’, an unfair practice in which debt collectors file suit against consumers in courts which are so distant or inconvenient that consumers are unable to appear, hence permitting the debt collector to obtain a default judgment.  As a result, Congress adopted venue provisions to ensure that a debt collector who files suit [does] so either where the consumer resides or where the underlying contract was signed.”  Id. at *2.

The issue was whether C&S filed suit “in the judicial district or similar legal entity where Hess resided as of the commencement of the action.”  Id. at *3.  The court determined that Congress meant the phrase “judicial district” to refer to a territorial subdivision of the courts.  Taking that analysis a step further, the court held that the term “judicial district” in the context of a debt collection action must be defined within the judicial system of the state where the action was brought.

Applying its analysis to the facts, the court held that “the FDCPA’s term ‘judicial district,’ as applied to a case where a debt collector sues a consumer in one of New York State’s city courts, extends no farther than the boundaries of the city containing that court and the towns within the same county that are contiguous by land thereto.  Because the proper ‘judicial district’ here does not include the town where Hess resides, we hold that the district court erred by dismissing his complaint.”  Id. at *5.  Further, where “a state law outlines the required nexus between the residence or activities of the consumer and the location of the court, we hold that such a law sets forth the appropriate ‘judicial district’ for purposes of the FDCPA with respect to debt collection actions brought in that court, regardless of whether that provision is styled as jurisdictional or otherwise.”  Id. at *6.  Finally, “when a debt collector elects to sue in a court of limited jurisdiction, the FDCPA requires, at the very least, that the suit be brought in a court where the consumer’s non-residency or lack of contacts thereto does not serve as a bar to further proceedings.”  Id. at *7.

In conclusion, the Court of Appeals held that Hess stated a claim that the underlying debt collection action was not brought in the appropriate “judicial district.”  As a result, the Court of Appeals reversed the District Court’s dismissal of Hess’ complaint and remanded the matter to the District Court for trial.

Comments/Questions: gdn@gdnlaw.com

© 2011 Nissenbaum Law Group, LLC

Can a consumer sue under the Fair Debt Collection Practices Act for debt collection letters sent to her attorney?

Recently, a Federal District Court for the District of New Jersey ruled that a letter from a debt collector to a consumer’s attorney is a communication that is subject to the Fair Debt Collection Practices Act (FDCPA).  Allen v. LaSalle Bank, N.A., No. 09-1466, 2011 WL 94420 (3d Cir. 2011). As a result, the consumer was permitted to sue the debt collector under the FDCPA for inaccuracies in the collection letter.

In that case, the letter overstated the amounts due for attorney’s fees, search fees, recording fees and process service fees.  Such inaccurate information in a demand letter sent by a debt collector to a consumer is prohibited by the FDCPA.

The debt collector argued that the FDCPA did not apply since the letter had been sent to the attorney for the consumer, rather than the consumer herself. It elaborated that the consumer’s attorney would have easily recognized the overcharges and protected the consumer.  Therefore, the public policy underlying the law; namely, to protect consumer debtors from being misled, was satisfied.

The Court did not accept this argument and held that the letter was an improper communication under the FDCPA regardless of who received it.  The Court reasoned that the FDCPA is a strict liability statute; in other words, it imposes liability without proof of an intentional violation.  Thus, permitting an improper communication to escape FDCPA liability simply because the communication was sent to a consumer’s attorney, rather than the consumer herself, would undermine the deterrent effect of the statute.

Comments/Questions: gdn@gdnlaw.com

© 2011 Nissenbaum Law Group, LLC