Vanessa Smith was involved in a traffic accident in Arkansas and received a citation. In connection with the accident, Nationwide Mutual Insurance and Investments obtained a default judgment against Smith. The insurer then assigned the judgment to The McHughes Law Firm, LLC for collection. Smith subsequently entered into a payment plan with McHughes to satisfy the judgment.

From time to time, Smith failed to make agreed-upon payments to McHughes. When this happened, McHughes would notify the Office of Driver Services in the Arkansas Department of Finance and Administration (“the Agency”), resulting in suspension of Smith’s license. When Smith made arrangements to cure the delinquency, McHughes would notify the Agency, and Smith would be allowed to reinstate her license for a fee. Smith ultimately satisfied the judgment in full, and McHughes notified the Agency accordingly. Several months later, McHughes erroneously sent a letter to the Agency stating that Smith was behind on her payments.

Smith brought suit against Nationwide and McHughes under the Fair Debt Collection Practices Act, alleging “deceptive, coercive, and harassing methods of collection on the insurance claim by means of the default judgment and repetitive suspension of her driver’s license.” In reviewing the complaint for failure to state a claim, the U.S. District Court for the Western District of Arkansas found that Smith could not state a claim under the FDCPA because the judgment did not meet the definition of a “consumer debt.” Specifically, the subject of the transaction – the traffic violation – had not been incurred “primarily for personal, family, or household purposes.” Thus, “[a] civil judgment arising out of an automobile accident is not a consumer debt within the meaning of the FDCPA.” The Court also found that Smith’s purported claim under the Arkansas Deceptive Trade Practices Act was time-barred.

A copy of the decision can be accessed here.