On June 18, 2013 the Illinois Appellate court issued its opinion in Unifund v. Shah. Joseph Messer and Nicole Strickler of Messer Strickler, Ltd. represented ACA International which was an Amicus Curiae on the appeal. Although not a landslide victory for Unifund, the decision was a clear victory for collection agencies and debt buyers operating in Illinois as the Appellate Court agreed with our argument that Section 8b applies only to assignments for collection and not to outright sales. The decision clarifies the law for collectors and debt buyers and establishes a workable framework for collectors who take assignments for collection from debt buyers. The following is a brief summary of the background of the case and the Appellate Court’s ruling.
The appeal involved the application of Section 8b of the Illinois Collection Agency Act (ICAA). Section 8b provides that “[a]n account may be assigned to a collection agency for collection with title passing to the collection agency to enable collection of the account in the agency’s name as assignee for the creditor provided:
(a) The assignment is manifested by a written agreement, separate from and in addition to any document intended for the purpose of listing a debt with a collection agency. The document manifesting the assignment shall specifically state and include:
(i) The effective date of the assignment; and
(ii) The consideration for the assignment.”
225 ILCS 425/8(b).
The Trial Court held that Section 8b applies not only to assignments made for collection purposes, but to those that contain a full transfer of rights associated with the debt (i.e., debt purchases). Further, the Trial Court held 8b applies for each and every transfer in the chain of title of an account. This decision obviously created problems for collectors collecting debt buyers as collectors would often lack information and documentation regarding the assignment of an account from the original creditor to the debt buyer, let alone the effective date of the assignment or the consideration for the assignment.
On appeal we argued on behalf of ACA International that the plain language of Section 8b makes absolutely no reference to full assignments. Instead, the section specifically references “assignment[s] for collection” purposes. Id. Appellee Shah argued that Section 8b mandates that both the date of transfer and consideration paid must be identified for any transfer involving an account, regardless of whether the transfer was a full transfer of rights or an assignment for collection purposes. We countered with the argument that the term “assignment” in Section 8b read in conjunction with the plain language of the statute, shows otherwise. Further, we argued that our interpretation of Section 8b was directly supported by the Illinois legislature’s recent clarification of the ICAA. After the appeal was filed the legislature amended Section 8.6 of the ICAA to specify that debt buyers are not required to “adhere to the assignment for collection criteria under Section 8b of this Act.” 225 ILCS 425/8.6(b)(iv) (effective January 1, 2013). Finally, we argued that in cases involving purchased debt the Trial Court’s interpretation of Section 8(b) would place assignee collectors in an often impossible situation since they would often be unable to obtain the date of and consideration paid for each and every transfer in the chain of title of a purchased account.
The Appellate Court agreed with us, finding that the plain language of Section 8b indicates the legislature intended to exclude sales of an account to a debt buyer from the Section’s reach. Thus, to state a cause of action in a collection lawsuit a debt buyer, unlike an assignee for collection, need not comply with Section 8b.
However, the Appellate Court found that a collector who takes legal title to an account as an assignee for collection must comply with Section 8b. Specifically to plead a valid assignment for collection the collector must plead that the document manifesting the assignment identifies (1) the accounts transferred, (2) the consideration paid, and (3) the effective date of the transfer. This pleading requirement exists regardless of whether the collector has taken an assignment for collection from a debt buyer or the original creditor. Further, the Appellate Court ruled that in cases involving multiple transfers of an account between collection agencies that have passed title to the account as assignees for collection, the collector that files the collection lawsuit must comply with Section 8b by providing the 8b information for each prior transfer of the account between those agencies.
We hope that our clients and friends will benefit from the law established by Unifund v. Shaw, as well as the ACA International inspired guidance provided by the Appellate Court in this previously murky area of the law.
If you have any questions regarding the matter or would like a copy of the Appellate Court’s Opinion feel free to contact Joseph Messer at (312) 334-3440 or firstname.lastname@example.org.