Victory for ARM Industry in Ninth Circuit Case

Yesterday the United States Court of Appeals for the Ninth Circuit  issued a  3-0  Opinion in favor of the ARM industry in an FDCPA case entitled Ninth Circuit Opinion in Diaz v Kubler, 14-55235 (9th Cir., May 12, 2015).

The appeal involved a suit by a debtor against a debt collector alleging that by sending a collection letter that sought 10 percent interest on the debt the debt collector violated §1692f(1) of the FDCPA and also California’s Fair Debt Collection Practices Act (the Rosenthal Act). The district court had previously granted a summary judgment in favor of the debtor.  The appeals court reversed the prior decision and remanded the case back to the district court.

The facts of the case were not in dispute.  Kubler had sent the debtor a letter demanding that she pay a debt of $3,144 in principal and $298.03 in interest.  The parties agreed that the demand for interest reflected an annual interest rate of ten percent.

In reversing the lower court’s decision the appeals court relied on a specific California statute that “entitles” a creditor to add interest to a “certain” debt even without a prior judgment. The allowable interest rate under the statute is ten percent. The court ruled that sending a letter seeking to recover exactly what the statute allowed did not violate §1692f(1) of the FDCPA nor the Rosenthal Act.

While a victory for the ARM industry, it should be noted that the decision involved a very specific fact situation and a very specific state statute that allowed for recovery of statutory interest on a “certain” debt.