Ninth Circuit Holds That Debt Collector’s Interest Demand Did Not Violate FDCPA

The United States Court of Appeals for the Ninth Circuit recently reversed a District Court’s grant of summary judgment to a debtor and held that a debt collector was entitled to demand interest under California law.  See Diaz v. Kubler Corp., 785 F.3d 1326 (9th Cir. 2015).  The Fair Debt Collection Practices Act (“FDCPA”) is designed to eliminate abusive debt collection practices by debt collectors.  See 15 USC 1692.  Included in its prohibitions is a bar on attempting to collect an amount that is not “expressly authorized by the agreement creating the debt or permitted by law.”  In the case, a debt collector attempted to collect on the plaintiff’s medical bill, and sent a letter demanding the full principal amount plus interest.  The plaintiff filed the lawsuit, claiming that the request for prejudgment interest violated both the FDCPA and California law because ““[w]ithout a judgment for breach of contract awarding prejudgment interest, Defendant cannot seek to collect prejudgment interest on Plaintiff’s debt[.]”  The District Court agreed and granted summary judgment for the debtor.  The Ninth Circuit disagreed, however, and reversed the lower court’s decision.  It held that California law allows for the recovery of prejudgment interest before a judgment is entered if the debt in question was certain or capable of being made certain at the time, which was the case here.  Because the debt collector was entitled to prejudgment interest under California law, the letter did not violate the FDCPA.

For a copy of the decision, please contact Michael O’Donnell at modonnell@riker.com.