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Rutgers-The State University v. Fogel

403 N.J. Super. 389, 958 A.2d 1014 (App. Div. 2008)

NOTES; FDCPA — Under the Fair Debt Collection Practice Act, a suit against a consumer debtor must be brought either where the debtor lives or where the debtor signed the contract underlying the debt and it does not matter if the contract, itself, sets forth a different location as the place where the contract had been signed.

A borrower signed promissory notes for two student loans while attending law school. The borrower failed to repay the notes and was the subject of a debt collection action brought by the University that had extended the loans to him through a federal program. The University was based in Middlesex County but the borrower, who was a Brooklyn, New York resident when he signed the promissory notes, attended classes at a University-affiliated law school in Essex County. Because the two loans were taken out for personal, family or household purposes, they were subject to federal fair debt collection statutes. A law firm representing the University brought the action in Middlesex County and served notice on the borrower at his home in Brooklyn.

The borrower, arguing pro se, asserted as an affirmative defense that the action had been brought in the wrong venue and that according to federal fair debt collection statutes should have been brought in Brooklyn, where he lived, or in Essex County, where he attended law school. Neither party subsequently moved for a change of venue. The borrower also retained counsel to bring a third-party complaint against the law firm for using unconscionable means to collect the debt by filing the action in the wrong venue. The lower court granted the law firm’s motion to dismiss the third-party complaint on summary judgment. Its decision was made on the grounds that the notes stated that the University was located in a Middlesex County and that the borrower’s signature constituted acknowledgment that the University was a Middlesex County entity.

On the borrower’s appeal, the Appellate Division pointed out that the federal fair debt collection statutes were intended to prevent abusive debt collection practices such as bringing claims in distant forums, which could discourage or prevent debtors from contesting the claims, resulting in default judgments. The Court concluded that the law firm violated the federal fair debt collection statutes by bringing the action in Middlesex County. Since the lower court did not address the borrower’s third-party complaint against the law firm, those claims were not heard on appeal. The Court remanded the matter to the lower court for further proceedings.

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