If I had been keeping up with my coverage of the Court of Appeals, I might have speculated whether the split decision in Mazie Green v. Portfolio Recovery Associates, LLC (February 20, 2024) would result in a petition for rehearing en banc or an appeal to the Supreme Court. As I was not keeping up, however, we do not need to speculate, because the Court has granted the rehearing en banc already. Technically, this means I shouldn't summarize the now withdrawn panel opinion, but as it is likely the en banc will result in taking the view of either the majority or the dissent, let's dive in.
Ms. Green, who is pro se, appealed a judgment in a debt collection action. Portfolio Recovery Associates is a debt collection agency that acquires debt, mostly from credit card issuers, and then seeks to recover from the debtor. Generally, debt buyers like PRA seek to recover directly from the debtor, but failing that will file a warrant in debt in the general district court of the jurisdiction where the debtor was last know to live to obtain a judgment on the debt and then seek enforcement of the judgment. Service is almost always by posting.
A fairly significant percentage of these debt actions are not contested and the debt buyer gets a default judgment. If, however, the judgment is contested, the debt buyer may have difficulty establishing the debt depending on what documentation they received from the original creditor (or as in this case, from a third-party). They can also run afoul of the Fair Debt Collections Practices Act if, for example, the debtor previously contested the debt or cannot show that they had a good faith belief that the debt was actually owed.
PRA acquired Green's alleged debt from Synchrony Bank in 2019, but the documents submitted in the general district court to establish the chain back to the original credit card agreement involved three other credit card servicers of Green's "PayPal" credit card. All of the "bills of sale" from one bank to the next were for multiple accounts and none specifically referenced Green's account. She argued that PRA was thus unable to establish the requisite change of title to prove she owed the debt to PRA. she also contended that PRA was in violation of the FDCPA for having failed to perform due diligence to determine whether it had standing to pursue her for the debt. The general district court ruled in favor of PRA and Green appealed.
In the circuit court, PRA admitted that none of the documents it had submitted included Green's name or account number. PRA could also offer no explanation as to why in some of its documents the last four digits of the account was different from that originally alleged in the warrant in debt, though they contended that the account number had been changed at some point. The circuit court ruled for PRA on the debt, dismissing Green's FDCPA claim as well.
The Court of Appeals, Judge Causey joined by Ortiz, reverses the judgment and remands for an order finding that PRA failed to establish that it owned the debt it was trying to collect and for further proceedings on the FDCPA claim. The majority finds that PRA did not have standing to pursue the debt because its evidence supporting ownership of Green's oblication was "scanty and incomplete." The majority goes on to find that even if PRA has standing, it didn't prove ownership of the debt, thus it should not have prevailed on the claim and there is a colorable argument that it is in violation of the FDCPA.
Judge Malveaux dissents from these decisions, finding that Green improperly couched her argument in terms of standing, rather than the merits of PRA's claim. Unlike the majority, she does not consider this an "unsettled" question, because PRA's belief that it was owed the debt, even if wrong, was sufficient to grant it standing, thus she would not reach the merits of that claim or whether the dismissal of the FDCPA claim was proper.
There was an additional issue regarding whether a procedure in the general district court was proper, but all three judges agree that issue is not properly before them.
If the majority decision stands, it may create minor ripple in the debt collection business. As indicated above, most of the actions to collect these debts are uncontested in the general district court, so strict proof is never required to establish the damages. However, when a debtor does contest the claim, the majority view will make it more difficult for the debt buyer to establish their ownership of the debt -- or even the standing to bring the suit.