Part I: Federal appeals court weighs abusive debt collection case revival

The 9th U.S. Circuit Court of Appeals is weighing arguments it heard a few days ago about whether to revive a lawsuit over abusive debt collection. The suit raises the question of whether a debt collector can be held liable under the Fair Debt Collection Practices Act (FDCPA) for trying to collect a debt that was based on a factual error.

Consumer groups say a lower court’s dismissal of the case was a threat to consumers, while the debt collection lobby insists that a revival of the case could result in the creation of standards impossible for debt collectors to meet.

Birth of debt collection

The lawsuit was filed by a couple who had a child born in 2013 at a hospital near their home. They made a $400 co-pay at the time, with their insurer picking up the rest of the cost.

In 2014, the hospital erroneously assigned the couple’s account to a debt collector. But the collector did not contact the couple until 2016, when it demanded that the couple pay $7,000 to settle the account.

Though the couple disputed the debt in writing and by phone, the collector continued collection efforts for months, even threatening legal action before it finally admitted an error had been made.

Birth of a lawsuit

In September of that year, the couple sued the debt collector under the FDCPA, asking for an injunction to prevent the company from doing the same to other consumers.

In 2017, a U.S. District Court judge dismissed the case, ruling that the collection agency had proven that its collection actions had been a “bona fide error.” The 9th Circuit revived the case on appeal, saying it should be decided by a jury.

We will have more on this case in an upcoming post to our Minnesota Consumer Rights Blog. Please check back.