Dismissing a Debt Collection Lawsuit Under the North Carolina Debt Buyer Act
Updated: Jan 22
A debt collection lawsuit filed under North Carolina law can be dismissed if it was filed by a debt collector who, in the initial court filing, did not attach certain documents showing that the account is owed. Here we explain why these cases can be dismissed, and also provide an example of a decision where a court dismissed a debt buyer’s lawsuit.
Nobody wants to be sued by a debt collector. But it’s well established that certain debt collectors – so-called “debt buyers,” who purchase based debts in order to collect on them – often have little documentation to prove that they own an account.
The North Carolina legislature got wise to this fact and passed a special law that applies to debt buyers. The definition of debt buyer comes from G.S. 58-70-15 and is as follows:
“[D]ebt buyer” means a person or entity that is engaged in the business of purchasing delinquent or charged-off consumer loans or consumer credit accounts, or other delinquent consumer debt for collection purposes, whether it collects the debt itself or hires a third party for collection or an attorney-at-law for litigation in order to collect such debt.
Any debt collector that meets the above definition is a debt buyer and has to get a Collection Agency license from the North Carolina Department of Insurance.
When a debt buyer files a collection lawsuit there are important requirements they must comply with or else the lawsuit will be dismissed. Here are the requirements.
The lawsuit must state the debt buyer’s Collection Agency license number.
A copy of the signed contract, or, if there’s no signed contact, “copies of documents generated when the credit card was actually used,” must be attached.
Also attached must be all the assignments of the debt showing that ownership was legally transferred from the original creditor to the debt buyer.
These requirements come from G.S. § 58-70-150, which is titled “Complaint of a debt buyer plaintiff must be accompanied by certain materials.”
If the debt buyer fails to attach these documents to its debt lawsuit, the case is subject to dismissal. This is usually done by the consumer filing a motion to dismiss.
An example of one court dismissing a debt buyer’s case for failure to comply with these requirements is in Midland Funding v. Barker. In that case, a debt buyer, Midland Funding, filed a collection lawsuit. Midland Funding never said there wasn’t a signed cardholder agreement, yet it failed to attach a signed agreement. As a result, the judge said that “for failure to comply with the mandatory requirements of G.S. § 58-70-150, [Midland Funding’s] complaint should be dismissed.
Culik Law is a North Carolina consumer protection law firm. Our attorneys represent consumers and small business owners against creditors, debt collectors, and debt buyers throughout North Carolina. If you received notice of a debt collection lawsuit, or if you’re just not sure what to do about an account that has fallen behind, contact us at Culik Law to see if we can help.