Judge Partially Grants MTD in FDCPA Case Over Lack of License

A District Court judge in New Jersey has granted a defendant’s motion to dismiss on one count it violated the Fair Debt Collection Practices Act, but otherwise denied the motion it violated the statute by placing a debt to be collected without having a proper license to do so.

A copy of the ruling in the class action case of Valentine v. Mullooly, Jeffrey, Rooney & Flynn can be accessed by clicking here.

The plaintiff incurred a credit card debt that was sold to another entity, Distressed Asset Portfolio III. The account was then placed with the defendant for collection. The defendant sent the plaintiff a letter, indicating that Distress Asset Portfolio III was the current creditor to whom the debt was owed, that Unifund CCR was the assignee for collection purposes, and that Capital One was the original creditor.

The plaintiff filed suit, accusing Distressed Asset Portfolio III of not having obtained a license to operate as a consumer lender or a sales finance company in New Jersey. The plaintiff claimed the letter violated Sections 1692e, 1693f, and 1692g, of the FDCPA by misrepresenting that the defendant had the right to collect payment.

To the defendant’s detriment, there was a case — filed by the same plaintiff — making the exact same allegations in which another District Court judge from New Jersey rejected the defendant’s arguments that it was subject to the licensing requirements of the New Jersey Consumer Finance Licensing Act.

In this case, the defendants attempted to make the same arguments as the other case, but were subjected to the same fate. The defendant attempted to argue that the debt was originated by a federally chartered bank, which would exempt the debt from state laws under the “valid when made” doctrine. But Judge William J. Martini of the District Court for the District of New Jersey disagreed.

“Considering the plain language of the amended regulations, along with the OCC and FDIC’s aims in issuing the clarifying regulations in the aftermath of Madden, the Court cannot find that the OCC and FDIC’s rules encompass state licensing requirements,” Judge Martini wrote.

The defense tried to introduce a state law ruling from New Jersey in which a state court Judge determined that a debt buyer was not required to obtain a license because it did not meet the definition of a “consumer lender.” But Judge Martini said he was “not persuaded” by the line of reasoning in that ruling.

Judge Martini did grant the motion to dismiss on the 1692g claim, saying that none of the conduct in question related to that portion of the statute.