Hiding Behind Regional FDCPA NSF
Rules
(FDCPA: Does it have anything to do with checks?)
As many of you who've been keeping your finger on the pulse of the
financial services industry know, there is some debate about the Fair
Debt Collection Practices Act (FDCPA) and whether or not it applies
to the collection of checks returned NSF. The main debate is whether
or not a check is an extension of credit.
Since May of last year, there have been 10 major cases which
address this issue. In all but three, it was found that FDCPA does
not apply to NSF checks because checks are not an extension of
credit.
The dominant cases in this arena are Zimmerman v HBO Affiliate
Group and Bass v Stopler, Koritzinsky, et al.
In the Zimmerman case (1987), the judge ruled that the "FDCPA does
not pertain to this action because acceptance of a check in payment
for consumer goods does not constitute the extension of credit
contemplated by the FDCPA."
In the Koritzinsky case (1996), a Wisconsin judge found NSF checks
to be "an extension of credit and qualify as debt collection of which
is governed by the FDCPA."
A variety of cases have followed both these decisions. Below are
some highlights:
Charles v CheckRite, LTD
In May of 1996, an Arizona Federal judge dismissed an FDCPA action
against a debt collector citing Zimmerman and stating that the
collection efforts aimed at recovering NSF checks are not governed by
the FDCPA and are not debts.
Cedarstand v Landerg
In June, 1996 a Minnesota case also cited Zimmerman and found that
the plaintiff failed to allege that the defendant's collection
efforts were an attempt to collect a debt and failed to prove that
the check was for personal or household purposes, as is contained in
the definition of "debt."
Draper v CRA Security Systems
An Arizona judge dismissed a compliant in an FDCPA case, citing
Zimmerman.
Sarver v
Capital Recovery Associates, Inc.
In Pennsylvania in November, 1996 Zimmerman was again cited and it
was found that the payee had not extended an opportunity to defer
payment on the check and therefore the argument that the check was an
extension of credit was not supported.
Ganske v CheckRite, Ltd.
In January of this year, a Wisconsin judge found more persuasive
and controlling the line of cases that conclude that an NSF check is
a debt within the meaning of the FDCPA, similar to Kloritzinsky.
Quaderer v Landberg, Duffy v Landberg, & Hacken v Landberg
Also in January, Zimmerman was cited and it was ruled that FDCPA
does not apply because the collection activity of NSF checks did not
arise from a transaction involving an offer or extension of credit to
a consumer.
Snow v Riddle, Dean v Riddle
Most interesting, are two cases within weeks of each other with
the same defendant yet with different outcomes. In Utah, in Snow v
Jesse L. Riddle, Zimmerman was cited and it was ruled that an NSF
check is not a FDCPA covered debt. In Louisiana, in Dean v Jesse L.
Riddle, the judge ignored the cases citing Zimmerman and based the
decision on the Louisiana law that defines "transaction."
What does all this prove? Well, it seems the jury is still out
when it comes to FDCPA and NSF checks, but with these many differing
views of the issue, it is highly likely that the matter will need to
be decided by the Supreme Court in the near future. In the meantime,
we will continue to see hyper-technical lawsuits by debtor attorneys
attempting to get their clients out of having to pay by alleging
improper "credit" collection practices when their clients are simply
looking for ways to get out of paying for the goods or services
received.
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