Consumer Finance Litigation

In O'Bryne v. Portfolio Recovery Associates, Inc., No. cv447-IEG (NLS), 2013 WL 1223590 (S.D. Cal. Mar. 26, 2013), the Southern District of California held that a debt collector did not violate the Fair Debt Collection Practices Act ("FDCPA") by seeking to collect principal, interest, and fees in a collection lawsuit under the common law theories of account stated and assumpsit. The defendant in O'Bryne, a debt collector, filed suit in California state court against the plaintiff-debtor seeking to recover a debt under various common law theories. The debtor subsequently brought suit against the debt collector, alleging that the debt collector misrepresented the legal status of the debt in violation of 1692e by alleging an account stated existed where there was no express, written contract between the parties. The debtor also alleged that the debt collector misrepresented that the debtor owed contractual fees and interest under the theory of assumpsit in violation of 1692f, for according to the debtor, assumpsit does not permit the collection of contractual fees and interest. Granting summary judgment in favor of the debt collector on the debtor's 1692e claim, the court noted that an account stated under California law has three elements: a debtor/creditor relationship; an agreement between the parties, whether express or implied; and a promise by the debtor, whether express or implied, to pay the debt. Because the debtor did not dispute that there was a debtor/creditor relationship, and because the debtor had implicitly accepted the debt by failing to object to the final billing statement, the debt collector's account stated claim could not be a false, misleading, or deceptive misrepresentation under 1692e. It was immaterial that the account stated was not an express agreement between the parties. The court also granted summary judgment in favor of the debt collector on the debtor's 1692f claim, noting that California law permits a debt collector to collect contractual interest under an assumpsit claim. Moreover, the court observed that California courts permit plaintiffs to collect interest aggregated with principal to be collected in assumpsit. Because the debtor had admitted that interest and fees were aggregated to the principal balance, the court observed, the debt collector was permitted to seek those fees under a theory of assumpsit, and therefore did not violate 1692f by doing so. For more information on consumer finance litigation topics, please contact one of the Burr & Forman team members for assistance. We are happy to answer any questions or concerns you may have.