Tuesday, May 3, 2016

Fair Debt Collection Practices Act (FDCPA) Bites Rent Collector

In a recent case before the U.S. District Court for the Eastern District of Virginia, a trio of residential tenants alleged that a collection agency representing their landlord violated the Fair Debt Collection Practices Act (FDCPA) by sending them a letter containing a demand for payment of back rent and interest allegedly owed to the landlord. See Galdamez, et. al. v. I.Q. Data International, Inc.  The tenants specifically alleged that since their lease and the Virginia Residential Landlord Tenant Act (VRLTA) did not permit the landlord to recover pre-judgment interest, the collection agency’s demand for $19.33 in interest ran afoul of the FDCPA. The tenants in the case had already vacated the property and no lawsuit had been commenced by the landlord to recover back rent. 

The collection agency filed a motion to dismiss the lawsuit, arguing that Virginia Code § 55-227 permits a landlord to claim interest in “any action for rent”. Judge Brinkema denied the motion and ruled in favor of the tenants, finding that the VLRTA does not contain any reference to pre-judgment interest, and that Virginia Code § 55-227 was not applicable since the VRLTA governed the case. Thus, the case will go forward to determine how much the collection agency will be sanctioned for demanding pre-judgment interest in an otherwise proper demand letter. Undoubtedly, it will be a stiff penalty for a seemingly minor oversight. 

Each violation of the FDCPA can result in statutory damages up to $1,000 per violation plus reasonable attorney’s fees. In addition, the debtor can claim damages for physical distress, emotional distress, lost wages if the debtor’s job was disrupted, and recovery of funds from a wage garnishment. The court can also impose injunctive relief, such as ordering the debt collector to cease from further communication with the debtor and the debtor’s family.