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Financial Services Law Insights and Observations

District Court grants motions to compel and dismiss in FDCPA, TCPA class action

Courts Class Action TCPA FDCPA Credit Cards Debt Collection Autodialer

Courts

On June 16, the U.S. District Court for the Southern District of California granted a Delaware-based debt collector’s (defendant) motions to dismiss with prejudice and compel arbitration in an FDCPA, TCPA class-action case, while denying as moot the defendant’s motion to strike or stay. The plaintiff’s unpaid credit card debt was sold to the defendant, who sought to collect the debt by calling the plaintiff’s cell phone two dozen times in a span of two weeks using an automated telephone dialing system. The plaintiff filed a lawsuit originally alleging TCPA violations. He later amended the complaint to include FDCPA violations after he claimed he never received notice as required by the FDCPA. Under the FDCPA, debt collectors are required to provide a consumer with written notice containing various required information within five days after the initial communication in connection with the collection of any debt, “unless the. . .information is contained in the initial communication or the consumer has paid the debt.” The defendant initially moved to dismiss, but after the plaintiff opposed, filed an instant motion to compel arbitration based on an arbitration provision contained in a set of terms and conditions in the plaintiff’s credit card agreement with the original creditor. The plaintiff countered, among other things, that the debt collector cannot enforce the arbitration provision because the plaintiff never signed it, and further argued that the card agreement is unconscionable.

The court disagreed, ruling that the defendant did not waive its right to arbitrate the plaintiff’s claims, pointing out that the arbitration provision between the plaintiff and the defendant is part of the card agreement, which the plaintiff accepted once he began using the credit card. According to the court, the arbitration provision “states that it covers ‘any claim, dispute or controversy between you and us arising out of or related to your [a]ccount, a previous related [a]ccount, or our relationship,’ including but not limited to those ‘based on. . .statutory or regulatory provisions, or any other sources of law.’” According to the court, the plaintiff’s dispute with the defendant relates to violations of the TCPA and FDCPA and exists between the plaintiff and the original creditor’s assignee (the defendant). Thus, because the claims relate to a creditor-debtor relationship arising out of the card agreement, the court determined that the arbitration provision “constitutes a valid agreement to arbitrate” and was unpersuaded by the plaintiff’s arguments that the arbitration provision is unconscionable. With respect to the plaintiff’s TCPA claims, the court found that it “disregards as unreasonable and implausible Plaintiff’s allegation that any calls he received related to amounts unpaid arising out of his [credit card] were unlawful in light of the [c]ard [a]greement,” which expressly authorizes the original creditor or its assignees to call the plaintiff once the plaintiff accepted the card agreement. The court found that as the plaintiff did not plead sufficient facts to show that the calls were inconsistent with the FDCPA, the defendant had every right to call him.

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