On April 13, the United States District Court for the Eastern District of Wisconsin granted summary judgment to defendants in a lawsuit brought under the Fair Debt Collection Practices Act (“FDCPA”) and the Wisconsin Consumer Act (“WCA”). A copy of the Court’s opinion can be found here.
The case arises from a state court action filed by Kohn Law Firm on behalf of Unifund CCR, LLC, for breach of contract stemming from an unpaid credit card with Citibank, NA. In his answer and counterclaim, consumer John Burton stated he had no knowledge of the credit agreement and denied that he had ever applied for the account with Citibank. The initial state court action by Kohn was dismissed without prejudice and, subsequently, Burton filed the FDCPA/WCA suit against Kohn (later adding Unifund as a co-defendant) in the Eastern District of Wisconsin.
In granting summary judgment to Kohn and Unifund, the Court noted that in order for Burton to be entitled to relief under the FDCPA, he must establish that: (1) Kohn and Unifund are debt collectors; (2) they sought to collect a “debt” as defined by the FDCPA; and (3) the collection attempt violated the FDCPA.
In support of his claim, Burton argued that the debt in question was a consumer debt for two reasons. First, he argued that the billing statements produced in discovery show that the charges were for personal, family, and household use. Second, he argued that an employee of Citibank described the underlying account as a “consumer account.”
In dispelling these arguments, the Court held that the burden was on Burton to establish each requirement for his FDCPA claim, including that the debt was “consumer debt.” Billing statements do not, in and of themselves, establish that the debt was clearly incurred for personal, family, or household purposes as required by the FDCPA as a person can be sued “in his or her individual capacity even for business debt … .” The Court found that the billing statements in the record do not reveal the nature of the transactions. Additionally, the Court found that a statement from a non-party entity, such as the employee from Citibank, is inadmissible hearsay which does not fall into any exception.
As the Court reasoned, the burden is on the plaintiff to establish the elements of his or her claim, and failure to do so should result in a defeat of the claim. For this reason, the Court held that Burton did not meet his burden in establishing that the debt was a “consumer debt” so as to entitle him to relief under either the FDCPA or WCA.
The “consumer debt” requirement is an often overlooked but important element that debt collectors should analyze in preparing a defense to any FDCPA claim. Troutman Sanders will continue to monitor this case should Burton seek to appeal the Court’s ruling.