District court says unlicensed debt collection agency violated FDCPA

Courts State Issues FDCPA Interest Debt Collection

On February 24, the U.S. District Court for the District of Utah issued an order granting in part and denying in part a Wisconsin debt collection agency’s (defendant) motion for judgment on the pleadings in a suit concerning alleged FDCPA and state law violations. In 2019, the plaintiffs filed a lawsuit against the defendant—who had purchased the plaintiffs’ debts from various lending agencies—for attempting to garnish their wages to satisfy default judgments. The plaintiffs contended that the defendant violated Section 1692e(5) of the FDCPA and the Utah Consumer Sales Practice Act (UCSPA) because it operated as a collection agency in the state without being registered according to the Utah Collection Agency Act (UCAA). The defendant argued, however, that “failing to comply with the UCAA’s registration provision would not make it illegal for it to file debt collection actions in Utah,” and that “even if it is illegal to file suit while unregistered, courts cannot transform a UCAA violation into a private right of action under the FDCPA.”

The court determined that the plaintiffs adequately pleaded an FDCPA claim against the defendant for false, deceptive, or misleading representations, stating that it is illegal for a collection agency to file a debt collection action in Utah if it is not registered with the state according to UCAA provisions. According to the court, violating the UCAA’s registration provision “may provide a basis for finding an FDCPA violation when accompanied by the filing of a lawsuit to collect debt.” However, the court ruled that the plaintiffs failed to show that the defendant engaged in “deceptive and unconscionable sales practices” under the UCSPA. According to the court, the plaintiffs were “improperly attempting to transform a violation of the UCAA into a private right of action under the UCSPA” since they failed to plead sufficient facts to show that the defendant “knowingly made misleading statements or intended to deceive [the plaintiffs] regarding its registration or bond status.”