The Illinois Appellate Court for the First District Tuesday issued an opinion in a case that challenges state law requirements for bringing debt collection law suits against consumers. The opinion, while technically a loss for the debt buyer plaintiff, is seen as “a clear victory for collection agencies and debt buyers operating in Illinois.”
Decided by the Appellate Court’s First District, which covers the inner core of the Chicagoland area, the opinion in Unifund v. Shah was actually addressed the second appeal of the case. At issue was the application of a specific section (8b) of the Illinois Collection Agency Act (ICAA).
The case originated as a debt collection lawsuit filed by debt buyer Unifund over a $16,000 Citibank credit card debt issued to defendant Shah. After finding its way to the appeals level, the First District originally ruled that a collection agency has standing to sue as an assignee for collection but further determined that the ICAA did not allow the agency to rely on an affidavit from the assignee to prove ownership, and instead required the agency to produce the assignment of the account as an exhibit to the lawsuit and to provide the consideration paid for the assignment.
The appeal brought the attention of ARM industry groups, with NARCA filing an amicus brief written by Michael L. Starzec of Blitt and Gaines, P.C. and Christopher R. DiPlacido of Resurgence Legal Group, P.C., and ACA International likewise filing a brief prepared by Joseph Messer and Nicole Strickler of Messer & Stilp, Ltd.
The arguments from the industry groups centered around Section 8b’s applicability to purchased debt. Messer & Stilp argued that the plain language of Section 8b indicates the legislature intended to exclude sales of an account to a debt buyer from the Section’s reach. Thus, to state a cause of action in a collection lawsuit a debt buyer, unlike an assignee for collection, need not comply with Section 8b.
A three-judge panel agreed, writing, “do section 8b’s requirements apply to all assignments in the chain of title for a debt, or do they apply only to assignments for collection? We decide that it is the latter.”
The panel did, however, ultimately dismiss Unifund’s case against Shah because some of the documentation presented by Unifund was redacted. “Plaintiff’s failure to include unredacted copies of the documents that contain the consideration terms and account information for the assignments prevents us from reviewing plaintiff’s claim that the assignments satisfy section 8b,” wrote the judges.
“Although not a landslide victory for Unifund, the decision was a clear victory for collection agencies and debt buyers operating in Illinois as the Appellate Court agreed with our argument that Section 8b applies only to assignments for collection and not to outright sales,” wrote Messer & Stilp in discussing the case. “The decision clarifies the law for collectors and debt buyers and establishes a workable framework for collectors who take assignments for collection from debt buyers.”
The Appellate Court found that a collector who takes legal title to an account as an assignee for collection must comply with Section 8b. Specifically to plead a valid assignment for collection the collector must plead that the document manifesting the assignment identifies (1) the accounts transferred, (2) the consideration paid, and (3) the effective date of the transfer.