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COLLECTION ACTION MAY BE FILED WITHOUT IMMEDIATE MEANS OF PROVING DEBT

The United States District Court for the Eastern District of Michigan recently held that a debt purchaser did not violate the FDCPA by suing a debtor for an alleged debt without providing the underlying loan agreement or, in the alternative, a timely affidavit of account. Lipa v. Asset Acceptance, LLC, No. 07-12950, 2008 WL 2242619 (E.D. Mich. May 20, 2008).

In Lipa, a debt purchaser sued a debtor in Michigan state court to collect an unpaid credit card obligation. The debt purchaser did not file the underlying credit agreement with its state-court complaint, but rather submitted an affidavit of account certifying that the debtor owed a specified amount to the debt purchaser based upon business records received at the time of account purchase.

The debtor sued the debt purchaser claiming that it violated the FDCPA by allegedly filing a defective collection lawsuit in state court. The debtor alleged that the defendant violated Sections 1692d (prohibiting conduct the natural consequence of which is to harass, oppress or abuse any person in connection with the collection of the debt), 1692e(5) (prohibiting a debt collector from threatening to take any action that cannot legally be taken), 1692e(10) (prohibiting the use of any false representation or deceptive means to collect or attempt to collect any debt or to obtain information concerning a consumer) and 1692f (prohibiting an attempt to collect any amount unless such amount is expressly authorized by the agreement creating the debt or permitted by law). According to the debtor, the collection lawsuit was defective because the affidavit of account stated was stale and there was no other written proof of the debt attached to the state court pleadings. The debtor argued that the affidavit of account was stale because it was not executed within 10 days before the complaint was filed as purportedly required by Michigan law.

The debt purchaser filed a motion to dismiss arguing that Sixth Circuit precedent, as set forth in Harvey v. Great Seneca Fin. Corp., 453 F.3d 324 (6th Cir. 2006), was controlling. The court agreed. In Harvey, the Sixth Circuit held that a debt collector and its law firm did not violate Sections 1692d and 1692e(10) of the FDCPA by filing a collection action without the means of proving the debt collection claim at the time of filing. The Sixth Circuit indicated that Section 1692d of the FDCPA prohibits tactics intended to embarrass, upset or frighten a debtor and that are likely to cause the suffering and anguish that occur when a debt collector attempts to collect money that the debtor, through no fault of his own, does not have. According to the Sixth Circuit, the single filing of a debt collection lawsuit is not such a tactic and therefore does not violate Section 1692d. The Sixth Circuit also indicated that the defendants did not violate Section 1692e(10)’s prohibition against misrepresenting the legal character of the debts because they never implicitly represented that by filing the complaint that they had in hand the means to prove their claims. Furthermore, the Sixth Circuit indicated that a debt may be properly pursued in court even if the debt collector does not yet possess adequate proof of its claim. The court indicated that the debtor’s claims in the case before the court did not differ materially from those discussed in Harvey, which the Sixth Circuit made clear do not amount to violations of Sections 1692d and 1692e(10) of the FDCPA.

The court also indicated that the debtor did not state a claim under Sections 1692e(5) or 1692f of the FDCPA because the debtor did not (i) allege that the debt was time-barred, (ii) contest owing the debt or the amount claimed in his complaint or (iii) allege that the account affidavit was not based on adequate records. Moreover, the court indicated that the collection lawsuit was not fatally flawed under Michigan law because of the out-of-time affidavit. For these reasons, the court granted the debt buyer’s motion to dismiss the debtor’s claims.