CHICAGO (CN) - Municipal fines are not debts under federal law, the 7th Circuit ruled Thursday, making itself the first court of appeals to officially decide the issue.
"Apparently the question whether fines are 'debts' under the [Fair Debt Collection Practices Act] has never arisen in a court of appeals (at least not in a precedential decision)," the short unsigned decision states. "Yet the issue has come up frequently in the district courts, which have concluded uniformly that a fine does not stem from a consensual transaction and thus is not a debt. ... We agree with these decisions."
The case at issue involved Chicago resident Victor Gulley, who sued Markoff & Krasny, a debt-collection law firm hired by the city to collect four separate unpaid fines arising from a parcel of real estate that he no longer owned.
Gulley argued that Markoff & Krasny had violated the FDCPA by misrepresenting the total amount he owed, failing to validate the alleged debts, communicating with him after being told to stop and generally harassing him.
Markoff & Krasny moved to dismiss, arguing that Gully is not a "consumer" and the unpaid fines are not debts under the statute. U.S. District Judge Robert Gettleman granted the motion, and the 7th Circuit affirmed.
The appellate court's conclusion is also supported by the Federal Trade Commission.
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