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Financial Services Law Insights and Observations

California appellate court affirms arbitration denial

Courts Debt Collection Arbitration State Issues California Rosenthal Fair Debt Collection Practices Act Appellate


On November 8, the Sixth Appellate District Court in the Court of Appeal in California affirmed a lower court’s decision denying a defendant collection agency’s motion to compel arbitration in a California Rosenthal Fair Debt Collection Practices Act (RFDCPA) suit. According to the order, the defendant was hired to collect unpaid credit card debt from the plaintiff on behalf of a creditor. The plaintiff asserted that the defendant “engaged in a routine practice of sending initial communications that failed to provide notice as required by Civil Code section 1788.14, subdivision (d)(2), which governs attempts to collect ‘time-barred’ debts—those that are ‘past the date of obsolescence set forth in Section 605(a) of the federal Fair Credit Reporting Act.’” The defendant filed a motion to compel arbitration, submitting two cardholder agreements produced by the original creditor that did not reference the plaintiff’s name, account number, or the plaintiff’s signature. The plaintiff opposed the motion, arguing that the defendant failed to link the plaintiff to the “generic documents” and denied ever seeing or receiving the agreements before. The trial court ruled the documents were not admissible because there was no evidence that they were ever sent to the plaintiff. The trial court concluded that failing to show evidence of mutual assent, the defendant “could not show that the card agreements were enforceable binding arbitration agreements, and thus it denied the motion to compel arbitration.” The defendant appealed.

The appellate court noted that while the custodian of records for the original creditor declared that the agreements submitted by the defendant were linked to the plaintiff’s account, the custodian did not declare how or if the agreements were provided to the plaintiff for his review and acceptance. The appellate court further found that since the plaintiff declared that he never received the agreements, the burden to prove the existence of a valid arbitration agreement shifted back to the defendant.