The Fair Debt Collection Practices Act (FDCPA) was enacted by Congress in 1977 in an effort to curb abusive, deceptive, and unfair debt collection practices by debt collectors. Since then, consumers have routinely filed suit against debt collectors for abusive collection practices. The statute explicitly states that creditors who "offer or extend to offer credit creating a debt or to whom a debt is owed" are excluded from liability under the FDCPA. 15 U.S.C. § 1692a(4). Recently, in Brown v. Firstsource Advantage, LLC, No. 17-5760, the Honorable Gerald J. Pappert of the United States District Court, Eastern District of Pennsylvania granted a motion to compel arbitration in an FDCPA class action lawsuit filed against a third-party debt collection vendor based on language contained in the original creditor's Cardmember Agreement.
Plaintiff, Dayo Brown, opened a Gold Delta SkyMiles credit card account in 2015 and entered into a Cardmember Agreement with American Express that contained an arbitration provision applying to: "[A]ny current or future claim, dispute or controversy relating to [a customer's Account(s), this Agreement, or any agreement or relationship you have had with us...includ[ing]...claims by or against any third party using or providing any product, service or benefit in connection with any account." The Cardmember Agreement also precluded acting in a representative capacity in a class action involving any claim subject to arbitration. Between December 2016 and April 2017, Brown received four (4) letters from Firstsource, an American Express vendor, inviting him to settle his debt. Thereafter, Brown filed a class action lawsuit against Firstsource alleging various violations of the FDCPA.
American Express, though not originally named as a Defendant in the class action, moved to intervene in the action, asserting that Brown's suit threatened its ability to use third-party vendors (such as Firstsource) and further asserting that the Cardmember Agreement and its arbitration provision governed the dispute between Brown and Firstsource. American Express' motion to intervene was granted, and American Express promptly filed a motion to compel arbitration. Brown opposed the motion, disputing the arbitration clause's validity on the grounds that it was "overly broad" and further arguing that the Agreement does not encompass claims relating to FDCPA violations by third-party debt collectors, not a party to the Agreement.
In granting American Express' motion to compel, Judge Pappert held that the arbitration clause was valid and enforceable since Plaintiff's "FDCPA claim arises from conduct related to the credit card account he opened when he entered into his Cardmember Agreement with American Express and agreed to resolve any claims, including claims by statute, by individual arbitration." Further, Judge Pappert held that since American Express is a signatory to the Cardmember Agreement, it had the standing to enforce the terms of the Agreement in Brown's suit against Firstsource since the agreement expressly encompassed claims "against any third party...providing any service...in connection with" Brown's account. Thus, Brown's action was stayed and placed in civil suspense pending the outcome of the arbitration. The Court further ordered that the arbitration would proceed on an individual basis and not as a class action.
Comment: Nearly every contract or written agreement between a consumer and a creditor contains a mandatory arbitration provision concerning dispute of claims arising from the agreement or the credit terms. However, Judge Pappert's decision in Brown v. Firstsource Advantage, LLC is noteworthy in that it enforces a mandatory arbitration provision in a class action lawsuit against a party that is not a signatory or party to the contract containing the arbitration agreement. Brown did not name American Express as a defendant in the action since original creditors are immune from liability under the FDCPA. However, due to American Express' intervention in the class action lawsuit, Firstsource reaped the benefits of American Express' Cardmember Agreement.
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Chelsea R. Seidel