District court grants debt collector’s arbitration request

Courts Arbitration FDCPA Debt Collection

On May 11, the U.S. District Court for the District of New Jersey granted a debt collector’s renewed motion to compel arbitration, concluding that the previously-ordered discovery demonstrated that the plaintiff’s FDCPA claim fell within the bounds of the arbitration clause in the underlying credit card agreement. As previously covered by InfoBytes, the plaintiffs filed a proposed class action alleging that the debt collection company’s collection letters violated the FDCPA because they did not “properly identify the name of the current creditor to whom the debt is owed.” The debt collectors filed an initial motion to compel arbitration, arguing that the debts described in the plaintiffs’ amended complaint arose pursuant to credit card agreements that include an arbitration clause. In February 2019, the court denied the motion concluding that discovery was needed in order to determine whether an arbitration clause applied to the plaintiffs’ claims regarding FDCPA violations. After the parties engaged in discovery, the plaintiff argued that only the card issuer has a right to compel arbitration under the agreement. The court rejected this argument, concluding that the collection agency was an agent of the creditor and as an agent, the collector may enforce the arbitration agreement. Moreover, the court determined that the debt collection letter relates to the consumer’s credit account as the debt is a result of the credit card use and the FDCPA claim “is statuary, as explicitly provided for in the card agreement.”