Banking and Finance Law Daily FDCPA claim fails for lack of evidence that debt was consumer debt
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Monday, August 12, 2019

FDCPA claim fails for lack of evidence that debt was consumer debt

By Nicole D. Prysby, J.D.

Although a consumer was not prohibited from bringing an FDCPA claim where the underlying debt was not his, he failed to demonstrate that the debt in question was a consumer debt covered by FDCPA protections.

A consumer’s Fair Debt Collection Practices Act (FDCPA) claim brought with respect to an underlying debt that was not his has failed, because he did not demonstrate that the debt was for personal, family, or household purposes, held the U.S. Court of Appeals for the Seventh Circuit. While a plaintiff maintaining that an underlying debt was not his can claim FDCPA protection, he must still present evidence that the debt was consumer debt (Burton v. Kohn Law Firm, S.C., August 9, 2019, Ripple, K.).

Alleged FDCPA violation. The Kohn Law Firm, acting on behalf of Unifund, CCR, LLC, a debt collection agency, brought a lawsuit against the consumer in Wisconsin state court, claiming that the consumer failed to make payments on his Citibank account. The consumer testified that the debt was not his. While the state action was pending, the consumer sued in federal court, claiming that "to the extent" he entered into a credit agreement with Citibank, it was entered into for personal, family, or household purposes, and that by failing to provide written notice of his right to cure the default on the Citibank agreement before bringing the state court action, Kohn had violated the FDCPA, 15 U.S.C. §§ 1692d and 1692e, as well Wisconsin state law. Essentially, the consumer continued to maintain that he did not know anything about the debt, but also argued that it was a consumer debt and that the defendants had violated the FDCPA. The district court concluded that the consumer failed to show it was a consumer debt.

Failed to show existence of "consumer debt." The Seventh Circuit agreed that the consumer failed to demonstrate that the Citibank debt was a consumer debt. The FDCPA and the Wisconsin Consumer Act (WCA) contain similar provisions, under which a plaintiff must demonstrate that the debt in question was incurred for personal, family, or household purposes. While a plaintiff maintaining that the underlying debt was not his can claim FDCPA protection, he must still present evidence that the debt was incurred for personal, family, or household purposes.

The consumer presented several pieces of evidence purporting to show that the debt was consumer debt, all of which the court found insufficient. The consumer presented statements he had made that to the extent he was liable for the debt, it was a consumer debt. His statements do not suffice to show the nature of the debt because in the state court action, he represented that he had no knowledge of the debt. The consumer asserted that Kohn and Unifund treated the debt as consumer debt by including FDCPA disclaimers. However, merely including FDCPA disclaimers on debt collection letters is insufficient evidence of a consumer debt; the debt collectors may merely be exercising caution to avoid any FDCPA liability.

Evidence that the consumer was sued in his personal capacity and that Kohn sent communications to his home address did not prove the debt was a consumer debt, because an individual can be sued in a personal capacity for a business debt and can carry on business activities from his residence. Evidence that Kohn and Unifund advertised their services collecting consumer debt on their websites did not establish that the debt they attempted to collect in this case was a consumer debt.

An email from a Citibank employee stating that the account was a consumer account was heresay, and does not fit under the exclusion for statements offered against an opposing party made by a person authorized to made a statement on the subject. Citibank is not a party to the lawsuit, and a Citibank employee’s statement cannot be attributed to Kohn or Unifund. The email also did not fit under the catch-all exception to the hearsay rule, as it did not have any of the usual circumstantial guarantees of trustworthiness (e.g., it was not made under oath), the consumer did not offer the email as evidence of a material fact, and whether the account was a consumer account did not provide a factual dispute that the debt itself was a consumer debt. The consumer could have obtained a sworn deposition or in-court testimony from Citibank, but did not do so. There also was no demonstration that admitting the email would serve the purposes of justice.

Finally, evidence of the billing statements for the account did not show it was a consumer debt. The purchases were mostly for low dollar amounts, at gas stations, convenience stores and other local businesses. The court concluded that there was insufficient information for a trier of fact to conclude the purchases were made for a personal, family, or household purpose.

The case number is No. 18-2059.

Attorneys: Briane F. Pagel (Lawton & Cates SC) for John H. Burton. Paul R. Erickson (Gutglass, Erickson, Bonville & Larson, S.C.) for Kohn Law Firm, S.C. David Anthony Ambrosh (Kohn Law Firm S.C.) for Unifund CCR Partners, Inc.

Companies: Kohn Law Firm, S.C.; Unifund CCR Partners, Inc

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