Judge Denies MTD in FDCPA Suit Over Fraudulent Debt

A District Court judge in Washington has denied a defendant’s motion to dismiss claims it violated the Fair Debt Collection Practices Act after it was accused of continuing to demand payment and moving forward with a collection lawsuit even though it had been notified by the plaintiff’s attorney that the underlying debt in question was written using a dishonored check on an account that had been closed because of fraudulent activity.

A copy of the ruling in the case of Tinsley v. Fairway Collections can be accessed by clicking here.

The plaintiff was notified by her financial institution that someone had used stolen checks to make purchases on her account. The transactions were not honored, all the fees were refunded, and, at the plaintiff’s request, the account was closed. Three years later, the plaintiff was served with a collection lawsuit seeking to recover a debt that was incurred from one of the dishonored checks. The plaintiff hired an attorney, who contacted the defendant to provide details of the situation and written documentation of the fraudulent activity. The defendant allegedly continued to move forward with the lawsuit, at which point the plaintiff sued the defendant, alleging it violated Section 1692e and 1692f of the FDCPA.

The defendant argued in its motion that the plaintiff failed to state a claim because it was not alleged that the defendant filed its collection lawsuit in bad faith and that communications between a collector and a consumer’s attorney are not actionable under the FDCPA.

But the issue is that the claims made by the plaintiff relate to being sued for the unpaid debt and have nothing to do with the communications between the plaintiff’s attorney and the defendant, noted Judge John Coughenour of the District Court for the Western District of Washington.

The defendant also argued it had a good faith basis for filing the underlying collection lawsuit, but Judge Coughenor noted that the FDCPA is a strict liability statute, and while there is an exception for bona fide errors, that exception is an affirmative defense and a complaint can not be dismissed at this stage unless the complaint establishes the defense.

Judge Coughenor did strike a request from the plaintiff for injunctive relief to restrict the defendant from being able to collect debts in the manner described it the plaintiff’s complaint, ruling the plaintiff’s arguments to be conclusory.

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