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Financial Services Law Insights and Observations

FDCPA class action garnishments award overturned

Courts Appellate Sixth Circuit FDCPA Debt Collection Class Action Class Certification


On January 16, the U.S. Court of Appeals for the Sixth Circuit overturned a district court’s class action award to the plaintiffs in an FDCPA action. According to the opinion, the credit card company hired the defendant, a law firm, to collect an unpaid credit card debt from the plaintiff. The defendant filed suit against the plaintiff and secured a judgment against her. The defendant then filed several writ of garnishment requests attempting to satisfy the judgment and, in addition, seeking the costs of the current writ request. In later garnishment requests, the defendant also added the costs of prior failed garnishments. The plaintiff then filed a class action in district court against the defendant alleging the requests for writ of garnishment from the defendant contained false statements in violation of the FDCPA. The court found for the plaintiff and awarded class members a total of $3,662, and attorney’s fees of $186,680 and the defendant appealed.

After rejecting a jurisdictional argument by the defendant, the appellate court addressed whether the defendant’s writ of garnishment requests seeking all total costs to date, including the cost of the current garnishment,” were false, deceptive, or misleading. The appellate court concluded that it was reasonable to request the costs of the current garnishment request, as Michigan law at the time allowed creditors to include “the total amount of the post-judgment costs accrued to date” in their garnishment requests. Additionally, the opinion pointed to the recently revised Michigan rule that explicitly allows debt collectors to “include the costs associated with filing the current writ of garnishment” as clarification that the prior version of the rule was intended to cover current costs.

Regarding the costs of prior failed garnishment requests, the opinion stated that Michigan law did not allow a creditor to seek these costs and that including them was therefore a false representation under the FDCPA. The appellate court remanded the case, however, to provide the defendants an opportunity to prove the violation was a “bona fide” mistake of fact and that its procedure for preventing such mistakes were sufficient. In addition to vacating the award and attorney’s fees, and remanding the case, the court vacated the class certification order.

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