The Center celebrates the decision of the California Court of Appeal for the 5th District to publish its groundbreaking decision in LVNV Funding, LLC v. Rodriguez, which held that non-debtors have a cause of action against debt collectors that mistakenly bring suit against them. LVNV Funding clarifies that filing a debt collection suit against an innocent consumer constitutes an unfair and misleading debt collection practice under California state law. As a result of the order publishing the opinion, the decision may now be cited throughout California’s superior courts as binding precedent and – as the first California court of appeal decision expressly holding as it did – will be enormously helpful to litigants and courts in enforcing both California and federal consumer protection laws.
Debt collectors file a high volume of lawsuits – up to a third of state courts’ entire civil docket – with the understanding that most consumers will not respond. As a result of collectors’ failure to properly serve consumers with the summons and complaint, or (as the collectors are well aware) consumers’ reluctance to pay hundreds of dollars they don’t have in filing fees, over 70% of debt collection suits result in default judgments against the consumer. 1 A direct consequence of the high volume, slipshod litigation strategy employed by many collectors is that these debt collection suits are often filed against the wrong person.
The LVNV Funding opinion makes clear that under California law consumers have a cause of action against debt collectors that mistakenly file debt collection suits against them. LVNV Funding, a debt buyer that files tens of thousands of debt collection suits per year, initiated a debt collection suit against the wrong defendant. The defendant filed a cross-claim alleging that LVNV Funding was subject to strict liability for false suit under the federal Fair Debt Collection Practices Act (FDCPA) and its California counterpart, the Rosenthal Fair Debt Collection Practices Act. The court of appeals, siding with the consumer, clarified that LVNV Funding’s suit was exactly type of predatory debt collection activity the FDCPA and Rosenthal Act intended to prohibit, holding that “[i]t is hard to imagine a more unfair and misleading debt collection activity than actually suing an innocent person who happens to share the same name as another debtor.”
The Center filed a letter, as did both Ms. Rodriguez’s counsel and the California Attorney General’s office, explaining to the Court of Appeal why this important decision merited publication. The Court ultimately agreed.
Publication of the Court’s decision in LVNV Funding sends a powerful message that debt-collectors cannot escape liability for filing debt collection suits against the wrong individual. The now-citable opinion will help consumers – and the state of California – hold abusive debt collectors accountable.