Troutman Sanders recently secured dismissal of a lawsuit filed by a consumer in the U.S. District Court for the Northern District of Georgia, alleging the defendants violated the Fair Debt Collection Practices Act (FDCPA) by improperly adding statutory interest to a charged-off credit card debt in contravention of Georgia’s prejudgment interest statute. The District Court’s analysis adds to a growing consensus on the issue and represents a significant victory for companies operating in this space.

Plaintiff Hsiao Yip, through counsel, filed a complaint against LVNV Funding, LLC (LVNV) and Resurgent Capital Services LP (Resurgent), alleging that her original creditor charged off her $2,833.99 credit card debt in 2009 and waived contractual interest at that time. Thereafter, the defendants acquired the debt, and according to the complaint, “illegally” added post-charge-off interest. In their motion to dismiss for failure to state a claim, the defendants explained that courts in at least five states — Kansas, Oklahoma, Washington, Connecticut, and Missouri — have allowed debt collectors to recover prejudgment interest under state prejudgment interest statutes even after the original creditor charged off the debt at issue. Based on the similarity between the laws of those states with Georgia’s prejudgment interest statute — O.C.G.A. § 7-4-2(a)(1)(A) — the court found that the defendants similarly had a statutory right to charge post-charge-off interest on the plaintiff’s debt.

Thus, Magistrate Judge Justin Anand concluded that, under Georgia law, the defendants were entitled to impose statutory interest “notwithstanding any waiver of contractual interest that may have been made by the original creditor after the debt was charged-off.” Plaintiff objected to Judge Anand’s recommendation, but the District Court agreed with Judge Anand’s “thorough and well-reasoned analysis,” overruling Plaintiff’s objections and dismissing her complaint with prejudice.

Mark Windham and Mike Lacy of Troutman Sanders represented the defendants in the Northern District of Georgia. The case is Hsiao Yip v. Dynamic Recovery Solutions, LLC, et al., No. 18-cv-2586. The briefs prepared by Troutman Sanders are available here and here, and Judge Anand’s report and recommendation as well as the District Court’s decision can be found here and here.