Court: Debt collector can be held liable for aggressive tactics

A round of cheers for the U.S. Court of Appeals for the Ninth Circuit in San Francisco for putting a bully in its place. In a ruling released Wednesday, the court told a California debt collector that the people it was harassing and threatening could indeed sue the company. Public Citizen argued the case on behalf of consumers on appeal.

American Corrective Counseling Services tried to claim that it couldn’t be sued because local prosecutors had hired the company to collect from people who had written bad checks.

The company sent out its letters on official stationary and threatened people with arrest and prosecution if they didn’t pay up. It then split the money it collected with the local district attorneys.

The company argued that it couldn’t be sued by pissed off consumers because it had “sovereign immunity,” which gives state agencies broad protection from lawsuits.

As Howard Mintz wrote in the San Jose Mercury News, “the 9th Circuit found that the company is not an arm of the government and can be sued for wrongdoing as a private debt collection agency.”

Read the Ninth Circuit’s ruling. You can also find other documents related to the case on the Public Citizen Web site.

The Daily Case Report discusses the legal issues of the case.

[Update: Public Citizen attorney Deepak Gupta also writes about the case on the Consumer Law & Policy Blog.]