A District Court judge in New Jersey has denied a motion to dismiss and a motion for summary judgment filed by a collection agency after it was accused in a class action lawsuit of violating the Fair Debt Collection Practices Act by not having the proper license to purchase the plaintiff’s debt, which did not give the defendant the legal ability to collect on the debt.
A copy of the ruling in Tompkins v. Selip & Stylianou, LLP and RAB Performance Recoveries, LLC can be accessed by clicking here.
The plaintiff defaulted on a debt back in 2009, which was subsequently assigned to RAB. RAB obtained a default judgment on the debt. Nine years later, the plaintiff received a letter from Selip & Stylianou, on behalf of RAB as the judgment creditor, seeking to garnish the plaintiff’s wages. The letter did not itemize the debt by breaking out principal, interest, or any fees that were assessed, nor did it inform the plaintiff whether the balance included any interest that had been assessed and the interest rate that was applied.
The plaintiff filed suit, alleging the letter violated Section 1692e(10) of the FDCPA, which prohibits using false representation or deceptive means while attempting to collect on a debt. The defendant was accused of not obtaining a license from the New Jersey Department of Banking and Insurance as required by the New Jersey Consumer Finance Licensing Act (NJCFLA).
The defendant argued it was not subject to the NJCFLA. The law defines a “consumer loan business” as:
“Consumer loan business” means the business of making loans of money, credit, goods or things in action, which are to be used primarily for personal, family household purposes, in the amount or value of $50,000 or less and charging, contracting for, or receiving a greater rate of interest, discount or consideration therefor than the lender would permitted by law to charge if he were not licensee hereunder, except as authorized by this act and without first obtaining a license from the commissioner. Any person directly or indirectly engaging in the business of soliciting or taking applications for such loans of $50,000 or less, or in the business of negotiating or arranging or aiding the borrower or lender
in procuring or making such loans of $50,000 less, or in the business of buying, discounting or endorsing notes, or of furnishing, or procuring guarantee or security for compensation in amounts of S50,000 or less, shall be deemed be engaging the consumer loan business.
The defendant argued it was not a consumer loan business because it it did not charge an interest rate below the state’s 16% usury law limit. But the plaintiff countered that the defendant met the definition because it engaged in the buying, discounting, or endorsing notes. Other courts in New Jersey have ruled that debt collectors meet that part of the definition under the NJCFLA.
The defendant also tried to argue that it did not need a license when it sent the letter in 2018 because it was no longer purchasing debts. But the judge indicated that the license would have been required when the underlying debt was purchased.