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Hoffman v. Encore Capital Group, Inc.

A-3008-07T1 (N.J. Super. App. Div. 2008) (Unpublished)

CONSUMER FRAUD ACT; CREDIT CARDS — Where a consumer cannot allege a Consumer Fraud Act by a credit card issuer and its debt collection agency’s activity is not connected to either merchandise marketing or to the sale or making of any loans, the agency cannot be charged with violation of the Act even under the broadest reading of the Act.

Two consumers were initially sued by a debt collector in two individual actions to collect unpaid credit card debts. The collector received full judgment from one debtor after acquiring a default judgment, but the complaint against the other debtor was dismissed because he was the victim of identity theft and did not incur the debt. A counterclaim by the identity theft victim against the collector was amended to include the other consumer. The consumers alleged fraud, violations of the New Jersey Consumer Fraud Act (CFA), and violations of the New Jersey Racketeer Influenced and Corrupt Organizations Act (RICO). The lower court dismissed their complaint for failure to state a claim upon which relief can be granted. The consumers appealed.

The Appellate Division affirmed, commenting only regarding the alleged violations of the CFA. The consumers contended the CFA applies to offers of credit to the public and that the debt collector stood in the shoes of the commercial lenders from whom it purchased delinquent debt. The Court said that the CFA is intended to protect consumers by eliminating sharp practices and dealings in the marketing of merchandise and real estate. It noted that the consumers in this appeal did not allege a CFA violation by the original lenders. Consequently, it held that the debt collection activities could not be connected to either merchandise marketing or to the sale or making of any loan even under the broadest reading of the CFA. Thus, the Court affirmed the lower court’s findings that the debt collector did not induce the consumers to incur an obligation as defined by the CFA, and did not offer to sell anything to the consumers.

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