The Second Circuit Court of Appeals has overturned a verdict in favor of a collection law firm that had garnished the bank account of an individual whose sole source of income was from Social Security.
A copy of the ruling can be downloaded here.
The plaintiff, Franklin Arias, had rented an apartment and subsequently let his daughter move in, assuming she would continue making rent payments. When she missed two payments, the owner of the apartment sued Arias for the unpaid debts. When Arias did not respond to the lawsuit, a default judgment was entered in favor of the plaintiff.
The plaintiff used the judgment to liquidate a bank account owned by the plaintiff. The bank identified $2,625 that was exempt from liquidation because it was protected income from Social Security benefits, but did allow $1,294.62 to be liquidated. Arias tried to convince the plaintiff, Gutman, Mintz, Baker & Sonnenfeldt LLP, that all of the funds were protected income. He provided bank statements to substantiate his claim but he was told that the only way the funds would be released was if he made a payment. When he said he couldn’t afford it, GMBS told Arias that he would have to go to court to have the restraint notice removed.
When he went to court and showed a copy of the statements to a lawyer for GMBS, statements he had already transmitted to the firm, GMBS promptly withdrew the restraint notice.
Arias subsequently sued GMBS for violating the Fair Debt Collection Practices Act, alleging that GMBS violated section 1692(e) which prohibits false, deceptive, or misleading representations, and section 1692(f) which prohibits collecting or attempting to collect a debt through unfair or unconscionable means.
A district court had granted summary judgment in favor of GMBS, but Arias appealed to the Second Circuit, which ruled in favor of Arias and remanded the case back to the district court.
Consumer advocates lauded the court’s decision.
“We’ve never had a court ruling that looks at these practices before,” said Claudia Wilner, a staff attorney with the National Center for Law and Economic Justice, in a published report. “To have a court say so clearly that the representations are deceptive, that the conduct is unfair, really is just so important.”