District Court (Cal.) Certifies FDCPA Class; Says Factual Questions Re: Whether Debt Was For Consumer or Commerical Purposes Could Not Defeat Certification

In Gold v. Midland Credit Management, Inc., — F.Supp.3d —-, 2014 WL 5026270 (N.D.Cal. 2014), Judge Freeman rejected the argument that factual questions regarding whether financial transactions were primarily for consumer or business purposes could defeat class certification in an FDCPA case.

Plaintiff owes a financial obligation, “namely a consumer credit account issued by HSBC Bank Nevada, N.A,” that was at some time prior to this lawsuit “consigned, placed or otherwise transferred to De-fendants for collection.” Compl. ¶¶ 13–14, ECF 1. The subject of this action is a collection notice dated May 3, 2012 that Defendants sent to Plaintiff. Id. ¶ 15–17, Exh. 1. Though the letter states that the current owner of the debt is defendant Midland Funding, LLC, id. ¶ 18, Plaintiff alleges that the following passages in the notice and accompanying brochure are misleading: “We can help you reduce your past balance with HSBC Bank Nevada, N.A. and get your finances back on track.” “Your credit report will be updated with each payment made, and once you’ve completed your agreed-upon payments to settle the account, your credit report will be updated as ‘Paid in Full’!” “Having a good credit report is important … We can help you get your finances back on track.” Id. ¶¶ 19, 21, 23. It appears to be Plaintiff’s theory that because Defendants are the “current owners” of the debt, these passages misleadingly imply either that any debt is still owed to HSBC Bank or that Defendants can affect the manner in which HSBC Bank reports the debt to credit bureaus.

Judge Freemen found that a class action could be maintained.

 Here, the dispute centers on the criterion in Plaintiff’s proposed class definition that the underlying debt originally owed to HSBC Bank have been incurred “primarily for personal, family, or household purposes (as shown by Defendants’ records or the records of the original creditor).” . . . Defendants in their supplemental letter brief urge that Plaintiff’s solution is unworkable, and that “[a]llowing potential class members to self-identify regarding this ‘threshold’ issue would deprive Defendants their due process right to challenge the validity of the class members’ claims and would en-courage inaccurate and potentially fraudulent claims.” Def.’s Ltr. 1. Defendants cite to recent Third Circuit cases rejecting the identification of a consumer class using claim forms as prejudicial to both defendants and absent class members whose claims could be diluted by fraudulent or inaccurate claims. Id. at 1–2 (citing Marcus v. BMW of North America, LLC, 687 F.3d 583 (3d Cir.2012); Carrera v. Bayer Corp., 727 F.3d 300 (3d Cir.2013)). ¶ Certainly, Defendants are entitled to assurance through reasonable proof that only qualified individuals with debt related to personal, family, or household purposes are confirmed as class members. However, as many other courts have determined in considering class certification under the FDCPA, the mere fact that the debt collection agency does not segregate business and consumer debt accounts is not enough to thwart class certification. Moreover, acceptance of Defendants’ arguments would effectively eliminate class action litigation under the FDCPA because in all cases, separating out the business debt from the consumer debt would pose a bar to class certification. Numerous federal courts throughout the country have rejected similar arguments and certified consumer class action cases under the FDCPA. This Court finds those cases persuasive. See Butto v. Collecto Inc., 290 F.R.D. 372, 382 (E.D.N.Y.2013); Macarz v. Transworld Sys., Inc., 193 F.R.D. 46, 57 (D.Conn.2000) (in a similar FDCPA case where the defendant did not maintain records that identified the nature of the debt, the court stated “[t]he defendant’s protestations of impossibility do not alter the Court’s conclusion that class certification is appropriate here.”); Wilborn v. Dun & Bradstreet Corp., 180 F.R.D. 347, 357 (N.D.Ill.1998) (“The need to show that the transactions involved in a particular case are consumer transactions is inherent in every FDCPA class actions [sic]. If that need alone precluded certification, there would be no class actions under the FDCPA.”). In any event, Defendants’ due process concerns can be addressed more fulsomely after class certification, when the Court may evaluate their overall conduct and total exposure. 15 U.S.C. §§ 1692k(a)(2)(B), (b)(2); see also Murray v. GMAC Mortg. Corp., 434 F.3d 948, 954 (7th Cir.2006) (constitutional questions best addressed after class certification).