The Fair Debt Collections Practice Act applies to debt collectors. A debt collector is defined under the FDCPA as:
"...Any person who uses any instrumentality of interstate commerce or the mails in any business the principal purpose of which is the collection of any debts, or who regularly collects or attempts to collect, directly or indirectly, debts owed or due or asserted to be owed or due another. Notwithstanding the exclusion provided by clause (F) of the last sentence of this paragraph, the term includes any creditor who, in the process of collecting his own debts, uses any name other than his own which would indicate that a third person is collecting or attempting to collect such debts."
Less commonly known is the fact that the FDCPA does not apply to a creditor attempting to collect its own debt in its own name. The FDCPA will apply to any creditor that is collecting its own debt, but in another name.
Christy L. Murphy, Attorney, Kaufman & Canoles
A court recently found that a claim for an alleged violation of the FDCPA against a creditor could survive a Motion to Dismiss because a letter was sent in the name of an affiliate of the creditor to the plaintiff on a lien. The plaintiff alleged that the affiliate was a “fictitious name for” the creditor, instead of in the name of the creditor. The court found that, under these facts, the creditor fell “into the creditor exception” of the FDCPA.
There are six exclusions to the definition of a debt collector under FDCPA, but the 4th U.S. Circuit Court of Appeals found that an initial inquiry, before analysis of any of the exclusions, is whether the person is a debt collector as defined. This means that only after it is found that the person is a debt collector should the court analyze any of the exclusions. Once it is established that the person is a debt collector, the court must then analyze the six exclusions.
Kaufman & Canoles has a substantial credit union practice, serving as general counsel to credit unions, large and small. They regularly advise clients on consumer compliance issues, NCUA requirements, and the rules governing credit union service organizations. With over 30 years experience to more than 100 credit unions nationwide, they keep on top of the latest laws and regulations related to commercial litigation and real estate transactions, as well as daily operations, regulatory compliance issues and human resources.
Those exclusions are:
(A) any officer or employee of a creditor while, in the name of the creditor, collecting debts for such creditor;
(B) any person while acting as a debt collector for another person, both of whom are related by common ownership or affiliated by corporate control, if the person acting as a debt collector does so only for persons to whom it is so related or affiliated and if the principal business of such person is not the collection of debts;
(C) any officer or employee of the United States or any state to the extent that collecting or attempting to collect any debt is in the performance of his official duties;
(D) any person while serving or attempting to serve legal process on any other person in connection with the judicial enforcement of any debt;
(E) any nonprofit organization which, at the request of consumers, performs bona fide consumer credit counseling and assists consumers in the liquidation of their debts by receiving payments from such consumers and distributing such amounts to creditors; and
(F) any person collecting or attempting to collect any debt owed or due or asserted to be owed or due another to the extent such activity (i) is incidental to a bona fide fiduciary obligation or a bona fide escrow arrangement; (ii) concerns a debt which was originated by such person; (iii) concerns a debt which was not in default at the time it was obtained by such person; or (iv) concerns a debt obtained by such person as a secured party in a commercial credit transaction involving the creditor.
Importantly, some states have adopted additional state versions of the FDCPA that expand the coverage of the FDCPA and the definition of a debt collector. By way of example only, under Maryland law, a collector is defined as a “person collecting or attempting to collect an alleged debt arising out of a consumer transaction.”
Note that in Maryland, there is no limitation or exclusion for people collecting their own debts. There are other states that have adopted state specific debt collection laws as well. Therefore, any time a debt collector or a creditor communicates with a consumer on a debt, it is important to first review federal and state laws.
If you have any questions about the applicability of the FDCPA or debt collection and how it applies to your credit union, please do not hesitate to contact Christy L. Murphy, Esq. at Kaufman & Canoles, P.C. at firstname.lastname@example.org or at (757) 624-3177.