Class Decertified Due to Credit Store's Insolvency

[David A. Szwak]

Barnett v. Experian: Texas Court Decertifies Class Action Under Federal Fair Debt Collection Practices Act (FDCPA) Decertified Because Defendant In Bankruptcy
Federal Court Holds Decertification of Class Action Appropriate Where Defense Lacks Financial Ability to Satisfy Claims

Plaintiffs filed a class action against defendants, including The Credit Store, alleging violations of the federal Fair Debt Collection Practices Act (FDCPA); a Texas federal district court certified the class action, but the defense delayed implementation of the certification order by filing a bankruptcy petition. The district court decertified the class action against The Credit Store sua sponte because it lacked the financial ability to satisfy any judgment against it. Barnett v. Experian Information Solutions, Inc., 236 F.R.D. 307 (E.D. Tex. 2006). The district court summarized the allegations against The Credit Store as follows: "The plaintiffs contend that the defendant purchased old debts and changed the date of last activity on the accounts such that they could be reported to credit reporting agencies under the Fair Credit Reporting Act. This gave the debt collectors leverage to collect the obsolete debts." Id., at 308.