Banking and Finance Law Daily Consumer can deny debt but claim debt collection act protections
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Monday, October 22, 2018

Consumer can deny debt but claim debt collection act protections

By Richard A. Roth, J.D.

An individual who denied having opened a credit card account nevertheless was a consumer who had rights under the Fair Debt Collection Practices Act, the U.S. Court of Appeals for the Seventh Circuit has decided. It is not necessary for an individual to admit that he owes a debt to be deemed a consumer (Loja v. Main Street Acquisition Corp., Oct. 18, 2018, Brennan, M.).

According to the individual, someone else fraudulently opened a credit card account using his name. Unsurprisingly, the bill was not paid, and the credit card company sold the charged-off account to Main Street Acquisition Corp. Main Street, in turn, hired a law firm to collect the unpaid account. The firm filed a small claims collection suit that claimed the individual owed the debt.

The consumer appeared in court and denied that he had opened the account or incurred the debt. After the judge ruled in favor of the individual (without explaining why), the individual filed a federal FDCPA suit against Main Street and its lawyers.

Suit dismissed. The U.S. district court judge dismissed the FDCPA suit because, in his opinion, an individual who denied owing an asserted debt was not a consumer under the FDCPA—an argument that neither Main Street nor the firm had raised. The judge also told the individual that it would be futile to amend his complaint unless he was prepared to admit that he owed the debt.

Debt need not be admitted. The appellate court disagreed. According to the appellate court, the FDCPA defines consumer as "any natural person obligated or allegedly obligated to pay any debt" (15 U.S.C. §1692a(3)). The Act does not limit "allegedly" to claims of the consumer, the court added. Allegations by the debt collector are included.

As a result, individuals who are alleged by debt collectors to owe debts are consumers, even if they deny having any connection to the debt or any obligation to pay it.

The consumer should have been allowed an opportunity to amend his complaint to remedy any other defects, the court added.

The case is No. 17-2477.

Attorneys: Mario Kris Kasalo (Law Office of M. Kris Kasalo, Ltd.) for Mario Loja. David M. Schultz (Hinshaw & Culbertson LLP) for Main Street Acquisition Corp. and Law Office of Keith S. Shindler, Ltd. d/b/a Shindler & Joyce.

Companies: Law Office of Keith S. Shindler, Ltd., d/b/a Shindler & Joyce; Main Street Acquisition Corp.

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