The U.S. Court of Appeals for the Seventh Circuit has ruled that debt collectors do not violate the deceptive threat provision of the Fair Debt Collection Practices Act (FDCPA) for filing a lawsuit against a debtor without the intention to go to trial.
In St. John v. Cavalry Portfolio Services, three consumers filed suit against their respective collection agencies, alleging that the agencies sued them to settle debts but never intended to proceed to trial and therefore violated the FDCPA’s provision against debt collectors using any false, deceptive or misleading representation threatening to take action they do not intend to take during the collection of a debt. The consumers said the proof of this violation was that the debt collectors later moved for voluntary dismissal of each suit.
The Seventh Circuit said that filing and then dismissing a lawsuit is not “trickery,” but is instead a process where recovery of a debt may be achieved at different stages, of which trial may not be the most cost-effective or desirable. “There are many reasons why a litigant may eventually want to dismiss its own case,” the Court noted. “That it ultimately seeks to do so does not provide an adequate basis to broadly discern its original intentions at the time of filing, much less to specifically infer that it did not intend to prove its case at trial.”
In addition, the Court said that since the plaintiffs never claimed that the debt collectors stated their intention to go to trial, their claim was not viable. Since the consumers owed the debts over which the suits were filed, there was no indication the suits were not filed in good faith.
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