A recent lawsuit filed by a debtor against a law firm claims that the law firm violated the terms of the Fair Debt Collection Practices Act (FDCPA). The FDCPA is a piece of federal legislation that prevents debt collectors or agents for creditors from harassing debtors or taking illegal actions. 

In this case, the debtor fell behind on Condo Association payments, and the condo handed the matter over to a law firm. The law firm filed a notice of lien on the debtor’s condo and threatened foreclosure if the debtor did not pay $10,000 in restitution. The debtor filed a countersuit under the FDCPA alleging violations that included adding excessive fees, attorney’s fees, and other charges not permitted under state law. He further claimed that the lien was filed with a third party that violated the FDCPA, which prevents creditors from discussing collections issues with family, friends, and the public at large. 

The plaintiff contended that the excessive fees and other violations caused him emotional distress and wasted his time. However, the district court ruled in favor of the defendant and found that the debtor did not have standing to sue because he had not been sufficiently injured. 

While it is nearly impossible for an individual to file a personal injury claim on the basis of emotional injury, the 11 Circuit Court of Appeals determined that the law firm could not dismiss the lawsuit on the grounds that there was no real injury. Wasted time and emotional distress are enough to move an FDCPA lawsuit forward. 

What Does the Successful Appeal Mean?

A lot. For the plaintiff, it means that his counterclaim of violations under the FDCPA will be allowed to move forward against the law firm. It also means that future claims related to emotional distress caused by debt collectors can be heard by circuit courts. The court found that the defendant did commit time and energy in an attempt to resolve the debt, fight the lien, and otherwise determine what debts were valid and which were made up. The court ruled that this, in fact, qualifies as emotional distress and is thus actionable under the FDCPA.

Why Did the Debtor Win?

There are two reasons the court gave. The first involves the law firm charging the debtor more than he owed to release a lien on his condo. That, the court determined, was illegal. Secondly, the court determined that the emotional distress involved in filing a counterclaim is not actionable. However, the court separated the efforts to file the FDCPA action from the act of fighting the illegal lien placed on the debtor’s property. Ultimately, the court ruled that the defendant had standing to sue because he had to put in a lot of extra effort to fight the illegal lien, and the defendant would not lift the lien unless he paid more than he owed. 

Talk to an Indiana Bankruptcy Attorney Today

Creditors don’t always play fair. If you’re facing harassment, call Chris Arrington, Indiana bankruptcy attorney, today to schedule a free consultation and learn more about how we can help.