Judge Grants MTD on FDCPA Claims in Class-Action, But Denies RICO Claim

A District Court judge in Virginia has granted motions to dismiss on claims that defendants in a class-action lawsuit violated the Fair Debt Collection Practices Act, but denied a motion to dismiss that the defendants — a group of debt buyers — and the debt collectors it used to collect on the debts in question formed a RICO enterprise whose purpose was to allegedly collect unlawful debts.

A copy of the ruling in the case of Mao v. Global Trust Management et al can be accessed by clicking here.

The plaintiffs took out online payday loans from a lender and defaulted on those loans. The loans in question were allegedly part of a tribal lending scheme in which the lender partners with a Native American tribe in an effort to skirt state usury laws. In some cases, the plaintiffs had loans with interest rates as high as 700%.

The defendants purchased the defaulted loans and assigned them to a group of debt collectors for collection. The collectors were accused of contacting the families of the plaintiffs, of alleging that the plaintiffs were violating the law by not making payments on their debts, and of failing to provide proper documentation about the debts and refusing to reveal their identities, according to the complaint. In some of the cases, plaintiffs made payments to the collectors.

The plaintiffs filed suit, alleging the defendants, through the actions of the collectors, violated the FDCPA and the Racketeer Influenced and Corrupt Organization (RICO) Act by engaging in an illegal enterprise.

On the FDCPA counts, Judge Roderick C. Young of the District Court for the Eastern District of Virginia, granted the defendants’ motion to dismiss, ruling that he could not infer that the loans were unlawful under state law, and that the defendants could not be held vicariously liable for the actions of the collectors. Although Judge Young did dismiss the counts without prejudice, allowing the plaintiffs to file an amended complaint to cure any deficiencies.

Judge Young did deny the motion to dismiss the count that the defendants violated the RICO Act, ruling that the plaintiffs adequately alleged the existence of a RICO enterprise.

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