Debt Buyers not Licensed in Illinois Can Have Third Party Collectors Attempt to Collect for them within the State

Last February, the Illinois Court of Appeals, Second Division, upheld a ruling that a debt collection law firm that filed a collection suit on the behalf of a debt buyer that was not licensed in Illinois did not violate the Fair Debt Collection Practices Act (FDCPA). In the consumer action, Gibbs v. Blitt and Gaines, the consumer plaintiff alleged that the law firm violated the Illinois Collection Agency Act and the FDCPA when it filed a collection action against the plaintiff even though the debt buyer was not licensed in Illinois. The court found that filing this lawsuit did not violate the Illinois Collection Agency Act, and therefore was not a viable basis for a FDCPA violation claim.

The debt collector, Blitt and Gaines, initially filed a lawsuit on the debt buyers’ behalf to recover an outstanding credit card debt. At the time the lawsuit was filed, the debt buyer was not licensed in Illinois. The plaintiff, Gibbs, filed a putative class action complaint, asserting that by filing the initial lawsuit, the debt collector violated the Illinois Collection Agency Act and the FDCPA. The consumer sought class action status for other similarly situated plaintiffs against Blitt and Gaines for their actions taken on the behalf of this specific client as well as any other collection agency that was not licensed in Illinois. The defendant debt collector moved to dismiss on the grounds that the Illinois Collection Agency Act expressly exempts attorneys from liability. Additionally, this exemption would preclude the Act from being a basis for a FDCPA claim. The lower court agreed with the debt collectors and dismissed the case.

The plaintiff relied on LVNV Funding, LLC v. Trice, claiming that the case found that a judgment obtained by a debt collector that was not licensed in Illinois was void. Therefore, since the defendant was aware of this, the defendant should have known that since the client was not licensed that the judgment would be considered void. Additionally, by filing this lawsuit, the defendants would also have committed a violation of the FDCPA under § 1692e.

However, the appellate panel found that since the Trice case was remanded, and the trial court then upheld the unlicensed collector’s judgment, the decision did not support the plaintiff’s claim that the law firm was pursuing a frivolous lawsuit. Additionally, when the law firm filed the complaint on its client’s behalf, it did not violate the Illinois Collection Agency Act because it specifically exempts licensed attorneys. Therefore, the conclusion of the court was that the lawsuit could not be considered a basis for a FDCPA claim.

FDCPA § 1692e states that a “debt collector may not use any false, deceptive, or misleading representations or means in connection with the collection of any debt.” The court in this case cited an Indiana case, Fick v. American Acceptance Co., where the debtor sued an unlicensed debt collector and their law firm, alleging that by filing a collection lawsuit that both the law firm and the debt collector violated the FDCPA. The section 1692e claim against the law firm was dismissed by the federal district court because it was found that the section applies “to threats to take action that cannot legally be taken, not illegal actions actually taken.” Therefore, since Gibbs’ claim was based on the lawsuit filed by Blitt and Gaines, the section 1692e claim could not stand under Flick.
Our experienced attorneys here at Krohn and Moss Consumer Law Center have also provided many helpful resources regarding the TCPA and the FDCPA and how telephone debt collectors should act. We have been successfully representing those abused and taken advantage of by debt collectors for years, and have a long list of successful stories to share with you. We offer a FREE CASE REVIEW for you to assess whether we can assist you with your matter. Please do not hesitate to contact us toll free at 1-800-875-3666 or visit our website at http://www.krohnandmoss.com/.