Two recent decisions from the Southern District of New York and the District of New Jersey have expressly disagreed about a credit repair company’s dispute of a debt on behalf of a consumer in two Fair Debt Collection Practices Act cases. 

In Taylor-Burns v. AR Resources, Inc., plaintiff Tonya Taylor-Burns alleged that the debt collector AR Resources, Inc. failed to list an account as disputed after she purportedly sent a letter to AR disputing the debt.  The dispute letter, however, was not written, sent, or signed by Taylor-Burns.  Instead, Taylor-Burns had retained credit repair organization Collection Shield 360 (CS360) which actually sent the letter.   

On summary judgment, AR argued that the dispute letter was written and sent without actual or apparent authority because the contract between Taylor-Burns and CS360 failed to meet the requirements of the Credit Repair Organizations Act (CROA).  The Southern District of New York agreed, holding that the contract was invalid and that the credit repair organization had no authority to send the letter on Taylor-Burns’s behalf.  Accordingly, AR did not receive a valid dispute of the debt, and summary judgment was granted in favor of AR. 

Similarly, in the New Jersey case Ridgeway v. AR Resources, Inc., plaintiff Christina Ridgeway disputed a debt with AR, but AR failed to identify the debt as disputed or delete the debt.  CS360 wrote the dispute letter on behalf of Ridgeway.  The record before the court contained a one-page “Collection Shield Service Agreement” electronically signed by both CS360 and Ridgeway, authorizing CS360 “to make, receive, sign, endorse, execute, acknowledge, deliver, and process such applications, correspondence, contracts, or agreements to credit reporting agencies and creditors/collection agencies as necessary to improve [Ridgeway’s] credit.” 

AR moved for summary judgment.  The New Jersey judge expressly disagreed with the New York judge’s analysis and refused to follow the same logic: “In the undersigned’s view . . . even if (1) the Ridgeway-CS360 Agreement violates the CROA, and even if (2) that violation of law invalidates the Agreement (both issues the undersigned need not, and does not, decide), it does not follow that (3) CS360 had no authority to send the letter on [plaintiff’s] behalf.”  The Court concluded that a reasonable factfinder could find that CS360 had authority to act on Ridgeway’s behalf and thus validly disputed the debt.  The District of New Jersey denied AR’s summary judgment motion.