Damages in FDCPA Class Actions

[David A. Szwak]

The FDCPA also contains special damage provisions for class actions. Recovery of statutory damages for the class is limited to 1% of the debt collector's net worth or $500,000, whichever is less. 15 U.S.C. 1692k(2)(B).

The named plaintiffs, however, can collect their full statutory damages. The Seventh Circuit has held that net worth is book value, i.e., calculated by subtracting liabilities from assets [Sanders v. Jackson, 209 F.3d 998 (7th Cir. 2000).], but a least one district court has held otherwise. Wisneski v. Nationwide Collections, Inc., 2004 U.S. Dist. LEXIS 15715 (U.S.D.C. E.D. Pa. 2004) (equity, capital stock, and goodwill should be included in the calculation of the collector’s net worth). See: Mailloux v. Arrow Financial Services, LLC, 2002 WestLaw 246771 (U.S.D.C. E.D. N.Y. 2002) (compelling discovery of net worth materials).

To determine net worth, FDCPA defendants were ordered to "provide an audited balance sheet for each defendant, and identification of each lawsuit in which defendants have provided or produced financial documents or net worth information, and identification of the each instance in which the defendants have provided their net worth to any government agency, and financial statements, annual reports, semi-annual and quarterly financial statements, credit applications, and tax returns for the last three years." Lucas v. G.C. Services, L.P., 226 FRAT 328, 334 (U.S.D.C. N.D. Ind. 2004).

A district court rejected the debt collector’s argument that the superiority requirement of Rule 23(b)(3) had not been satisfied because it had a net worth of zero, stating “I do not believe that Congress intended to allow a company to avoid a class action litigation arising under the FDCPA by presenting a balance sheet which shows that assets equal liabilities; such a demonstration is the nature of a balance sheet. I would include equity, capital stock, and goodwill into the calculation of a company’s net worth for these purposes.â€