A recent Fair Debt Collection Practices Act case in Michigan illustrates the importance of attention to detail when operating in a heavily regulated business space such as debt collection. The case is Loewe v. Weltman, Weinberg & Reis Co., L.P.A., from the United States District Court for the Eastern District of Michigan. You can read the Court’s latest order here.
In Loewe, defendant Weltman, Weinberg & Reis Co. filed two lawsuits in state court in an effort to collect on two overdue student loans. The suits were filed about a week apart, the first seeking just over $5,000 in damages and the second seeking just over $13,000. The complaints alleged different loan numbers, different principal amounts, and different distribution dates for the funds in the two loans. The exhibits to each complaint apparently were supposed to include the original loan applications and promissory notes, but that is where the problem arose: The loan application and promissory note attached as exhibits to the second complaint were the same documents as those attached to the first complaint, identifiable as such by the amounts requested and the “pre-approval codes,” among other distinguishing details. Somewhere in the process leading up to filing the second complaint, the correct loan application and promissory note got separated from the complaint and the incorrect documents were attached to it.
This unfortunate error is proving to be costly, since borrower plaintiff Joan E. Loewe filed a federal lawsuit alleging violations of 15 U.S.C. §§ 1692(e) and 1692(f) for making “false or misleading representations” or engaging in “unfair practices” when attempting to collect a debt. As the Court pointed out in its order denying Weltman, Weinberg & Reis Co.’s motion to dismiss, the application of these provisions is extremely broad and generally in favor of borrowers. Courts generally ask only if a creditor’s act might deceive “the least sophisticated consumer” or a “reasonably unsophisticated consumer.” Applying that standard in Loewe, the Court pointed out that attaching a purported contract to a lawsuit could “mislead” a consumer into thinking that the debt collector’s case was stronger than it actually was, and that a second suit appearing to involve the same loan as the first suit could be construed as pressure to settle quickly when used against a consumer with only a basic understanding of the court system.
Ultimately, the Court found that Loewe’s claims could go forward, and there were genuine issues of fact (such as the questions surrounding a bona fide error defense) that required further factual development. The judge denied the debt collector’s motion to dismiss, and denied the motion for summary judgment without prejudice, giving the collector the option of refiling it after discovery. The lesson from Loewe for businesses engaged in debt collection is clear: there is no substitute for attention to detail at the first stages of any action.