Student debt collector argues suing borrowers was harmless

REUTERS/Dado Ruvic/Illustration

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  • Borrowers propose class action claiming misleading collection lawsuit violated consumer protection law
  • Collector Transworld Systems Inc Says Supreme Court Precedent Requires Concrete Harm

(Reuters) – A debt collector who handled student loans after they were consolidated and sold to investors on Thursday urged a Manhattan judge to dismiss a proposed class action lawsuit alleging he lied in debt collection cases to across the country.

Borrowers sued the four investment funds and debt collectors Transworld Systems Inc (TSI) and EGS Financial Care Inc in 2018, claiming they violated the Fair Debt Collection Practices Act by filing thousands of lawsuits between 2012 and 2017 to recover loans that were not properly documented. .

The borrowers claim the lawsuits violated the FDCPA because they were based on misrepresentations regarding the loan documentation.

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Lawyer Bryan Shartle, who represents debt collectors, surprised US Magistrate Barbara Moses during oral argument on Thursday by saying for the first time that the whole case should be thrown out based on the Supreme Court’s ruling on last year in TransUnion v. Ramirez.

In that case, judges ruled that people who sued credit bureau TransUnion for matching their names to government watch lists could only sue under the FDCPA if they had suffered material harm by doing so. publish the information.

The judge asked why the debt suits were not similar.

“Waiting for a debt collection lawsuit against a consumer damages their reputation, doesn’t it? asked the judge, citing hypothetical examples of employers and landlords turning down applicants with outstanding debts.

“The information in the public record is not enough,” Shartle replied, saying plaintiffs needed to prove that documents filed in court caused further harm.

Moses said that position appeared to significantly reduce borrowers’ ability to sue federal class action lawsuits under the FDCPA because the harms they would suffer would all be different.

Shartle responded that while the FDCPA is “good” law, Congress cannot extend the jurisdiction of federal courts to deal with disputes that do not involve reparable injuries.

The judge will later issue a recommendation on the motion to U.S. District Judge Paul Gardephe, who is overseeing the case.

The Consumer Financial Protection Bureau fined TSI $2.5 million for deceptive collection practices in 2017. TSI did not admit the allegations.

The agency is still in court against a group of 15 student loan trusts. The 3rd US Circuit Court of Appeals is currently considering whether trusts are subject to the authority of the CFPB.

The cases are Bifulco et al. vs. National Collegiate Student Loan Trust 2004-2 et al., No. 18-CV-07692, and Seaman et al. vs. National Collegiate Student Loan Trust 2007-2 et al., No. 18-CV-01781, US District Court, Southern District of New York.

For Borrowers: Gregory Frank of Frank

For trusts: Gregory Casamento of Locke Lord

For TSI: Bryan Shartle of Sessions, Israel and Shartle

Read more:

US Supreme Court halts TransUnion ‘terror list’ lawsuit

US cracks down on private student loan debt collection

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Jody Godoy

Thomson Reuters

Jody Godoy reports on banking and securities law. Contact her at [email protected]

Tana T. Thorsen