Consumer Finance Litigation

In Grubb v. Portfolio Recovery Associates, LLC, No. 2:12-cv-301 (E.D. Tenn. July 10, 2013), the U.S. District Court for the Eastern District of Tennessee recently dismissed a Fair Debt Collection Practices Act ("FDCPA") claim against defendants for filing a false affidavit in a state collection lawsuit because the affidavit at issue clearly stated that it was only based on business records of the defendant. Furthermore, the court dismissed an additional FDCPA claim, which alleged that defendants sought an unauthorized rate of interest and attorneys' fees in their state court collection lawsuit because the plaintiff failed to allege facts to overcome the plain language of the civil warrant and the affidavit. In Grubb, the plaintiff's complaint alleged the defendants violated the FDCPA in three primary ways. First, the plaintiff alleged the defendants violated the FDCPA by making a business decision to file a state court collection lawsuit without evidence, or intention to obtain evidence, that would establish the validity of the debt. Second, the plaintiff alleged the defendants filed a false, deceptive, and misleading civil warrant and affidavit by seeking an amount exceeding the contract rate of interest and attorney's fees unauthorized by the contract or statute. Third, the plaintiff alleged defendants executed and filed a false affidavit. The court allowed the plaintiff's first claim to survive. The defendants' motion to dismiss argued the plaintiff's first claim was due to be dismissed because "the failure to provide adequate evidence to prevail in a state court lawsuit, by itself, does not constitute a valid FDCPA claim." The Tennessee federal court agreed, citing Harvey v. Great Seneca Financial Corp., 453 F.3d 324, 331 (6th Cir. 2006), which stated that the "mere inability to prove the debt at the time of the filing of the collection lawsuit does not constitute a violation of the FDCPA." The Grubb court, however, denied the motion to dismiss on this ground finding the defendants, and Harvey, failed to address the more specific claim that defendants made an intentional business decision to never obtain the evidence necessary to prevail in the state court collection lawsuit. The court dismissed the rest of plaintiff's claims. The court found the defendants' civil warrant did not seek a contract rate of interest, but only sought prejudgment and post judgment interest. Furthermore, the court found defendants' affidavit made no mention of interest at all. Likewise, the court found neither the civil warrant nor the affidavit made any claim for attorney's fees. Absent references to improper interest or attorney's fees in the civil warrant or the affidavit, the court found the plaintiff failed to allege any facts to state a plausible claim for relief. Similarly, the court found that a review of the defendants' affidavit clearly showed that the affiant did not falsely swear to personal knowledge of the plaintiff's debt, but rather that the affidavit stated that it was based on the affiants knowledge of business records. The court noted that the Sixth Circuit has "clearly held that an affidavit based on business records is not false or deceptive for FDCPA purposes." Therefore, the court found the plaintiff's allegations were conclusory and due to be dismissed. For more information on consumer finance litigation topics, please contact one of the Burr & Forman team members for assistance. We are happy to answer any questions or concerns you may have.