New York District Court Approves Class Action in FDCPA Case Alleging Improper Debt Assignment Notification

On August 18, a judge in the U.S. District Court for the Western District of New York granted the plaintiff’s motion for class certification for alleged violations of the Fair Debt Collections Practices Act (FDCPA) relating to an allegedly improper debt assignment notification.

In McCrobie v. Palisades Acquisition XVI, LLC, the plaintiff incurred a credit card debt, which was later assigned to a new creditor. In 2007, the new creditor commenced an action to recover the debt and obtained a default judgment against the plaintiff. The plaintiff claimed that because the summons and complaint had been mailed to an old address, he had no knowledge of the action or the default judgment. The default judgment was later assigned to Palisades Acquisition.

In 2014, an attorney from defendant Houslanger & Associates signed an income execution on behalf of Palisades Acquisition representing that it had the right to execute upon the judgment. Palisades Acquisition subsequently recovered $572.45 by executing on the plaintiff’s income.

In 2015, the plaintiff contacted Houslanger & Associates and requested the chain of title that proved Palisades Acquisition had the right to enforce the default judgment. Houslanger & Associates provided a copy of the bill of sale of the portfolio, which did not reference the plaintiff or the default judgment. Based on this information, the plaintiff filed a motion to vacate the judgment, which was granted. The garnished money was returned to the plaintiff, but the vacated judgment was later reinstated because the motion had been untimely. The plaintiff never repaid the garnished money.

In 2015, the plaintiff filed suit asserting that Palisades Acquisition and its attorneys’ enforcement of the default judgment violated the FDCPA. The plaintiff argued that Palisades Acquisition did not take the steps required to enforce the judgment. Specifically, the plaintiff argued that for an assignment of a judgment to take effect, the assignor must notify the judgment debtor of the assignment. While an employee of Palisades Acquisition testified that when it purchases a new debt portfolio, it will typically send an introductory letter to the debtors, the employee did not know whether Palisades Acquisition’s predecessors in interest sent a notice of assignment to the plaintiff.

The plaintiff moved to certify a putative class consisting of debtors included in the debt portfolio at issue who were subject to allegedly unlawful collection efforts by Houslanger & Associates and had money taken from them through either an income execution or a bank account garnishment. The defendants objected. After the magistrate judge heard oral argument, the parties submitted additional briefing to address whether the plaintiff has standing in light of TransUnion LLC v. Ramirez, 141 S. Ct. 2190 (2021). The magistrate judge issued a report & recommendation finding that the plaintiff had standing and the class should be certified. The defendants again objected. After briefing, the district court judge adopted the magistrate judge’s report & recommendation.

Both the magistrate and district judges found that the plaintiff had standing because the defendants allegedly deprived the plaintiff of more than $500 for several months by enforcing a default judgment in a manner that allegedly violated the FDCPA and state law. Further, the plaintiff alleged that the defendants still claim that they have a right to enforce that judgment if they so choose. The district court judge also agreed that the proposed class satisfied the requirements for class certification.