Many original creditors write off bad debts and sell them to third party debt collectors who use aggressive, and sometimes unlawful, practices to collect those debts in violation of the Fair Debt Collection Practices Act (FDCPA).
Sometimes, however, third-party debt buyers are legally intertwined so it's hard to discern who the players are. In many cases, innocent debtors often cannot tell to whom they should write their check – or if they even owe the debt at all.
LVNV Funding LLC, Alegis Group LLC, Resurgent LP, Resurgent LLC – Who's Who?
In the case of Giselle vs. Resurgent, all of the above companies, and several law firms, were involved in collecting an old debt from Giselle Fritz for $2,678. The original creditor wrote it off as a bad debt and LVNV Funding LLC (LVNV), a third party debt collector, allegedly purchased her debt.
Here's where it gets a bit confusing. LVNV
outsources its collection practices to
Resurgent Capital Services LP (Resurgent LP), Resurgent Capital Services LLC (Resurgent LLC) and the latter two's general partner, Alegis Group, LLC (Alegis).
Resurgent LP sued Fritz for the debt and an additional $160 in court costs. Fritz claims, among other things, that the defendants violated the FDCPA by 1) misrepresenting the claim by failing to name LVNV as the owner of the debt (instead showing Resurgent as the owner) and 2) including court costs in the amount of her debt reported to credit reporting agencies.
Here's how the court responded:
Misrepresentation. In order to violate the FDCPA, a debt collector must make "material representations" about the debtor's identity. The court agreed that in Fritz's case, debt collectors
did materially misrepresent their identities – especially by failing to name LVNV as the debt's true owner. It reasoned:
The entity to which a debtor owes money potentially affects the debtor in the most basic ways, such as what the debtor should write after "pay to the order of" on the payment check to ensure that the debt is satisfied.
Misrepresentation is a big issue in debt-buyer cases because of all the players involved. In fact, the FDCPA specifically requires that all communication to debtors must contain "the name of the creditor to whom the debt is owed." Unfortunately, debt-buyers simply want their money, they want it
now and they usually aren't incentivized to feel a responsibility to dot all the i's and cross all the t's on behalf of the consumer.
Court costs. New York law is clear;
a party is not liable for court costs unless and until there is a judgment in favor of the opposing party. N.Y.C.P.L.R. §8101. Sadly, this is also a huge issue in New York and many don't realize it until they've already paid.
Fritz was successful in both of the issues above. Yet, she had one more allegation up her sleeve...
NYGL §349: What Is It & How Does It Work?
NYGL §349 prohibits all deceptive acts or practices in the conduct of any business, trade or commerce or in the furnishing of any service in New York. It is basically another remedy for damages. Fritz claimed that the debt collectors in her case did just that. However, in order to succeed, the court stated that she must prove these three things, that the:
- act or practice was consumer-oriented, meaning that the defendant's acts or practices in this situation have a broader impact on consumers at large;
- act or practice was misleading in a material respect; and
- plaintiff was injured as a result.
In this case, the court ruled that although Fritz was a particular victim of the defendants' debt-collection practices, the claim is not unique to them. The court concluded that the practices involve "hundreds of thousands of dollars in consumer debt" and have a "broad impact on the public at large."
So, this case is another in New York (2nd federal circuit) where the deceptive-acts-and-practices statute of NYGBL § 349 has been applied to debt-buyer litigation.
Fritz v. Resurgent Capital Services, LP, LVNV Funding, et al, 955 F.Supp.2d 163.