Samuels vs. Midland Funding, LLC, 2013 Westlaw 466386 (S.D. Ala. 2013)
A United States District court in Alabama has held that a consumer debtor may bring a suit against a debt collector for malicious prosecution after the debt collector showed up for trial with no witnesses and no evidence.
Facts: An individual debtor was sued by a debt collector. The debtor appeared at trial, but the debt collector had no evidence to prove the creation of the alleged debt, the date of the default, the amount due, or any other crucial fact. The debt collector also had no witnesses at trial.
After the trial court entered judgment for the individual debtor, the debtor brought suit under the Fair Debt Collection Practices Act ("FDCPA") and also brought a claim under state law for malicious prosecution. The debt collector moved to dismiss the complaint, but the district court denied the motion.
Reasoning: The court held that under well-established FDCPA authority, the debt collector’s behavior was actionable. In addition, the court noted that the debt collector’s alleged modus operandi (i.e., filing suit in order to obtain a settlement, without actually intending to litigate the case on its merits) constituted an "improper manipulation of the legal system to obtain payment," thus supporting the state law claim for malicious prosecution and abuse of process.
Comment: Judging by the published opinions in this area, the behavior of "bulk purchasers" of consumer debt is a national scandal. Whenever these outfits are challenged by consumer debtors, the outcome is overwhelmingly in favor of the debtor, due to the complete absence of documentation to support the debt collector’s claim. Unfortunately, very few consumer debtors are aware of their rights, and they cannot afford representation, which is exactly what the debt collectors are apparently counting on. Unlikely that the tiny percent of consumers who do so will cause the “debt buyer” industry to clean up its practices, unless it gets hit with some huge punitive damage tort awards.