Zuckerman Spaeder Obtains Dismissal of Two Federal Debt Collection Class Action Cases

In recent years, the consumer credit plaintiff's bar has sought to expand liability under the federal Fair Debt Collection Practices Act (FDCPA) by claiming that debt collectors violate the FDCPA when they attempt to collect defaulted debt that is "out of statue." Out of statue debts are unpaid loans that a debt collector may not be able to enforce in court because the legal claims against the debtor lie outside the applicable statue of limitations. Despite the age of the debt, many debt collectors request the payment of out of statute debt—an exercise not prohibited by the FDCPA—through varying means. Only a handful of trial court-level cases address the lawfulness of debt collectors' various efforts to obtain repayment of out of statute debt. These judicial decisions have been mixed, with some courts at least suggesting that it is unlawful to attempt to collect an out of statue debt even where no legal action is taken or threatened.

On behalf of their client The Credit Store, Inc., Zuckerman Spaeder attorney Graeme W. Bush recently obtained orders dismissing two putative class action complaints alleging such claims under the FDCPA. A prominent Chicago-based consumer credit attorney had filed two virtually identical complaints in the United States District Courts in Phoenix, Arizona and Tampa, Florida. In the complaints, both of which sought class certification, the plaintiff alleged that The Credit Store violated the FDCPA by sending collection mailers to debtors whose debts were allegedly out of statute. The mailers at issue, however, were completely devoid of any language that could be construed as a threat to commence legal action in the event that the debtor did not accept the terms of repayment. In both cases, the plaintiffs also alleged violations of applicable state consumer protection and debt collection statutes and claimed additionally that the Credit Store violated the FDCPA by failing to display certain disclosures required by the Act with sufficient prominence.

Zuckerman Spaeder responded first by moving to dismiss the complaints for failure to state a claim under the FDCPA and the state statutes. The Zuckerman attorneys then conserved a tremendous amount of client time and money by successfully moving to stay discovery while they briefed the issues asserted in their motions to dismiss. Indeed, had The Credit Store not prevailed on its motions to dismiss, it could have been facing years of expensive, distracting and time consuming discovery and litigation, not to mention extensive monetary damages.

In both the Arizona and Florida cases, the District Court has now dismissed all claims asserted in the putative class action complaints, before the briefing of whether a class should be certified. This result demonstrates the ability of Zuckerman Spaeder attorneys to litigate novel legal issues in all areas of law and to aggressively challenge procedural norms, such as allowing discovery to go forward during the pendency of a motion to dismiss. Both cases will certainly draw the attention of practitioners and commentators in the area of consumer credit law.