In Security Finance v. Brian Kirsch (2019 WI 42), the Wisconsin Supreme Court held that debtors sued without first receiving a notice of right to cure default may not sue a creditor for damages under the Wisconsin Consumer Act.

The underlying claim in this case arose when Security Finance sued Brian Kirsch for a default on a loan. Kirsch counterclaimed that Security Finance’s complaint failed to give him proper notice of right to cure the default under Wis. Stat. Ch. 425. Security Finance ultimately voluntarily dismissed the case, but Kirsch wanted to maintain his counterclaims and pursue remedies for violations of Wis. Stat. § 427.104 (1)(g) and (j), which respectively prohibit creditors from harassing and threatening debtors and from attempting to enforce a right that doesn’t exist.

The court decided Kirsch cannot sue for damages under Ch. 427 simply because Security Finance failed to give proper notice of right to cure. Because Security violated the notice requirement under Ch. 425, Kirsch was entitled to the dismissal of the action without prejudice. However, the Ch. 425 violation is simply a procedural error and does not relinquish Security’s right to collect. In contrast, Ch. 427 addresses illegal “egregious behavior” by collectors, and Security’s Ch. 425 procedural violation does not entitle Kirsch to remedies under that chapter, which include damages caused by emotional distress (Wis. Stat. § 427.105(1)).

Justice Daniel Kelly (joined by Justice R. Bradley) wrote a concurring opinion that agreed with the court but also would have overturned Kett v. Community Credit Plan, Inc. (1999). While the court distinguished between Kett and the instant case, Kelly said both cases address the same issue: whether a procedural mistake by creditors allows debtors to collect remedies under § 427.105. The concurring opinion would overrule Kett to say that, in addition to the holding in Security Finance that violation of notice requirements do not constitute a Ch. 427 violation, filing in an improper venue is not grounds for damages under § 427.105.

In a dissent, Justice Walsh Bradley (joined by Justice Abrahamson) said the court should have followed Kett and allowed Kirsch’s § 427.105 claims to stand. Security Finance filing a lawsuit without proper notice of right to cure constituted enforcement of a right it had reason to know did not exist, thus violating § 427.104(1)(j).  Furthermore, the dissent argued the court’s ruling contradicts the overall purpose of the Wisconsin Consumer Act to protect consumers against unfair practices.