On May 19, the Seventh Circuit Court of Appeals ruled that debt collectors who filed collection lawsuits and then dismissed them prior to trial did not violate the Fair Debt Collection Practices Act.
Section 1692e(5) of the FDCPA prohibits debt collectors from using a false, deceptive, or misleading representation to threaten to take an action that they do not intend to take in the course of collecting a debt. The Court considered whether the debt collector’s communication would deceive or mislead an unsophisticated, but reasonable, consumer.
First, the Court found that Plaintiffs had not sufficiently alleged that Defendants did not intend to proceed to trial by simply asserting that Defendants filed collection complaints and then voluntarily dismissed those complaints prior to trial. In the Court’s view, a voluntary dismissal alone is not an indication that Defendants never had any intention of going to trial, as there are many reasons why a litigant may eventually want to dismiss its own case.
Second, the Court found that Plaintiffs failed to show that Defendants had ever threatened to go to trial at all. The Court did not agree with Plaintiffs that the act of filing a lawsuit includes an implied “threat” that the case will go to trial. Instead, the Court found that the mere filing of a civil action does not indicate that a plaintiff intends to advance an action through to trial, especially when trial is often not the most cost-effective or desirable way to resolve a case. In fact, the Court explained, a typical plaintiff likely hopes to recover through avenues such as settlement or default judgment to avoid the expense, inconvenience, and uncertainty of trial.
Based on its finding that a debt collector does not implicitly threaten to proceed to trial simply by filing a lawsuit to recover a debt, the Court held that the FDCPA does not make it unlawful for a debt collector to file a collection lawsuit without intending to proceed to trial. Therefore, Plaintiffs failed to state a claim under 1692e(5) even if Defendants did not intend to go to trial when they filed their lawsuits.