NJ Judge Disagrees with NY Judge in FDCPA Case Involving Credit Repair Agreement

On August 30, 2017, in a Fair Debt Collection Practices Act (FDCPA) case involving almost the exact same facts as a case insideARM wrote about on July 20, 2017, a federal judge in New Jersey disagreed with the judge in the prior New York case and denied a motion for summary judgment in favor of the defendant. The case is Ridgeway v. AR Resources, Inc. (Case No 16-1188, U.S.D.C., District of New Jersey).

A copy of the court’s opinion can be found here.

Background 

The case involves a FDCPA claim. Plaintiff Christine Ridgeway alleged that she disputed a debt with defendant AR Resources, Inc., a debt collector, but AR Resources failed to identify the debt as disputed or to delete the debt. The fact situation is familiar to those at many ARM firms - faxed dispute letters from credit repair company, Collection Shield 360. 

In October, 2015, defendant AR Resources received a one-page letter by fax, with no coversheet. At the top of the page, the letter states that it is “FROM:” Plaintiff Christine Ridgeway, and bears Ridgeway’s home address in New Jersey. No other sender is identified, although the fax header printed on the letter bears a fax number with an area code of 414, and the time stamp is in Mountain Daylight Time. The letter goes on to identify the debt at issue by name on the account (Christine Ridgeway), the last four digits of Ridgeway’s social security number, Ridgeway’s date of birth, the creditor, and the balance of the debt. The remainder of the letter appears to be a boilerplate form stating, among other things, “I dispute this debt.” The letter bears the electronic “/s/” signature of Christine Ridgeway. 

Ridgeway testified at her deposition that she did not draft the letter. A “credit repair agency,” Collection Shield 360 (CS360), wrote the letter after Ridgeway called the company. Ridgeway testified that she specifically asked CS360 to dispute the AR Resources debt.

The record contained a one-page “Collection Shield Service Agreement” electronically signed by both CS360 and Ridgeway. The agreement states in relevant part, “I, Christine Ridgeway, hereby authorize, [CS360], to make, receive, sign, endorse, execute, acknowledge, deliver, and process such applications, correspondence, contracts, or agreements to credit reporting agencies and creditors/collection agencies as necessary to improve my credit.” The agreement is undated. 

AR Resources moved for summary judgment on the one-count complaint.

Editor’s Note: A motion for summary judgment is based upon a claim by one party (or, in some cases, both parties) that contends that all necessary factual issues are settled or so one-sided they need not be tried. The summary judgment is appropriate when the court determines there no factual issues remaining to be tried, and therefore a cause of action or all causes of action in a complaint can be decided upon certain facts without trial. 

On July 20, 2017 insideARM wrote about a very similar case, involving almost identical facts and the same defendant, Taylor-Burns v. AR Resources, Inc. (Case No. 16-cv-1259, U.S.D.C. Southern District of New York). In that case, New York district court judge Robert W. Sweet, forcefully determined that the CS360 Agreement failed to comply with seven different requirements of the Credit Repair Organizations Act ("CROA"), 15 U.S.C. § 1679 et seq. and therefore void and unenforceable.  Judge Sweet wrote:

“The lack of a CROA - compliant contract between CS360 and Plaintiff - and therefore the lack of a valid contract between CS360 and Plaintiff - means that CS360 had no authority to send the Letter on Plaintiff's behalf. 

As previously noted, the Plaintiff testified that she did not prepare, sign, or send the Letter. She contacted CS360, which sent the Letter on her behalf. Therefore, no valid dispute was made, ARR cannot be liable for an alleged failure to report the debt as disputed, and the ARR motion for summary judgment dismissing the Complaint is granted.” 

In the instant case, the Honorable Noel L. Hillman considered the Taylor-Burns opinion, but disagreed with Judge Sweet’s analysis and refused to follow the same logic. Per Judge Hillman:

“In the undersigned’s view, however, even if (1) the Ridgeway-CS360 Agreement violates the CROA, and even if (2) that violation of law invalidates the Agreement (both issues the undersigned need not, and does not, decide), it does not follow that (3) CS360 had no authority to send the letter on Ridgeway’s behalf.

A reasonable factfinder could find on this record that CS360 had authority to act on Ridgeway’s behalf, and therefore Ridgeway, through her agent, CS360, disputed the debt at issue even if Ridgeway and CS360 did not have a CROA-compliant contract. Independent from the disputed written agreement, Ridgeway testified that she called CS360 and asked them to dispute the debt at issue, and in response, CS360 faxed the above-quoted correspondence.

However, we view these sections as voiding such contracts as between the parties to such agreements, i.e., the consumer and the credit agency, not provisions intended to shield third party debt collectors from conduct that may violate another consumer protection law. It truly would be ironic to deny a plaintiff the protections of the FDCPA because she had been a victim of the CROA. Here, as we have noted, Plaintiff makes no complaint of CS360 under the CROA. To the contrary, she insists they acted with her knowledge and approval. She alone – not Defendant – has standing to void any contract she may have with CS360 under the CROA.

AR Resources’ Motion for Summary Judgment on the FDCPA claim will be denied.”

insideARM Perspective

It will be interesting to see what happens next. This case is not over. The judge only denied a motion for summary judgment. Hopefully AR Resources will continue to defend the case and take it to trial. Two similar cases and two disparate results... it would be nice to get some consistency from the courts.

ARM firms are constantly struggling with how to deal with high volume validation requests or disputes. It seems that it is a strategy employed by many credit repair organizations and/or consumer rights law firms. The original case (Taylor-Burns v. AR Resources, Inc) provided strong language from a New York judge that saw significant issues with the practices of CS360. The judge went even further in discussing that firm’s relationship with the RC Law Group.

In light of the Taylor-Burns case it is likely that we have not seen the last of cases like this where a defendant ARM firm vigorously defends itself in a similar case.