Judge Rules that Government Debt is Covered by FDCPA, Forcing Collection Agency to Defend

A federal judge in Washington this week sided with a consumer plaintiff in denying a motion to dismiss an FDCPA class action case. The collection agency defendant argued that the debt did not fall under the FDCPA because it was incurred in a transaction required by law. The case also involves a claim concerning disclosure through a clear envelope window, a recent development that is sure to pop up more frequently.

The case, Dibb v. AllianceOne Receivables Management in the Western District of Washington, was brought by a consumer who bounced a check related to purchasing license plates and tags for an automobile.

Dibb moved to Washington in 2012 and registered her car. She paid the state $90.25 using a personal check. The following year, when she was attempting to renew the registration, she was informed that the first check had been returned and that the account was now with a debt collection agency. Dibb was told to contact the collection agency and settle the matter before moving forward with renewal.

She did just that the very same day and paid AllianceOne $98.77, which included an additional charge for allowed interest. But the collection agency informed her that she still owed it “considerable more money for legal fees and costs.”

AllianceOne filed a suit to recover the money it claimed it was owed, some $710 for legal fees and costs. The company subsequently filed a motion for summary judgment that included an attached Notice of Dishonor of Check that was previously sent to Dibb that read:

You are also CAUTIONED that law enforcement agencies may be provided with a copy of this notice of dishonor and the check drawn by you for the possibility of proceeding with criminal charges if you do not pay the amount of this check within thirty days after the date this letter is postmarked.

Dibb filed a class action suit shortly thereafter claiming violations of the FDCPA’s sections 1692e(4) and 1692e(7), both prohibiting collectors from making claims that a consumer could be arrested or charged with a crime as a penalty for non-payment.

The plaintiff also tacked on a § 1692f(8) claim because the Notice was sent in an envelope with a clear “glassine” window, through which Dibb’s account number was visible. This particular claim is one of the first following a Circuit Court ruling in late summer in Douglass v. Convergent Outsourcing.

AllianceOne filed a motion to dismiss the case, arguing that Dibb’s debt was not covered by the FDCPA since the underlying “transaction” (that of registering a vehicle) was required by state statute and that “failing to register a vehicle subjects the owner to fines and penalties,” similar to not paying taxes. The main reasoning was that the transaction was not consensual, as required under the FDCPA.

The Plaintiffs countered that that “they do not have to register their vehicles – they only must do so if they intend to drive their vehicles on public roads. Accordingly, they enter a consensual transaction and so any resulting debt (here due to the returned check) is covered under the FDCPA.”

U.S. District Judge Robert Bryan sided with the Plaintiffs ruling that they had stated a claim under the FDCPA and allowing the case to proceed.