Stratton v. Portfolio Recovery Assoc. LLC

Case No. 13-6574 (6th Cir 2014)
When original lender enters into agreement with borrower to waive right to collect interest on debt, later debt buyer is bound by that agreement and cannot charge either statutory or contract interest. Debt buyer who acquired debt after lender waived interest violated Fair Debt Collection Practices Act when debt buyer later attempted to collect debt plus statutory interest as attempting to collect interest when not permitted by law.
Procedural context:
Borrower brought class action suit against debt buyer for violation of Fair Debt Collection Practices Act. District Court dismissed case, holding that state statute authorized lender to collect interest at statutory rate even if lender previously waived right to collect contract interest. On appeal, Sixth Circuit reversed, holding that creditor's charge off and waiver of interest included waiver of statutory and contract interest, and debt buyer violated FDCPA by attempting to recover interest.
Borrower defaulted on her credit card. Lender charged off debt and stopped charging interest, allowing lender to take tax deduction for bad debt and relieving lender of burden of sending monthly statements. About a year later, lender sold debt to third party debt buyer who brought suit against borrower, claiming right to recover balance on loan as of date buyer acquired debt plus interest at statutory rate. Borrower brought separate action against debt buyer for violation of FDCPA for charging interest where estate law did not authorize interest recovery.
Stranch, Keith and Batchelder (dissenting)

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