Thread: Purchased debt not under FDCPA?

I spoke to a co-worker who WAS a collections attorney. She stated that when a CA purchases a debt, they no longer are considered a third-party collector and are not bound by the FDCPA.

I read the FDCPA and FTC opinions differently. Anyone have any info on this?

Also, she states that the collection company just laughs when they get a validation request after the 30-day period. She stated that no judge is going to believe that the debtor did not receive the initial letters - even without verfication that the mail was received.

The FDCPA does not seem to stipulate clearly that the CA is only required to respond to a validation request during the initial 30-days, but more in regards to the actions and behaviors of a CA during the initial 30-day period. Has anyone seen any opinions or case law on this issue?

I didn't really get much info from her and I don't really know her well. Maybe some other time.

Originally posted by lbrown59

So you agree or not with the above post ? ? ? ? ? ?

Originally posted by mommyof2
I spoke to a co-worker who WAS a collections attorney. She stated that when a CA purchases a debt, they no longer are considered a third-party collector and are not bound by the FDCPA.

I read the FDCPA and FTC opinions differently. Anyone have any info on this?

Also, she states that the collection company just laughs when they get a validation request after the 30-day period. She stated that no judge is going to believe that the debtor did not receive the initial letters - even without verfication that the mail was received.

The FDCPA does not seem to stipulate clearly that the CA is only required to respond to a validation request during the initial 30-days, but more in regards to the actions and behaviors of a CA during the initial 30-day period. Has anyone seen any opinions or case law on this issue?

I didn't really get much info from her and I don't really know her well. Maybe some other time.

I can understand why she no longer is a collection atty. She doesn't know what she is talking about. Here is an FTC letter regarding this. Clearly states that a purchaser of bad debt is subject to the FDCPA. Print this out and ask her if she can explain it.



Ms. Kimberlee Arbuckle
MIDLAND CREDIT MANAGEMENT
500 West First Street
Post Office Box #576
Hutchinson, Kansas 67504

Dear Ms. Arbuckle:

This responds to your letter dated December 2, 1993, inquiring whether Midland Credit Management, Inc. ("MCM") is a debt collector under the Fair Debt Collection Practices Act ("FDCPA" or "Act"). You report that MCM "purchases portfolios of delinquent accounts receivable for the purpose of profitable recovery, resale and cure. These accounts are owned solely by MCM . . ."

Section 803(6) of the FDCPA defines the term "debt collector" 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." In our view, a party that purchases delinquent accounts from the party to which the debts were originally owed and attempts to collect them from the consumer debtors fits clearly within that definition. The party is attempting to collect debts that were "owed or due another" and the fact that title to the accounts is passed to the collector in no way changes that fact.

In the leading case on point, involving a company whose business included the purchase of large volumes of checks that had been dishonored and subsequent collection of the checks from their makers (in the same manner as MCM buys defaulted accounts and thereafter attempts to collect from the account debtors), the court wrote persuasively that the purchaser is covered by the FDCPA. It gave short shrift to the fact that the party had actually purchased the checks in question:

By use of the language "owed or due another" Congress was attempting to exclude those entities that extend credit from the effects of the Act. Congress intended to protect borrowers from "third persons who regularly collect debts for others." (Italics by court; citation omitted). (The purchaser) is a third party collecting a debt originally owed to another. . . . It cannot escape the spirit of the Act by the technicality of purchasing the debt upon default so that title technically rests in itself.

Holmes v. Telecredit Service Corp., 736 F. Supp. 1289, 1293 (D. Del. 1990)

The only theory for exclusion of a party such as MCM from the "debt collector" definition (and thereby from coverage under the FDCPA) is that it is a "creditor."(1) Section 803(4) defines "creditor" as "any person who offers or extends credit creating a debt or to whom a debt is owed, but such term does not include any person to the extent that he receives an assignment or trans-fer of a debt in default solely for the purpose of facilitating collection of such debt for another." Since the accounts that MCM buys are delinquent when purchased and are being transferred for the purpose of collection, we believe that MCM is within the class that the "creditor" definition expressly "does not include."(2) The words "for another" at the end of the clause excepting assignees from the definition of creditor in no way changes this result:

(T)he excluding factors in the exception are that the debts are the result of an assignment or transfer and that the debts were already in default at the time of assignment or transfer. With the phrase "for another" at the end of the exception, Congress merely intended that the debts should have originally belonged to another and that the creditor was therefore in effect a third-party or independent creditor. (Italics by court)

Kimber v. Federal Financial Corp., 668 F. Supp. 1480, 1485 (M.D.Ala. 1987). Accord, Holmes, supra, at 1293.

In sum, it is our view that a party that obtains consumer obligations in default for the purpose of collection is a "debt collector" under the FDCPA, even if that party actually purchases the accounts from the original creditor.

The views set forth in this informal staff opinion letter are not binding on the Commission.

Sincerely yours,

Clarke W. Brinckerhoff

Hi Lizardking,

Could you please post the link for that letter.

Thanks

I am undergoing the same situation. A CA purchased my debt from the original creditor. Puts in on my credit report as an OPEN item, with a 120+ days late notation.

In the letter they sent (which was sent my mothers home...she sent to me) they say, "We will provide you will all the documents if you reply within 30 days", if not, we'll just tell you the name. WTF??? They don't have to right to decide what they do after 30 days or not!

Not to mention, re-aging the account and making it look like it's current is BOGUS. I don't know what to do about this.

I sent a validation letter....I haven't heard anything. However, because I am trying to apply for a mortgage, I sent a payment for deletion letter also. I haven't heard anything yet...from either letter.

In addition, aren't they supposed to be reporting this as "disputed" on my credit report?

Is your CA Calvary Investments by chance?

They are doing the same thing to me. I have sent validation, estoppel, filed complaints with FTC, and now NC Attorney General's office. They are demanding immediate action. We will see what happens.

Originally posted by NCGolfer
Hi Lizardking,

Could you please post the link for that letter.

Thanks

Hate to disappoint you but Lizardking didn't post that letter - I did. (LKH) Here is the link:


http://www.ftc.gov/os/statutes/fdcpa...s/arbuckle.htm