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February 2017

Gordon & Rees New York Team Obtains Dismissal of Federal Consumer Claims

Gordon & Rees New York partner Peter G. Siachos and associate Eugene Roymisher obtained complete dismissal of a federal lawsuit against a client that manages and services domestic and international consumer debt portfolios for credit grantors and debt buyers. The U.S. District Court for Eastern District of New York found there were no plausible claims under the Fair Debt Collection Practices Act (FDCPA) and various consumer protection statutes regarding the client’s actions when the plaintiff attempted to dispute her account with the client.

The claims stemmed from the client’s interactions with a "debt counselor" the plaintiff hired to improve her credit and dispute loans. The debt counselor sent a limited power of attorney to the client, which allegedly authorized the debt counselor to dispute and resolve the outstanding account on behalf of the plaintiff. The debt counselor initiated a telephone call to the client to dispute the account on behalf of the plaintiff. The client allegedly refused to allow the debt counselor to verbally dispute the debt, and instead, stated that the plaintiff needed to contact another company that was handling the debt. The plaintiff claimed these acts, coupled with the reporting the debt to the credit reporting agencies after it was disputed, violated the FDCPA and various consumer protection statutes.  

The district court found that that these actions did not form a plausible basis for relief under the FDCPA.  The court found that the client’s reporting an outstanding debt to credit bureaus when the client received a dispute letter from the plaintiff did not violate the FDCPA.  Additionally, the court also found that the client’s refusal to report a “change in status of the debt” as “disputed” did not violate the FDCPA, as such actions were not “unfair or unconscionable,” and were not “materially false or misleading.”  Finally, the court found that because the debt counselor (and not the client) had initiated the phone call, the claims did not fall within the domain of the FDCPA. The lawsuit was dismissed with prejudice. 

The plaintiffs’ bar has sued the client in multiple jurisdictions on substantially similar grounds. The client was thrilled that Gordon & Rees has now defeated similar claims in two jurisdictions. 

Peter G. Siachos