Ninth Circuit Court of Appeals Made a Ruling in Favor of Debt Collection Industry
On May 12, 2015, the Ninth Circuit Court of Appeals ruled 3-0 in favor of the credit and collection industry in the case of Kubler Corporation, dba Alternative Recovery Management v. Diaz, 14-55235 (9th Cir., May 12, 2015). The issue on appeal was the district court’s decision that California law does not permit a creditor without a contractual interest provision to claim and collect interest prior to a court awarding prejudgment interest. The Ninth Circuit held that California law can entitle a creditor to interest even without a prior judgment. Consequently, the court found that the collection agency did not violate the Fair Debt Collection Practices Act when it sent a collection letter to the consumer seeking to recover the principal amount of the debt, plus prejudgment interest calculated at the statutory rate of 10 percent. The court reasoned that the collection agency would have been entitled to prejudgment under California state law because said law allows recovery of prejudgment interest on a debt that is certain or capable of being made certain, even if a judgment has not yet been obtained. The court ruled that"…just because prejudgment interest can be awarded if a plaintiff prevails in court does not mean the plaintiff was not entitled to prejudgment interest even before."