A federal district court in Oklahoma recently dismissed a putative class action asserting that defendants’ credit card debt collection activities violated the Fair Debt Collection Practices Act (“FDCPA”). The case, Walkabout v. Midland Funding LLC, Case No. CIV-14-939-M (W.D. Okla. Mar. 22, 2016), after addressing a threshold statute of limitations question under the FDCPA, focused on two primary issues impacting debt collector’s activities following the original creditor’s charge-off of the account. First, the Court examined whether the plaintiffs pleaded sufficient facts to establish that the original creditor waived its right to charge interest and late charges after charging-off the debt. Second, the Court examined whether there could be an FDCPA violation where the debt collector exercised its right to charge the statutory rate of interest post charge-off. This decision could impact both debt collectors and creditors selling debts to debt collectors (as it could affect the marketability of charged off accounts).
Walkabout concerned a credit card account opened with HSBC Bank Nevada, N.A. (“HSBC”) in 2007, and which was later charged off by HSBC in 2010 with a balance of $2,311. After the debt was acquired by Midland Funding LLC and Midland Credit Management, Inc. (“Midland”), Midland began adding interest to the debt despite the fact that HSBC, according to plaintiff’s allegations, had ceased furnishing monthly statements and stopped adding interest and other charges after the account was charged off.
Plaintiff argued that HSBC had waived its right to charge interest post charge-off, and that Midland’s practice of adding interest after it acquired the account, and reporting the new increased balances to credit reporting agencies, violated the FDCPA. Midland relied on two recent cases dismissing FDCPA claims to argue that the mere fact that an original creditor ceased to send statements or charge interest post charge-off is insufficient to infer waiver by the original creditor. Bunce v. Portfolio Recovery Assocs., 2014 WL 5849252 (D. Kan. Nov. 12, 2014; Willingham v. Midland Funding, LLC, Case No. CIV-13-748-D (W.D. Okla. July 6, 2015). The court disagreed, relying on Terech v. First Resolution Mgmt. Corp., 854 F.Supp.2d 537 (N.D. Ill. 2012), to point to additional allegations in plaintiff’s case beyond those alleged in Bunce and Willingham, which the court held were enough to survive a motion to dismiss. For example, the plaintiff alleged...
