Several websites that cover the ARM space reported about a decision last week out of Nevada, dealing with the issue of when a collection agency could charge interest on a debt.
Lawsuits are common in the collection industry. It is a rare collection agency that has never been sued. But sometimes these lawsuits border on ridiculous. Such was the case with Mercedes Urbina v. National Business Factors, Inc. of Nevada in the U.S. District Court for Nevada.
On April 22, 2019, the Magistrate Judge denied a motion for summary judgment for the plaintiff and granted a motion for summary judgment for the defendant. A motion for summary judgment is filed at the end of discovery in civil cases. It says, there are not issues for the jury (or judge) to decide at trial on the issue of liability and therefore one side should be granted a verdict without a trial.
National Business Factors defended this lawsuit on the bases of a “bona fide error.”
While the industry coverage has focused on the fact that National Business Factors won the case. But cases are driven by facts and this is one that should outrage people in the ARM industry and average citizens. The interest charged in this case was not hundreds of thousands of dollars. It was not tens of thousands or even thousands.
The interest charged in this case was $29.07.
National Business Factors was sued in Federal Court in a case that came down to a charge of $29.07. The company had to defend itself. The company (or its insurance carrier) had to pay tens of thousands of dollars in legal fees. The company had to tolerate disruptions of its business as it had to prepare for the litigation and go through discovery.
Normally, a $30 claim isn’t even going to end up in small claims court. But the plaintiffs sued under the Fair Debt Collection Practices Act, which allows for attorney’s fees for a prevailing plaintiff.
The FDCPA is a magnet for bad litigation. Many companies or insurance companies pay off plaintiffs just to save the expense of litigation. Unfortunately, many companies now end up the victims of zealous plaintiffs lawyers who see them as nothing but cash cows that can be extorted.