Appeals Court Affirms Dismissal of FDCPA Over Issue with Collection Lawsuit, Lack of Title Chain

The Eighth Circuit Court of Appeals has upheld the dismissal of a pair of lawsuits filed against a collection law firm that accused it of violating the Fair Debt Collection Practices Act because it included “disbursements” in a statement of claim document when collection lawsuits were filed against the plaintiffs, and because the debt buyer that purchased the accounts did not have a full and complete chain of title when it placed the accounts for collection.

A copy of the ruling in the cases of Smith & Washington v. Stewart, Zlimen & Jungers can be accessed by clicking here.

The defendant filed collection lawsuits against both plaintiffs, seeking to collect on unpaid credit card debts on behalf of its client, LVNV Funding. In the Statement of Claim, the law firm said one plaintiff owed “$497.76 plus filing fee of $85.00, for a total of $582.76, plus disbursements” and the other owed “$1,455.44 plus filing fee of $85.00, for a total of $1,530.44, plus disbursements.” The plaintiffs contested the collection lawsuit and had the cases dismissed when the law firm could only produce a redacted printout and not the actual bills of sale between the original creditors and LVNV, thus not establishing a valid and complete chain of assignment.

The plaintiffs then turned around and sued the defendant, alleging violations of Section 1692e and 1692f of the FDCPA by seeking to recover disbursements when it was not entitled to do so and by bringing collection lawsuits without sufficient evidence to prove ownership of the debt.

A District Court judge dismissed the claims against the defendant, ruling that “the FDCPA ‘was not meant to convert every violation of a state
debt collection law into a federal violation.’ ” Regular readers will note that this flies in the face of a ruling that was issued recently in the same District Court that found a defective summons in a collection lawsuit did amount to a violation of the FDCPA.

But the Appeals Court sided with the District Court judge in this case, ruling that a “good faith legal position in its prayer for relief” by seeking disbursements did not amount to a violation of the FDCPA.

As for the claim related to lack of ownership, the one thing the plaintiffs forgot to do in their complaint was allege that the law firm attempted to collect debts that were not, in fact, owed. Instead, they only claimed that the law firm lacked sufficient evidence to demonstrate that LVNV had standing to sue. Because the plaintiffs did not allege that the law firm did anything other than try to bring a “good faith claim to collect the alleged debts,” it did not violate the FDCPA.

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