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From Banking and Finance Law Daily, August 8, 2018

Debt buyers are debt collectors under consumer debt collection act

By Richard A. Roth, J.D.

A company whose sole business is buying and collecting consumer debts is a debt collector under the Fair Debt Collection Practices Act, according to the U.S. Court of Appeals for the Third Circuit. That means the company is required to conform its collection tactics to those that are permitted by the FDCPA (Tepper v. Amos Financial, LLC, Aug. 5, 2018, Ambro, T.).

The consumers originally took a home equity line of credit from a bank, and then they defaulted when the bank was placed into receivership and they had trouble making payments to the Federal Deposit Insurance Corporation receivership. The FDIC sold the note and mortgage to Amos Financial, which declared the loan to be in default, made payment demands, and then moved to foreclose.

The consumers responded by suing Amos under the FDCPA.

What is a debt collector? The appellate court began by noting that a company can meet the relevant FDCPA criteria for "debt collector" by satisfying either of two definitions:

  • the "principal purpose" definition, which applies to companies that use interstate commerce, or the mail or wires, in any business "the principal purpose of which is the collection of any debts"; or
  • the "regularly collects" definition, which applies to any person who regularly collects or tries to collects debts owed or said to owed to another person.

In Henson v. Santander Consumer USA, Inc., the Supreme Court clarified that the "regularly collects" definition did not cover a company that bought debts and then collected them for its own account (see Banking and Finance Law Daily, June 12, 2017). However, the Court did not examine the "principal purpose" definition.

Principal purpose. The plain language of the FDCPA makes clear a company that satisfies the "principal purpose" definition is a debt collector, the Third Circuit said. In this case, Amos admitted that collecting debts it had purchased was its sole business, and it clearly used both mail and telephone calls in its collection efforts. Collecting "any debts," as the FDCPA section specified, did not consider to whom the debts were owed.

"Asking if Amos is a debt collector is thus akin to asking if Popeye is a sailor. He’s no cowboy," the court said.

Summing up, the court said that "an entity whose purpose of business is the collection of any debts is a debt collector regardless whether the entity owns the debts it collects."

The case is No. 17-2851.

Attorneys: John J. Jacko, III (Fellheimer & Eichen LLP) for James Tepper and Allison Tepper. Erik M. Helbing (Helbing Law, LLC) for Amos Financial, LLC.

Companies: Amos Financial, LLC

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