“Debt buyers”—entities that purchase debt from original creditors or other downstream assignees—often view themselves as being different from “debt collectors”—entities that act to collect debts from obligors. But in Barbato v. Greystone Alliance, LLC,  the U.S. Court of Appeals for the Third Circuit disagreed, holding that debt buyers can be debt collectors under the Fair Debt Collection Practices Act (“FDCPA”). Specifically, the Third Circuit ruled that part of the FDCPA’s definition of “debt collector” encompasses debt buyers, regardless of whether they outsource collection activities to third parties.Read More
The Massachusetts Supreme Judicial Court recently held in Dorrian v. LVNV Funding, LLC, that “passive debt buyers” are not “debt collectors” required to be licensed under the Massachusetts Fair Debt Collection Practices Act (“MDCPA”).
Dorrian is a class action lawsuit filed by borrowers in default who alleged that defendant LVNV Funding, LLC (“LVNV”) was operating as a debt collector without being licensed under the MDCPA. Notably, the plaintiffs did not sue the third-party LVNV contracted with to handle all collection and servicing, which was licensed as a debt collector under the MDCPA. The trial court certified the class and granted summary judgment in the borrowers’ favor on their claims that LVNV violated the MDCPA by operating as an unlicensed debt collector.
The Sixth Circuit Court of Appeals recently ended a Fair Debt Collection Practices Act (“FDCPA”) lawsuit because the plaintiffs could not show that the allegedly offending letter had caused them actual harm. In Hagy v. Demers & Adams, the Sixth Circuit held that the plaintiffs lacked standing to sue a law firm for its technical FDCPA violation, namely failing to identify itself as a debt collector in a letter to the plaintiffs. Debt collectors will likely applaud the practical and sensible approach the Sixth Circuit applied in Hagy. The decision is remarkable, however, for its constitutional rebuke of Congress. Reminding the legislative branch that it lacks general police powers to create statutory remedies where no actual harm exists, the Sixth Circuit’s decision suggests — without specifically stating — that the statutory damage provision of the FDCPA may be unconstitutional. Read More
On January 24, 2013, the Massachusetts Office of the Attorney General (“AG”) issued guidance to the industry interpreting its debt collection regulations (“Regulations”) that became effective March 2, 2012. The AG took this unusual step as it recognized that the Regulations raise unique compliance issues for servicers of consumer debt. The AG promulgated the Regulations pursuant to the rulemaking authority conferred by the Massachusetts Consumer Protection Act (“Chapter 93A”), “to establish standards, by defining unfair or deceptive acts or practices, for the collection of debts from persons within the Commonwealth of Massachusetts.” 940 C.M.R. 7.01. Although there is no private right of action, a violation may, nevertheless, constitute “an unfair or deceptive act or practice under Chapter 93A.”