Damages under Fair Debt Collection Practice Act Class Actions: The Damages Cap Applies Only to Statutory Damages

The FDCPA provides for actual and statutory damages, and attorneys’ fees and costs, as follows:

(a) Amount of damages. Except as otherwise provided by this section, any debt collector who fails to comply with any provision of this title [15 USCS §§ 1692 et seq.] with respect to any person is liable to such person in an amount equal to the sum of--

   (1) any actual damage sustained by such person as a result of such failure;

   (2)     (A) in the case of any action by an individual, such additional damages as the court may allow, but not exceeding $ 1,000; or

             (B) in the case of a class action, (i) such amount for each named plaintiff as could be recovered under subparagraph (A), and (ii) such amount as the court may allow for all other class members, without regard to a minimum individual recovery, not to exceed the lesser of $ 500,000 or 1 per centum of the net worth of the debt collector; and

   (3) in the case of any successful action to enforce the foregoing liability, the costs of the action, together with a reasonable attorney's fee as determined by the court. . . .

15 U.S.C. § 1692k.

            Some debt collectors have attempted to interpret this statute as capping both actual and statutory damages, to the “lesser of $500,000 or 1 per centum of the net worth of the debt collector.” Because many debt collectors are not huge companies, the “1 per centum of net worth” limit ends up being a very modest sum. Those debt collectors and their attorneys therefore believe that their exposure is limited to just a few thousand dollars, even in class actions involving hundreds or thousands of consumers. They are mistaken.

            The damages cap described in § 1692k(a) applies only to statutory damages. The structure of the statute makes that clear:  sub-section (a)(1) describes actual damages; sub-section (a)(2) describes statutory damages; and section (a)(3) describes attorneys’ fees and costs. The class action cap is found under section (a)(2), not under section (a)(1). 

            As described in Santoro v. Aargon Agency, Inc., 252 F.R.D. 675, 685 (D. Nev. 2008):

Under the FDCPA, all class members with actual damages are entitled to recovery of them, and each named plaintiff is entitled to recover up to $1000 in statutory damages. 15 U.S.C. § 1692k(a).  However, in a class action, the FDCPA caps statutory damages for all non-named class members at, in aggregate, the lesser of $ 500,000 or one percent of a debt collector's net worth.  See id.

(Emphasis added).

In del Campo v. Am. Corrective Counseling Servs., Inc., 254 F.R.D. 585, 595 n.7 (N.D. Cal. 2008), the District Court certified both an injunctive relief and damages class under the FDCPA, explaining:

Statutory damages under the FDCPA are limited to one percent of a defendant's overall net worth, and are divided among all class members. 15 U.S.C. § 1692(k). In cases where both statutory and actual damages are alleged under the FDCPA, courts have certified hybrid 23(b)(2)/23(b)(3) classes, with 23(b)(3) treatment deemed appropriate for class members alleging actual damages. See [Schwarm v. Craighead, 233 F.R.D. 655, 663-64 (E.D. Cal. 2006)].

(Emphasis added).

                  Accordingly, the FDCPA’s class action damages cap applies only to statutory damages, and the FDCPA is a viable means to recoup wrongfully collected amounts for class members.


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