Sixth Circuit Overturns Lower Court’s Dismissal of FDCPA Suit Over Post-Judgment Interest Calculation

The Sixth Circuit Court of Appeals has overturned a lower court’s dismissal of a lawsuit that alleged a number of parties violated the Fair Debt Collection Practices Act by charging too much in post-judgment interest when attempting to recover unpaid debts.

A copy of the ruling in the case of VanderKodde, Buck, Robinson, Beckley, and Swagerty v. Elliott, Berndt & Associates, LVNV Funding, Midland Funding, Midland Credit Management, and Encore Capital Group can be accessed by clicking here.

The plaintiffs were each sued by the defendants for unpaid debts. In three of the cases, the judgments were awarded by default and in the other two, they were awarded by consent. The defendants then filed for writs of garnishment against the plaintiffs, and applied a post-judgment interest rate of 13% on the debt. The plaintiffs filed suit, alleging the defendants applied the wrong interest rate and thus, violated Sections 1692e and 1692f of the FDCPA by employing false, deceptive, or misleading practices in the collection of a debt.

The defendants filed — and were granted — motions to dismiss the plaintiffs’ lawsuit on the grounds of a lack of subject matter jurisdiction.

The plaintiffs appealed the ruling to the Sixth Circuit, which saw the case a different way than the lower court.

Discussing the applicability of the Rooker-Feldman doctrine, which holds that District Courts should essentially not become a court of appeals for state court decisions, the Appeals Court ruled that the doctrine only applies when a state court renders a judgment. A writ of garnishment, the Appeals Court said, is not a judgment. The lower court erred when it ruled the application of the 13% interest rate occurred in the underlying judgment and not in the writ of garnishment, the Sixth Circuit held.

“The problem with the district court’s reasoning is its focus on the likely source of defendants’ calculation error rather than the source of plaintiffs’ injury,” the Appeals Court wrote in reversing the lower court’s dismissal. “In their complaint, plaintiffs allege that defendants ‘willfully and intentionally collected and attempted to collect amounts that they are not entitled to collect,’ in violation of the FDCPA, by ‘calculating post-judgment interest [in the writs of garnishment] at a rate higher than’ Michigan law allows.”