Court of Appeal Grants Center’s Request to Publish Opinion Preventing Debt Collectors From Evading Liability Under the Rosenthal Act

January 11, 2024

The Center successfully requested publication of the opinion in Moten v. Transworld Systems, Inc., a decision that prevents debt collectors from invoking California’s litigation privilege as a shield from liability for fraudulent and deceptive debt collection practices.

Transworld Services, Inc. (TSI), a third party debt collector, sought to collect debt from student loan borrowers on behalf of National Collegiate Student Loan Trusts (NCSLT)--a Delaware Trust that claims ownership of over 800,000 private student loan debts nationwide. As part of its debt collection efforts, TSI filed a lawsuit against Jasmine Moten alleging she owed student debt. Ms. Moten responded with a putative class action claiming neither TSI nor NCSLT was properly authorized to collect on her debt--a violation of California’s Rosenthal Fair Debt Collection Practices Act. 

Ms. Moten is not the first to make such a claim. In 2017, the Consumer Financial Protection Bureau obtained a $21.6 million judgment against TSI for filing false or misleading affidavits, providing false or misleading testimony, and filing debt collection lawsuits when the companies could not prove the debt was owed. Nevertheless, TSI continued to enforce debt collection suits against private student loan borrowers. 

TSI responded to Ms. Moten’s class action with an anti-SLAPP motion. The trial Court granted the motion, finding that Ms. Moten’s complaint arose from TSI’s exercise of free speech and petitioning rights, and, crucially, that Ms. Moten had failed to demonstrate a probability of prevailing on her complaint because her claims were barred by the litigation privilege. 

On appeal, the Fourth District Court of Appeal rejected the trial court’s determination, explaining (in an initially unpublished opinion) that the litigation privilege could not be used to bar a plaintiff’s Rosenthal Act claims. Recognizing the case’s importance to anyone facing an improper debt collection lawsuit in California, the Center – along with the plaintiff and the state Attorney General – sought publication of the opinion so that it would become citable precedent for future litigants. 

The Center’s letter pointed out that, absent publication of the Court’s opinion, debt collectors could continue to insulate themselves from liability for their unlawful debt collection practices simply by filing a collection action. The letter underscored the logic of the Court’s observation that it would make little sense for the legislature to have passed the Rosenthal Act if the litigation privilege could so easily be used to evade the Act’s protections.  

By clarifying that the litigation privilege does not apply to Rosenthal Act claims, the now-published opinion in Moten affirms critical consumer protections for borrowers. The Center welcomes the Court’s decision to make its decision precedential and to thereby provide safeguards from illegal debt collection tactics to untold numbers of California consumers.