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Class Action Defense Cases-Jacobson v. Healthcare Financial: New York Federal Court Throws Out Class Action Under FDCPA (Fair Debt Collection Practices Act) And Awards Defense Attorney Fees

New York Federal Court Converts Defense Motion to Dismiss FDCPA Class Action to Motion for Summary Judgment, Grants Motion, and Awards Defense Attorney Fees and Costs Because Lawsuit was Filed for Purpose of Harassment

After debt collector sent plaintiff a letter demanding payment of a $492 debt, plaintiff filed a putative class action alleging that the letter violated the federal Fair Debt Collection Practices Act (FDCPA) because it (1) demanded payment within 30 days and (2) that the letter’s request for “payment or notice of dispute” within 30 days “might” be interpreted as giving the debtor 30 days from the date of the letter rather than from its receipt. Jacobson v. Healthcare Fin. Servs, Inc., 434 F.Supp.2d 133, 139 (E.D.N.Y. 2006). The defense was not amused; and judging from the ruling, neither was the federal court.

The federal court discussed the fact that FDCPA claims are subject to abuse:

It is interesting to contemplate the genesis of these suits. The hypothetical Mr. Least Sophisticated Consumer (“LSC”) makes a $400 purchase. His debt remains unpaid and undisputed. He eventually receives a collection letter requesting payment of the debt which he rightfully owes. Mr. LSC, upon receiving a debt collection letter that contains some minute variation from the statute’s requirements, immediately exclaims “This clearly runs afoul of the FDCPA!” and – rather than simply pay what he owes – repairs to his lawyer’s office to vindicate a perceived “wrong.” “[T]here comes a point where this Court should not be ignorant as judges of what we know as men.” Watts v. State of Ind., 338 U.S. 49, 52, 69 S.Ct. 1347, 1349, 93 L.Ed. 1801 (1949).

Jacobson, at 138-39. “The cottage industry that has emerged does not bring suits to remedy the ‘widespread and serious national problem’ of abuse that the Senate observed in adopting the legislation” but rather “the inescapable inference is that the judicially developed standards have enabled a class of professional plaintiffs.” Id., at 138.

Against that backdrop, the federal court considered the defense motion to dismiss, which the court converted into a motion for summary judgment. The district court granted the motion for summary judgment on the grounds that (1) a demand for immediate payment does not violate the FDCPA, and (2) the letter did not improperly shorten the statutory 30-day dispute period. Jacobson, at 141. The district court also granted the defense motion for an award of attorney fees and costs under 15 U.S.C. § 1692k(a)(3), holding that the lawsuit “constitutes per se harassment” and “is, in essence, a complaint against the creditor for the temerity of requesting that he pay what he owes.” Id.

Download PDF file of Jacobson v. Healthcare Financial Services