Before diving into the details, I originally decided to write about this ruling because I thought it would be helpful to detail the lengths to which the scammer went in this situation and how it’s not always the uneducated or unsophisticated who get taken advantage of. But on top of that, there is a Fair Debt Collection Practices Act angle to the case, too. A District Court judge in Pennsylvania has denied a credit union’s motion to dismiss a claim that it violated the FDCPA after the plaintiff was scammed out of nearly $5,000, ruling that the credit union could potentially be liable under the FDCPA because of its role in attempting to collect on a fraudulent debt.
The background: The case was filed after the plaintiff, a long-standing customer of the defendant credit union, became the victim of an elaborate scam. On March 24, 2024, the plaintiff received a text message appearing to be from the credit union, inquiring about a suspicious Zelle transfer. Shortly thereafter, she received a call from someone posing as a representative of the credit union, who had seemingly accessed her account information. The scammer, referred to in the case as “John Doe,” claimed to be investigating a fraudulent loan taken out in the plaintiff’s name.
- Under the scammer’s direction, the plaintiff logged into her mobile banking application using a password provided by the scammer, which had supposedly been changed for security purposes. The plaintiff was then instructed to transfer the loan proceeds, totaling nearly $5,000, to a Chime card via Apple Pay to “resolve the fraud.” The scammer assured the plaintiff that this step was necessary to confirm the fraudulent nature of the loan.
- After following the scammer’s instructions, the plaintiff contacted the credit union directly, only to learn that no representative had contacted her and that she had, in fact, been scammed. Despite being alerted to the fraud, the credit union failed to stop the transfer of funds, and it later denied the plaintiff’s fraud claim, instead holding her liable for repayment of the loan.
The ruling: The plaintiff filed a lawsuit seeking a declaration that the fraudulent loan was invalid and that she was not responsible for repaying it. Among her claims, she alleged that the credit union had violated the FDCPA by attempting to collect on the fraudulent debt. The defendant moved to dismiss the claim, arguing that, as a creditor collecting in its own name, it was not subject to the FDCPA.
- However, Judge Michael M. Baylson of the District Court for the Eastern District of Pennsylvania denied the motion to dismiss this claim, ruling that the plaintiff had plausibly alleged that the credit union could be treated as a debt collector under the FDCPA due to its actions. Specifically, the plaintiff alleged that the credit union used a subsidiary to withdraw a payment from her account, which could be interpreted as attempting to collect the debt under another name. This, according to the judge, was sufficient to push the claim “across the line from conceivable to plausible” under the FDCPA.
- In addition to the FDCPA claim, the plaintiff also brought claims for declaratory judgment, breach of contract, negligence, fraud, aiding and abetting fraud, and violation of the Truth in Lending Act (TILA). The judge denied the motion to dismiss the claims for declaratory judgment, breach of contract, negligence, aiding and abetting fraud, TILA, and the FDCPA. However, the motion to dismiss the fraud claim was granted, as the plaintiff failed to plausibly allege that the scammer was acting as an agent of the credit union.
