Judge Grants Motion to Set Aside Default Judgment in FDCPA, FCRA Case Over Complaint Sent to Empty Office

An interesting ruling out of South Dakota in which a District Court judge has agreed to set aside a default judgment that was obtained against a Buy Now, Pay Later service after it was sued for allegedly violating the Fair Debt Collection Practices Act and the Fair Credit Reporting Act because the company never received the summons or complaint because its office was largely unstaffed during the COVID-19 pandemic.

A copy of the ruling in the case of Steffen v. Uplift can be accessed by clicking here.

The plaintiff took out a BNPL loan from the defendant to pay for a flight from Rapid City, S.D. to Las Vegas, which was canceled. Because the plaintiff did not receive a refund for his flight, he was still bound to repay the loan on the terms that he agreed to. During a call with the defendant, the plaintiff acknowledged receiving a voucher from the airline.

After the defendant would not cancel the payments, the plaintiff started filing disputes with the credit reporting agencies, claiming he was the victim of identity theft. The defendant found no evidence of identity theft during its investigation (remember the voucher?). The plaintiff filed suit in state small claims court in South Dakota.

The defendant, which is based in California, was largely leaving its office unstaffed at the time as a result of the pandemic. It appears as though the summons and complaint were signed for by a receptionist working for the building in which the defendant had offices, but whom was not an employee of the defendant.

While it did not receive a copy of the summons and complaint, the defendant did receive a copy of the default judgment. It then removed the case to federal court and filed the motion to set aside the default judgment.

Even though the plaintiff informed the defendant he was planning to sue, that is not enough for the defendant to know that a suit had been filed, because “empty threats of lawsuits sadly are not uncommon in society,” wrote Judge Roberto A. Lange of the District Court for the District of South Dakota.

Even though the defendant had its website direct legal mail to an office that had been largely unstaffed for nearly three years, that was not enough for Judge Lange to consider the defendant’s actions to have been in bad faith, so he granted the motion to set aside the default judgment.

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