The Supreme Court of Alabama has reversed a jury verdict awarding the plaintiff $200,000 in damages, ruling on appeal that the Fair Debt Collection Practices Act (FDCPA) did not apply to the pawn transaction at issue.
The case, Complete Cash Holdings, LLC v. Powell, arose from a forged title-pawn agreement. Ms. Powell’s granddaughter stole title to Ms. Powell’s truck, and then, with the assistance of a Complete Cash employee, entered into a forged agreement with Complete Cash to pawn the truck. The granddaughter received $2,352 in cash from Complete Cash, purported to give Complete Cash a security interest in the truck, and forged signatures so that her grandmother was obligated to repay the loan (plus a finance charge) the following month. All of this was done without Ms. Powell’s knowledge. The title-pawn agreement was then extended several times for additional 30-day periods, and the granddaughter made several payments pursuant to the extensions. But the payments eventually stopped, and Ms. Powell’s truck was therefore repossessed.
Ms. Powell later brought suit against Complete Cash. Among other claims, she brought claims under the Alabama Pawnshop Act (Ala. Code § 5-19A-1, et. seq.) and the FDCPA. The trial court dismissed various claims before trial but it did not dismiss the FDCPA claim, and thus the FDCPA claim and several others were eventually tried to a jury. The jury ruled in Ms. Powell’s favor and awarded her $200,000 in damages.
On appeal, Complete Cash reiterated its argument that the FDCPA did not apply to the facts of this case because Complete Cash is not a “debt collector” as that term is defined under the FDCPA. Specifically, Complete Cash argued that it “is in the business of lending money to consumers by way of deferred presentment agreements and title pawns,” and that it is a “creditor” (rather than a “debt collector”) under the FDCPA.
The Alabama Supreme Court agreed with Complete Cash, noting that the company’s business “is to extend credit to borrowers, which places these borrowers in debt,” and that “Complete Cash is [therefore] Powell’s creditor.” Although Ms. Powell argued on appeal that a “creditor” may nonetheless become a “debt collector” when it seeks to enforce a security interest, the court rejected that argument. Instead, the court ruled that Complete Cash was merely collecting its own debt and enforcing its own security interest when it repossessed the truck. It was not collecting debts owed to others, and thus could not be a “debt collector” for purposes of the FDCPA.
The Alabama Supreme Court rarely gets an opportunity to weigh in on FDCPA matters. The court’s ruling in this case should provide some limited comfort to companies like Complete Cash that do business in Alabama. If the companies are merely collecting their own debts, they now have a strong precedent to rely upon in arguing that they should not face liability under the FDCPA.