http://0-pubs.bna.com.pegasus.law.c...0b14b4a8e966e32485256e000081ea99?OpenDocument Mere Sale of Overdue Credit Card Account Doesn't Subject Purchaser to TILA Standards Credit card holders who thought their delinquent accounts had been settled and then were dunned years later for accumulated interest by firms that purchased those accounts cannot get relief under the Truth in Lending Act and the Fair Debt Collection Practices Act, according to a decision by the U.S. Court of Appeals for the Seventh Circuit (Neff v. Capital Acquisitions & Management Co., 7th Cir., No. 02-4186, 12/15/03). The mere purchase of the open accounts did not make the purchasers "creditors" within the meaning of TILA, Judge Terence T. Evans holds. Therefore, the purchasers did not violate TILA by seeking to collect years of accrued interest without having sent the cardholders monthly billing statements. Under the terms of TILA, a "creditor" must have either "issued a credit card" or become the issuer's "agent," and the purchasers in this case did neither. The court also decides that, when one purchaser sold an account to another, it did not become a "debt collector" subject to the Fair Debt Collection Practices Act. Challenged Conduct The suit was brought by two holders of credit cards issued by nonparties. The cardholders alleged that defendant Capital One FSB had purchased their delinquent accounts from the issuers and had settled the alleged debts with the cardholders. Almost 10 years later, however, the cardholders allegedly received letters from defendant Capital Acquisitions & Management Co. (CAMCO), which had purchased their accounts from Capital One. CAMCO demanded $2,835.32 from one cardholder and almost $7,000 from the other, most of which represented accumulated interest. In their complaint against Capital One and CAMCO, the cardholders alleged that the defendants had violated TILA, the FDCPA, and the Illinois Consumer Fraud Act when they attempted to impose and collect interest on revolving credit accounts without sending monthly statements. The district court dismissed the federal claims for failure to state a claim and declined to take supplemental jurisdiction over the state claim. Neither Card Issuer Nor Agent The Seventh Circuit, affirming, explains that, under 15 U.S.C. §1637(b), TILA requires "creditors" to send consumers monthly billing statements. The cardholders alleged that Capital One and CAMCO became credit card issuers, and thus TILA creditors, when they purchased their open accounts. But the court rules that the claim did not square with TILA's definition of "creditor." A "creditor" is defined in 15 U.S.C. §1602(f) as any person who issues an open-ended credit card. To meet that definition, §1602(n) requires that the person have either "issued a credit card" or been the issuer's "agent." "Neither defendant meets either requirement," the court holds. A "credit card" is "something that is able to access a line of credit," according to the court, which cites the Federal Reserve Board staff's commentary to Regulation Z, 12 C.F.R. pt. 226, Supp. 1 at ¶ 2(a)(15)-2. Neither Capital One nor CAMCO granted the cardholders the right to "incur debt" or to "defer payment of debt" within the meaning of 15 U.S.C. §1602(e) or any other credit privileges at all, the court observes. Since they did not issue the plaintiffs a "credit card," the defendants are not "card issuers" under TILA, the court concludes. Furthermore, they were not "agents" of card issuers within the meaning of §1602(n), the court determines. "To become an agent, there must be an agreement that 'the cardholder may use a line of credit with the financial institution to pay obligations incurred by use of the credit card,' " according to the court, which quotes 12 C.F.R. pt 226, Supp. I, ¶ 2(a)(7). Here, the plaintiffs had no credit privileges with Capital One or CAMCO, who in turn had no contractual relationship with the original card issuers. The issuers' sale of the cardholders' accounts is not sufficient to make Capital One and CAMCO the agents of the issuers, the court holds. The cardholders' reliance on the rule for when "creditors" are allowed to stop sending statements is thus "misplaced," the court observes. "Furthermore, because TILA and Regulation Z specifically address the circumstances of an assignee's obligations under the Act, we do not look to the 'normal rule' that an assignee assumes the duties of the assigning party." Not Debt Collector The FDCPA claim "fares no better," the court explains. One of the cardholders argued that, when Capital One sold his debt to CAMCO, the sale resulted in further collection against him of a satisfied debt, in violation of the FDCPA. But the court, citing 15 U.S.C. §1629e, holds that the FDCPA applies only to debt collectors whose conduct is undertaken "in connection with the collection of any debt." Capital One was not a debt collector when it sold the cardholder's account to CAMCO because it did not directly or indirectly attempt to collect the cardholder's debt in selling its asset. Once the account was sold, it was "irrelevant" to Capital One whether the debt was collected or not. Counsel for plaintiffs: Daniel A. Edelman, Edelman, Combs & Latturner, Chicago, Ill.; counsel for defendants: Robert M. Moye, Bell, Boyd & Lloyd, Chicago, Ill.
