New Jersey’s Supreme Court has settled a question that debt collection defense attorneys and consumer advocates across the state have been fighting over for years, and the answer was not the one borrowers were hoping for. In a unanimous decision issued July 8 in Scott Diana v. LVNV Funding, LLC, the Court held that the state’s Consumer Finance Licensing Act does not give borrowers a private right to sue and void a loan contract on their own, even when the entity holding that debt was never properly licensed to do business in New Jersey in the first place.
The case traces back to an ordinary credit card default. Scott Diana fell behind on an outstanding credit card balance, and the original creditor sold that debt off, setting in motion a chain of assignments that is fairly typical in the debt collection industry. The balance moved from the original issuer to MHC Receivables, then to FNBM, then through two separate Sherman Originator entities, before finally landing with LVNV Funding, the company that ultimately tried to collect. None of the companies that held Diana’s debt along that chain were licensed in New Jersey as consumer lenders or sales finance companies at the time they held it, and notably, none of them were ever investigated or prosecuted by the state for that licensing failure either.
LVNV eventually filed suit to collect on the debt, and a default judgment was entered against Diana. Rather than simply contesting that judgment, Diana went further, filing a separate class action on behalf of himself and other consumers whose debt had similarly passed through LVNV’s hands. His argument rested on New Jersey’s licensing statute, which requires companies to be properly licensed before taking assignment of consumer debt, and on a related provision stating that a loan contract obtained in violation of that licensing requirement is void. If Diana was right, an entire category of debt purchases handled by unlicensed companies could potentially be unwound by the borrowers themselves, without needing the state to step in and enforce the licensing law directly.
The trial court did not buy that theory, dismissing Diana’s complaint with prejudice on the grounds that the CFLA simply does not hand borrowers that kind of private enforcement power. Diana appealed, but while his case was still pending, the Appellate Division had already reached the same conclusion in a separate case, Francavilla v. Absolute Resolutions VI, LLC, finding no private right of action anywhere in the statute. Facing that precedent directly, the Appellate Division saw no reason to break from its own recent ruling and affirmed the dismissal in Diana’s case as well.
Writing for a unanimous Supreme Court, Justice Hoffman upheld that outcome, working through the well established Cort v. Ash framework that New Jersey courts use whenever they need to determine if a statute implies a private right of action even when the legislature never wrote one in explicitly. That test asks three things: whether the plaintiff belongs to the class the statute was specifically designed to protect, whether there is real evidence the legislature intended to create a private enforcement right, and whether inferring that kind of remedy would actually align with the statute’s broader legislative purpose. Diana cleared the first hurdle without much difficulty, but the Court found he came up short on the second and third.
The reasoning behind that conclusion leaned heavily on legislative history rather than abstract statutory interpretation. The Court pointed out that earlier consumer lending statutes that came before the CFLA had explicitly included private recovery provisions, giving borrowers a clear, stated right to recover directly from a lender who violated licensing requirements. Those older voiding provisions, comparable to the one Diana relied on in the current statute, were never treated as standalone private remedies on their own. Courts only ever allowed a loan to be voided when that voiding happened alongside the express recovery right those earlier statutes spelled out directly. When the legislature wrote the CFLA, it dropped that express private recovery language entirely, and the Supreme Court treated that omission as a deliberate choice rather than an oversight, concluding it counsels firmly against reading an implied right of action into the current law where one used to exist explicitly.
The Court reinforced that conclusion by looking at how the CFLA’s voiding provision is actually structured within the broader statute. Violating the licensing requirement does not just void the loan contract, it also exposes the violator to prosecution as a fourth degree crime, placing the voiding language squarely inside a criminal penalty scheme rather than a private consumer protection framework. New Jersey courts have long been reluctant to let private plaintiffs sue to enforce what is fundamentally a penal statute, reasoning that criminal enforcement mechanisms belong to the state, not to individual litigants seeking a court-ordered remedy on their own. Absent a clear statement from the legislature that a criminal provision was also meant to create a parallel civil enforcement path for consumers, the Court concluded the CFLA’s underlying purpose was to establish criminal accountability for unlicensed lending, not to arm individual borrowers with a tool to unwind their own debts in court.
The practical effect of Diana reaches well beyond one defaulted credit card balance. Debt buying and collection in New Jersey routinely involves long chains of assignment, exactly like the one that carried Diana’s debt from his original card issuer through four separate intermediaries before landing with LVNV, and licensing compliance failures anywhere along that chain are not unheard of. Diana’s ruling forecloses a path consumer attorneys had been actively testing, using the CFLA’s licensing and voiding provisions as a basis for class-wide litigation against unlicensed debt purchasers. Going forward, a borrower who discovers that a company collecting on their debt was never properly licensed in New Jersey cannot rely on that fact alone to void the loan through a private lawsuit. Enforcement of the CFLA’s licensing requirement now sits squarely where the Supreme Court says the legislature always intended it to sit, with the state itself, through criminal prosecution, rather than with the individual consumers the licensing requirement was ultimately designed to protect.
