November 23, 2009

Constitution Does Not Shield Abusive Tactics by Debt Collectors, Alaska Supreme Court Rules

Public Citizen Wins Important Victory for Consumers

WASHINGTON, D.C. – The Alaska Supreme Court ruled on Friday, November 20, that debt collectors who employ unfair or deceptive tactics during collection lawsuits are not shielded by the First Amendment. The case is the first ruling on the issue by any court nationwide. Debt collection firms have raised a constitutional defense, based on the right to petition the courts, in a series of consumer cases. Friday’s ruling overturns a lower-court decision that had ruled in favor of a collection agency.

“The Alaska Supreme Court’s ruling sends the message that debt collection companies can’t get away with abusive tactics simply by hiring lawyers,” said Deepak Gupta, the Public Citizen attorney who argued the case. “The court rejected a dangerous new immunity defense that would have created a gaping hole in consumer protection law.”

The case arose out of an attempt by a collection agency to sue Robin Pepper, a mentally disabled woman, without providing her with proper notice. The agency sent papers to a nonexistent address, misrepresented to the court that Pepper was competent, and tried to get a default judgment against her. Pepper, represented by Alaska Legal Services, then brought a separate lawsuit, alleging that the collection agency’s practices violated the Unfair Trade Practices Act. The collection agency asked the court to dismiss Pepper’s case on the theory that its litigation conduct was protected by the First Amendment, which provides a right of access to the courts. The lower court agreed and dismissed Pepper’s case. Alaska Legal Services asked Public Citizen to handle the case on appeal.

The Alaska Supreme Court broadly rejected the debt collector’s immunity defense, ruling that the First Amendment’s petition clause does not extend to conduct that was unfair, deceptive, and in violation of the Unfair Trade Practices Act. Quoting Public Citizen’s brief, the court ruled that debt collectors have “no legitimate interest in pursuing collection litigation without notifying debtors, or in seeking to default incompetent debtors without notice to their lawyers or guardians.”

The court’s opinion is available at:
https://www.citizen.org/sites/default/files/sp-6437.pdf

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