An Illinois Appellate Court has held that a collection agency had standing to sue a debtor in its own name under Illinois law but that the collection agency’s complaint was deficient because it failed to include documents evidencing the debt’s assignment as required by Illinois law. Unifund CCR Partners v. Shah, No. 1-10-0855, 2011 WL 477725 (Ill. App. Ct. Feb. 1, 2011).

In Unifund, a credit card issuer sold a delinquent credit card debt. The purchaser sold the debt to another third party who assigned a legal interest in the debt to another entity for purposes of collection while retaining an equitable interest in the debt. The legal interest was again assigned to another entity who sued the debtor to collect the outstanding balance. To support the chain of title, the collection agency attached to the complaint an employee’s affidavit explaining the series of transactions along with purported documents evidencing the sale and assignment of the debt. The debtor moved to dismiss, arguing that the materials purporting to establish the assignment of his debt were inadequate because crucial information regarding the account was scattered over multiple documents. The trial court denied the debtor’s motion to dismiss.

On appeal, the Court of Appeals analyzed whether the collection agency had standing to sue the debtor even though the debt was assigned to it for collection purposes only. The Court indicated that the Illinois Code of Civil Procedure appears to limit standing to a party who is an assignee and owner of a debt, but that the Illinois Collection Agency Act (CAA) explicitly permits a collection agency who is assigned a debt for collection purpose to bring suit in its own name. The Court concluded that the more specific CAA should control and held that the collection agency had standing to bring suit in its own name if it pleads and proves that it has legal title to the account receivable assigned to it for collection purposes only. The Court then analyzed whether the collection agency adequately plead that it was the assignee of the original creditor.

The court indicated that the CAA permits an assignment to be established by a written contract of assignment, which can be established through multiple documents that are incorporated by reference into the contract of assignment. The contract of assignment, however, must contain the information required by the CAA including the date of assignment, the consideration paid and the identifying information for the account. The Court held that the collection agency failed to adequately plead the assignment because the affidavit attached to the complaint was not permitted by the CAA and the other documents attached to the complaint did not adequately set forth the consideration paid nor identify the assigned account.

The Unifund case illustrates that courts may hold collection agency’s to a high standard when bringing suit on assigned debts by requiring affidavits that are supported by detailed documents evidencing the chain of title.

  • Margaret Stolar and Chuck Gall