Although The Langel Firm is a New York-based law firm, we report on collection misconduct cases all over the country because the Fair Debt Collection Practices Act ("FDCPA") is a federal law with import and application to debt collectors in every state.
In this blog entry, we report on an Illinois class action (Grant-Hall v. Cavalry Portfolio Services, LLC, 11 CV 1832, N.D., Illinois, 2012) that accuses debt-buyer, Cavalry Portfolio Services, LLC, of using its attorneys to improperly file thousands of collection lawsuits without proper assignment documentation in violation of § 8 of the Illinois Collection Agency Act.
A written assignment, the court held, must embody:
- the effective date of the assignment;
- the consideration (amount paid) for the assignment; and
- relevant identifying information for the account that is being assigned.
The court observed that the Illinois documentation requirement "addresses the real danger that debtors might be sued by a party who does not have a legal interest in their debt."
Unsurprisingly, Cavalry, like most other debt buyers, produced a "Bill of Sale" referencing other documents – yet NOT PRODUCING those documents.
Specifically, the court found, Cavalry's documents:
- failed to specify consideration (amount paid for the particular account); and
- failed to attach the documents referenced in the Bill of Sale: "Purchase Agreements," "Sale File," "Schedule I," and "Servicing and Management Agreement."
Cavalry, unsurprisingly, sought to bypass its obligation to produce the above-referenced documentation by submitting an "Affidavit," which was rejected as a substitute for the business records required under the law.
Cavalry further argued that the Illinois-assignment law violated the commerce clause due to its discriminatory impact against out-of-state businesses. The court rejected that argument finding that the law applies with "equal force" against in-state and out-of-state debt collectors. Furthermore, "congress has expressly authorized the States' continued regulation of debt collection agencies (citing 15 U.S.C. § 1692n ("[The FDCPA] does not annul, alter, or affect, or exempt any person...from complying with the laws of any State with respect to debt collection practices, except to the extent that those laws are inconsistent with any provision of [the FDCPA], and then only to the extent of the inconsistency. For purposes of this section, a State law is not inconsistent with [the FDCPA] if the protection such law affords any consumer is greater than the protection provided by [the FDCPA.].").
The court confirmed the sound holding that "the filing of a legally defective debt collection suit can violate § 1692e where the filing falsely implies that the debt collector has legal recourse to collect the debt." Debt buyers often argue that they are legally entitled to start collection cases without having all of the proof at the outset of the case. That seems to be generally true. But if they are put to the test in a subsequent fair debt case brought by the consumer, and cannot produce valid proof of ownership, then fairness and clear statutory interpretation should render them liable for giving a false impression as to the legal status of the debt, and threatening to take legal action that cannot legally be taken (See FDCPA § 1692e(5)).