Appeals Court Upholds Dismissal of FDCPA Case Over Interest Disclosure

The Court of Appeals for the Second Circuit has upheld a lower court’s dismissal of a Fair Debt Collection Practices Act case in which the plaintiff appealed because she filed an amended complaint while the motion to dismiss was still pending and the judge granted the defendant’s motion without considering the amended complaint.

A copy of the ruling in the case of Pettaway v. National Recovery Solutions, LLC, and US Asset Management Inc. can be accessed by clicking here.

The plaintiff co-signed for a student loan, when went into default and was charged off. The creditor placed the account with the defendant, and a letter was sent to the plaintiff. The letter, in part, said:

As of the date of this letter, you owe $26,610.58. Because of interest, late charges, and other charges that may vary from day to day, the amount due on the day you pay may be greater. Hence, if you pay the amount shown above, an adjustment may be necessary after we receive your check, in which event we will inform you before depositing the check for collection.

The letter included a “time sensitive” offer to pay a slightly reduced amount.

The plaintiff filed suit, alleging the letter violated the FDCPA because it was “materially false, deceptive, and misleading” because it suggested that late fees and other charges could accrue, even though they were not contractually allowed to.

The defendants filed a motion to dismiss. The plaintiff filed an amended complaint 21 days later, adding more allegations. The amended complaint was marked by a clerk as deficient and the plaintiff was notified she would have to re-file, but because the 21-day window had closed, she would require permission from the defendant or the judge. The defendant declined to allow the amended complaint to be re-filed, and before the judge could rule on the request, he granted the defendant’s motion to dismiss.

The Second Circuit noted that courts in its District have, when faced with an amended complaint, either deny a pending motion to dismiss as moot or consider the merits of the motion, analyzing the facts as alleged in the amended pleading. But it was not a hard and fast rule, until now.

“This is a sound approach that promotes judicial economy by obviating the need for multiple rounds of briefing addressing complaints that are legally insufficient,” the Appeals Court wrote. “We now adopt this rule and hold that when a plaintiff properly amends her complaint after a defendant has filed a motion to dismiss that is still pending, the district court has the option of either denying the pending motion as moot or evaluating the motion in light of the facts alleged in the amended complaint.”

As well, because the initial letter said that interest and late charges “may” be applied to the balance, that was sufficient to even a least sophisticated consumer that the letter was not inaccurate.

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