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Illinois App. Court (2d Dist) Upholds Dismissal of FDCPA Claims as Demand Letter Indicated Debt Was Commercial

fdcpaThe Appellate Court of Illinois, Second District, recently affirmed the dismissal of a claim for supposed violations of the federal Fair Debt Collections Practices Act where the consumer plaintiff failed to allege facts that the money sought to be collected was a “debt” as defined by section 1692a(5) of the FDCPA, and the demand letter from the defendant law firm indicated that the debt was commercial in nature.

A copy of the opinion in Skrabets v. Tikhvinskiy Law, LLC is available at:  Link to Opinion.

A consumer filed a complaint against a law firm alleging violations of the FDCPA, 15 U.S.C. § 1692 et seq. Specifically, the consumer alleged that the law firm was “regularly engaged in the business of collecting debts,” making it a “debt collector” as defined by section 1692a(6) of the FDCPA, that the law firm sent him a letter to collect on a purported debt arising from an automobile transaction, but that no attorney was meaningfully involved in the matter, and that the defendant “falsely raised the specter of potential legal action that it never intended to take.”

On the law firm’s motion, the trial court dismissed the complaint with prejudice. The consumer timely appealed.

The Second District began its analysis by determining that it need not consider the consumer’s arguments as to the procedural propriety of the dismissal, because the complaint failed to state a cause of action, making dismissal appropriate.

A cause of action should not be dismissed unless it is clearly apparent that no set of facts can be proved that would entitle the plaintiff to recover. Paul v. County of Ogle, 2018 IL App (2d) 170696, ¶ 34. A court will consider all facts apparent from the face of the complaint, including any attached exhibits. Id. Matters contained in such exhibits that conflict with allegations of the complaint negate any contrary allegations of the complaint. Tucker v. Soy Capital Bank & Trust Co., 2012 IL App 103303, ¶ 23.

Here, the Appellate Court noted that the FDCPA protects debtors in connection with the collection of certain debts, but not others. To recover under the FDCPA, a plaintiff must make a threshold showing that the money being collected qualifies as a “debt” pursuant to the FDCPA. Oppenheim v. I.C. Sys., Inc., 627 F. 3d 833, 836-37 (11th Cir. 2010). The FDCPA defines “debt” as “any obligation or alleged obligation of a consumer to pay money arising out of a transaction in which the money [or] property… are primarily for personal, family, or household purposes.”  Aurora Loan Services, LLC v. Kmiecik, 2013 IL App (3d) 121700, ¶ 31. Therefore, the FDCPA does not cover actions arising out of commercial debts. Goldman v. Cohen, 445 F. 3d 152, 154 n.1 (2d Cir. 2006).

Here, the consumer argued that the transaction at issue fell within the definition of “debt” for the purposes of section 1692a(5). However, the Second District held that the consumer’s assertion was not supported by specific facts, only conclusory assertions. See Ash v. PSP Distribution, LLC, 2023 IL App (1st) 220151, ¶ 19.

More specifically, the consumer contended that the debt did not involve a commercial transaction because the law firm sent the demand letter to his home address. But the Court reasoned that an alleged debt collector’s treatment of an obligation is irrelevant to an inquiry regarding the nature of the obligation itself. Slenk v. Transworld System, Inc., 236 F.3d 1072, 1076 (9th Cir.2001).

Furthermore, the Second District concluded that the actual demand letter, attached to the consumer’s complaint, negated any allegation that the debt qualified as a “debt” under section 1692a(5) of the FDCPA. Specifically, the letter was addressed to the consumer and “your company.” It then discussed a contract to “deliver loads” and payment of “50% of gross revenue receipts.” Thus, the Court reasoned that, according to the letter, the consumer’s purported obligation arose out of a transaction that was primarily for commercial or business purposes and not “primarily for personal, family, or household purposes.” Aurora Loan Services, LLC, 2013 IL App (3d) 121700, ¶ 31 (quoting 15 U.S.C. § 1692a(5)).

Accordingly, the Second District held that the law firm’s demand letter belied the allegations contained in the consumer’s FDCPA claim and that the trial court properly dismissed the consumer’s complaint. Thus, the Court affirmed the decision of the trial court.

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The attorneys of Maurice Wutscher are seasoned business lawyers with substantial experience in business law, financial services litigation and regulatory compliance. They represent consumer and commercial financial services companies, including depository and non-depository mortgage lenders and servicers, as well as mortgage loan investors, financial asset buyers and sellers, loss mitigation companies, third-party debt collectors, and other financial services providers. They have defended scores of putative class actions, have substantial experience in federal appellate court litigation and bring substantial trial and complex bankruptcy experience. They are leaders and influencers in their highly specialized area of law. They serve in leadership positions in industry associations and regularly publish and speak before national audiences.

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