California Appellate Court overturns ruling on FDCPA

Courts California Appellate FDCPA Rosenthal Fair Debt Collection Practices Act

On December 18, a California Court of Appeal overturned a lower court’s dismissal of a case involving claims under the federal FDCPA and California’s Rosenthal Fair Debt Collection Practices Act (Rosenthal Act). The appellate court found the lower court had erred in dismissing the case pursuant to California’s anti-SLAPP statute, which provides a mechanism for early dismissal of meritless lawsuits arising from protected communicative activities.

The dismissal arises from a class action filed in 2021, alleging that the defendant debt collector – who had filed an action to collect on a defaulted student loan – lacked the documents necessary to collect or enforce the loan, and thus violated the FDCPA and the Rosenthal Act. The complaint also claimed the collector violated California’s Unfair Competition Law (UCL) by engaging in “prohibited unlawful, unfair, fraudulent, deceptive, untrue, and misleading acts and practices as part of its direct and indirect collection and attempted collection of debts that have previously been adjudicated.” The complaint referenced a 2017 CFPB consent order with the defendant, previously covered by InfoBytes here, where the consent order involved allegations that the collector had filed lawsuits against consumers for private student loan debt that it could not prove was owed or that was outside the applicable statute of limitations.

In response to the complaint, the defendant debt collector filed a demurrer and an anti-SLAPP motion. While the lower court granted the anti-SLAPP motion, the appellate court reversed, concluding that the plaintiff’s claims were not barred by the litigation privilege. The appellate court found that the lower court had “only considered the litigation privilege in considering the probability that [the plaintiff] would prevail on her claims,” and did not consider the public interest exception to California’s anti-SLAPP law (which provides that the anti-SLAPP law does not apply to actions brought solely in the public interest or on behalf of the general public if certain conditions are met). The appellate court directed the trial court to determine whether the plaintiff met her burden of demonstrating a probability of prevailing on the merits of her claims and to consider the public interest exception.