Creditors Be Wary: Charged Off Credit Card Debt Requires Notice of Right to Cure in Wisconsin

In Bahena v. Jefferson Capital Systems, the plaintiff alleged violations of the Wisconsin Consumer Act (“WCA”) and Fair Debt Collection Practices Act. The defendants brought a state-court debt collection action with no legal right to do so, because they had not provided the required notice of right to cure (“RTC”) before filing the suit. Pursuant to Wisconsin Law, debt collectors must provide a consumer with notice of RTC default prior to commencing suit. This is includes a previously charged off but not yet mature debt. Defendants sought an exception to the notice requirement when there is no possibility of the consumer restoring her pre-default position. Previously, Rosendale State Bank v. Schultz stated the purpose of requiring the notice of RTC before the creditor may accelerate the obligation, is to allow the consumer to restore his or her loan to current status and preserve the customer-merchant relationship. The court distinguished Rosendale from the facts in this case because that obligation was entirely past due and fully owed. The Court held that eliminating the RTC for charged off accounts would subvert the purpose of the WCA, which affords consumers a meaningful opportunity to cure the default. Please contact us if you need additional guidance or information regarding the WCA or compliance with state and federal debt collection laws.