Barron & Newburger Attorneys Secure Win at the Third Circuit, Confirming PA State Lending License Law Does Not Apply to Charged-Off Debt

On February 7, 2024, the Third Circuit Court of Appeals affirmed a district court holding that the Pennsylvania Consumer Discount Company Act (“CDCA”) did not apply to a charged-off debt that was later sold and could not form the basis for a lawsuit brought under the federal Fair Debt Collection Practices Act. Plaintiff brought the lawsuit stating that since a downstream debt buyer did not hold a license under the Consumer Discount Company Act, the debt buyer could not collect on the underlying debt. Brit Suttell moved for judgment on the pleadings on behalf of our client explaining why the CDCA did not apply. While the motion was pending, the Third Circuit ruled that the CDCA did not apply to loans that were charged-off and sold to non-CDCA licensed entities. See Lutz v. Portfolio Recovery Assocs., 49 F.4th 323 (3d Cir. 2022), and Zirpoli v. Midland Funding, LLC, 48 F.4th 136 (3d Cir. 2022).

Relying on the holdings in Lutz and Zirpoli, the district court granted the motion for judgment on the pleadings. The case was appealed to the Third Circuit. Both sides extensively briefed the applicability of the CDCA to charged-off debt that was then sold to non-CDCA licensees. After an invitation from the court, the Pennsylvania Department of Banking & Securities issued an amicus clearly stating that the CDCA did not apply, which was the central argument from the beginning. Brit Suttell and Francesca Di Troia handled the appeal with assistance from Mike Truesdale.