FDCPA Case — Absurd Class Action — Insufficient Class Notice To Bind Class Member


The Second Circuit Court of Appeals rejected a debt collection agency’s claim that a class action settlement, with a single notice in USA Today, is enough to bind a consumer so that consumer cannot sue. The case is Hecht v. United Collection Bureau, Inc. (2nd Cir. August 17, 2012).

The settlement smacks of a sweetheart deal between the lawyers for the consumers (supposedly) and the debt collector UCB:

The Settlement Order provided damages and injunctive relief in accordance with the parties’ stipulation. Each named class representative received $1,000, the maximum recovery allowed under the FDCPA for named class representatives, see 15 U.S.C. § 1692k(a)(2)(B)(i), as well as $1,500 “in recognition for their services to the Settlement Class Members.” The Settlement Class was awarded $13,254, 1% of UCB’s net worth, the maximum amount available under the FDCPA for unnamed class members. See 15 U.S.C. § 1692k(a)(2)(B)(ii) (providing that maximum damages amount for unnamed class members, in the aggregate, is “the lesser of $500,000 or 1 per centum of the net worth of the debt collector”). This amount was to be distributed to a national charitable organization as a cy pres payment. Class counsel was awarded up to $90,000 in fees and costs as provided for by the parties’ stipulation.

This case involved “mini-miranda” violations — the debt collector did not leave proper voicemails and instead left out the warning to consumers that it was a debt collector.

This will give you a feel for how absurd this settlement was — that generated ZERO money for over 2,000,000 class members. Yes, you read that right. Two Million consumers.

The district court rejected Hecht’s argument and held that the notice satisfied due process because “constructive notice through publication may be sufficient,” and because the amount of money at stake was minuscule since the more-than-two-million class members had only approximately $13,000 to divide among themselves.

Each case could have been brought and the consumer would normally recover at least a $1,000. We routinely settle these types of cases on behalf of one person for up to $5,000.

But this class action for 2,000,000 million people generated $13,000 in damages which was given away and not a penny went to class members.

The appellate court accurately noted:

Finally, as to UCB’s argument, and the district court’s implied holding, that the negligible amount of money to be awarded per person under the Gravina settlement justified lesser notice, the district court did not acknowledge that the FDCPA damages provision allows a single claimant up to $1000 in statutory damages, see 15 U.S.C. § 1692k(a)(2)(A), but allows unnamed class members, in the aggregate, “the lesser of $500,000 or 1 per centum of the net worth of the debt collector,” see id. § 1692k(a)(2)(B). Given this contrast between the damages available to unnamed class members and those available to individual plaintiffs, it was all the more important that Hecht receive adequate notice before being deprived of her individual right to sue. Cf. Mace v. Van Ru Credit Corp., 109 F.3d 338, 344-45 (7th Cir. 1997) (“When individual class members are offered the right and opportunity to opt out of the class action, the statutory language [in Section 1692k(a)(2)(B), capping the unnamed class members’ damages] `without regard to a minimum individual recovery’ generally controls.”).

The consumer was allowed to go back to court to pursue the individual case.

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