Plaintiff Who Denied Knowledge of a Debt Could Not Meet Burden of Proving Consumer Status

A decision by a U.S. Magistrate Judge in Wisconsin may provide an interesting defense for debt collectors who are sued by plaintiffs who will not acknowledge incurring the debts at issue.  In Burton v. Kohn Law Firm, S.C., Burton sued a debt buyer and its law firm for alleged violations of the FDCPA.  However, in the underlying state court collection suit Burton stated in his answer that he had no knowledge of the credit agreement, and he denied that he had applied for the account on which he was sued.

In addition to his answer, Burton testified the underlying state court proceeding that he did not apply for, and had no knowledge of, the credit card in question. He subsequently sued the Kohn law firm in federal court, and later amended to add its debt buyer client as a co-defendant.  The parties filed cross-motions for summary judgment.

Noting that there was no dispute regarding Burton’s testimony that he did not apply for, or have any knowledge of, the underlying credit card transactions, the court also found that the billing statements did not show that the transactions were clearly incurred for personal, family, or household purposes.

That the billing statements were addressed to Burton’s residence does not prove that the debt was consumer debt because “a person can be sued in his or her individual capacity even for business debt . . . .” Boosahda v. Providence, Case No. 10-1933, 462 F. App’x 331, 335, 2012 WL 268345 (4th Cir. Jan. 31, 2012) . . .

The court held that, as the plaintiff, it was “Burton’s burden to show that the debt in question is consumer debt” and that “it is not defendants’ burden to establish that the debt is not consumer debt.”   Looking to the billing statements, which were the primary evidence of the debt, the court concluded:

To be sure, the billing statements as a whole do not necessarily show that the charges were for commercial use. However, the billing statements do not facially show that the charges were made for personal use either.

The court recognized the tension created by requiring Burton to show the nature of a debt that he claimed was not his, noting that his case was similar to plaintiffs who allege that they are victims of identity theft and thus are unable to establish the intent or purpose of a debt. Generally, courts look to the intent or purpose of the transaction when determining whether a consumer debt exists. However, the court placed identity theft victims into a separate class of plaintiffs, noting that identity theft presented a relevant evidentiary factor.

In this case, Burton presents no evidence of identity theft or mistaken identity. He does not argue that the social security number on the account was not his or provide any other evidence of how Citibank (and thus Unifund) made a mistake in stating that the debt was his. Thus, I cannot consider mistaken identity as a relevant factor in determining whether the debt in question is consumer debt. . . Moreover, as discussed earlier, the billing statements themselves do not reveal whether the transactions were made for personal use or commercial use and Burton provides no context to the statements which would aide a rational fact finder in making that determination.

Burton’s failure to show that the debt at issue was incurred for personal, family, or household purposes resulted in summary judgment for the defendants, as he could not meet his burden of proof.  While this decision will not affect cases in which plaintiffs acknowledge incurring the debts at issue, it certainly may impair the viability of suits brought by plaintiffs who refuse to remember or acknowledge incurring the debts at issue.