New York City Debt Collection Defense Attorney

Class action against LVNV Funding, Resurgent, and Mel S. Harris Survives Dismissal Motion

In Fritz v. Resurgent Capital Services, LP,[1] the plaintiffs in a class action assert claims against Resurgent Capital Services, LP, LVNV Funding, and Mel Harris, et al. for alleged violations of the Fair Debt Collection Practices Act ("FDCPA") and New York General Business Law § 349 ("Deceptive Acts and Practices").

The main factual allegations include:

  1. Misrepresenting Resurgent Capital as "purchaser and assignee" of the debts when in fact different party, LVNV Funding, LLC, were assigned the debts;
  2. Falsely alleging that Resurgent possessed LVNV's debt collector license number; and
  3. Unlawfully shifting the costs of its collection actions to consumers before those costs were reduced to judgment.

Generally, the FDCPA prohibits the use of "any false deceptive or misleading representation or means in connection with the collection of any debt."

The defendants did not dispute that the representations were false. Instead they argued that 1) the FDCPA does not apply to litigation activity; and that 2) the misrepresentations were not material.

First, the court rejected the defendants' "litigation activity" exclusion argument, citing Supreme Court precedent, Heintz v. Jenkins (1995), and its legal progeny. Collection lawyers and litigation acts are not immune from the reach of the FDCPA.

Misrepresenting to whom the debt is owed is certainly material, held Judge Irizarry. That argument simply lacks merit. Also lacking merit was Defendants' contention that Resurgent's misrepresentation as to its possession of a debt collector's license was immaterial. Defendants did not dispute that Resurgent was required to have a license before taking any action to collect debts in New York City, but in essence, they argued that such lack of licensure was inconsequential when considering the purpose of the FDCPA ("materiality").

The false misrepresentation that Resurgent held a debt-collection license could easily have led an unsophisticated consumer to forgo a valid defense, the court held.

Next we see this issue of charging consumer defendants with court costs without authority from a judgment. I personally see this as a common practice amongst some collection lawyers. In this case, Resurgent actually included court costs in the amounts it alleged as due in plaintiffs' credit reports. Not only is this practice unlawful because it seeks to collect amounts not actually due, but it also runs afoul of the FDCPA rule disallowing false information from being reported to the credit bureaus.

Plaintiffs' NYGBL § 349 claim survives dismissal motion

To state a claim under New York General Business Law §349, the plaintiff must allege:

  1. The act or practice was consumer-oriented;
  2. The act or practice was misleading in a material respect; and
  3. The plaintiff was injured as a result.

The defendants argue that plaintiffs have not adequately alleged any of the three elements.

To establish a consumer-oriented practice, plaintiffs must establish that defendants' "acts or practices have a broader impact on consumers at large, whereas private contract disputes unique to parties do not fall within the ambit of the statute."

The court found that defendants' grievances were not unique to them, and involved debt collection practices aimed at the public at large.

Plaintiff must further allege that certain representations or omissions are "likely to mislead a reasonable consumer acting reasonably under the circumstances." This standard is more stringent than the "least sophisticated consumer" standard under the FDCPA, but similar to the FDCPA, the GBL does not require that plaintiffs actually rely on the deception. Here, the court found, a reasonable consumer would likely be mislead under the circumstances.

The court was convinced that "time spent" defending "meritless collection lawsuits" satisfied plaintiffs' claim of actual injury needed under NYGBL.

[1] 2013 WL 3821479, U.S. District Court, E.D. New York