Written by attorney Jonathan Silvanus Udoka

Arkansas Consumers Get A New Defense Against Debt Buyers: LVNV Funding LLC v. Rae Nardi, 2012 Ark.

The Arkansas Supreme Court’s decision in LVNV Funding LLC v. Rae Nardi gives consumers another line of defense against unscrupulous debt collectors abusing the court system in Arkansas. [1] In its four-page opinion, the Court closed the courthouse doors to debt-buyers that cannot produce the debtor’s credit contract. [2]

The third-party debt collection (“debt-buyer") industry collected approximately $54.9 billion in total debt in 2010, on which they earned $10.3 billion in commissions. [3] In Arkansas, debt-buyers collected $435.4 million and earned $68.4 million in commissions. [4] Debt buyers make money from collecting the debts of other businesses such as credit card issuers, banks, retail stores, and health care providers. [5] While some of these debt buyers may strive to work ethically in their industry, others blatantly abuse the court system to accomplish their ends.

In LVNV Funding LLC, the debt buyer, LVNV, brought a legal action to collect a debt from the debtor, Rae Nardi. [6] According to the complaint, Nardi received a credit card from Citibank, made purchases on the card, and failed to pay on the account. [7] Citibank eventually sold the account, and somewhere down the line LVNV purchased the account and brought an action to collect it. However, as is the case with many debt buyers, [8] LVNV proceeded to bring its lawsuit without the proper documentation to prove that Nardi owed the debt.

Under Arkansas Rules of Civil Procedure, when a party brings a lawsuit to recover money based on a contract, that party must attach a copy of the contract to the complaint in the lawsuit. [9] Such a contract may be omitted if “good cause is shown for its absence in such a pleading." [10] Comment 4 to this rule plainly states that “exhibits should be attached to pleadings in all but exceptional cases." [11] Debt buyers have been disregarding this rule in Arkansas due to Arkansas Code Annotated section 16-45-104 which states,

In any suit on an account in any of the courts of this state, the affidavit of the plaintiff, duly taken and certified according to law, that the account is just and correct shall be sufficient to establish the account, unless the defendant denies under oath the correctness of the account, either in whole or in part, in which case the plaintiff shall be held to prove by other evidence such part of his account as is thus denied.

(emphasis added). However, debt buyers may no longer rely on this provision. The Court made clear in LVNV Funding LLC that Rule 10(d) is mandatory. [12] The Court explained that a section 16-54-104 affidavit might offer proof of the account amount, but does not “satisfy or excuse compliance with Rule 10(d)." [13] Without attaching the contract that Nardi had signed, the Court plainly stated that summary judgment against LVNV was proper. [14] Thus, Arkansas debtors should fight back against these collectors if the collectors bring lawsuits without the proper documentation.

In addition to the prohibition against bringing collection lawsuits without the proper documentation, state and federal law also limits other collection activity. Under the federal law called the “Fair Debt Collection Practices Act," (“FDCPA") collectors are not allowed to do the following:

· Call before 8:00 AM or after 9 PM;

· Call repeatedly;

· Use obscene language;

· Tell your neighbors or employer about your bill;

· Threaten to have you arrested;

· Go into your home uninvited by an adult resident;

· Remain in your home when asked to leave;

· Continue to contact you after receiving a “Stop Contact" letter. [15]

If a debtor feels that a debt collector is acting illegally, she should contact an attorney. In this economy, many people are drowning in debt. However, debt collectors should not be allowed to illegally harass debtors. There are several ways to deal with debt. Debtors can work out a payment plan with their creditors; complain about billing errors; write a “Stop Contact" letter; sue the collection agency; or file for bankruptcy protection. The only thing debtors should not do is – nothing; debtors can fight back against harassing debt collection activity.

[1] 2012 Ark 460.

[2] Id.

[3] The Impact of Third-Party Debt Collection on the National and State Economies, February 2012, available at

[4] Id. at 7.

[5] Id. at 4.

[6] 2012 Ark 460, *1.

[7] Id.

[8] For a full discussion on the emerging issue of missing documentation in debt buyer lawsuits, see Peter A. Holland, The One Hundred Billion Dollar Problem: Robo-Signing and Lack of Proof in Debt Buyer Cases, 6 J. of Bus. & Tech. L. 259 (2011). Unscrupulous debt buyers sometimes bring lawsuits without ever owning the debt, and they may obtain judgments in lawsuits without ever notifying the debtor about the lawsuit.

[9] Ark. R. Civ. P. Rule 10(d).

[10] Id.

[11] Id. cmt. 4.

[12] 2012 Ark. 460 at *3.

[13] Id.

[14] Id.

[15] The FDCPA gives a debtor the right to send a letter to a collection agency asking the collection agency to verify the debt and to stop contacting the debtor.

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