In the

United States Court of Appeals

For the Seventh Circuit

No. 13-2264

ROCIO GALVAN and JOSEPH HAWTHORNE,

individually and on behalf of a class, and

PEOPLE OF THE STATE OF ILLINOIS ex rel.

ROCIO GALVAN and JOSEPH HAWTHORNE,

Plaintiffs-Appellants,

v.

NCO PORTFOLIO MANAGEMENT, INC.,

Defendant-Appellee.

No. 13-2266

ROCIO GALVAN and JOSEPH HAWTHORNE,

individually and on behalf of a class, and

PEOPLE OF THE STATE OF ILLINOIS ex rel.

ROCIO GALVAN and JOSEPH HAWTHORNE,

Plaintiffs-Appellants,

v.

NCO FINANCIAL SYSTEMS, INC.,

Defendant-Appellee.
2 Nos. 13-2264 & 13-2266

Appeals from the United States District Court 

for the Northern District of Illinois, Eastern Division.

Nos. 11 C 4561 & 11 C 3918 — Matthew F. Kennelly, Judge. 

ARGUED FEBRUARY 20, 2014 — DECIDED JULY 21, 2015

Before EASTERBROOK, MANION, and SYKES, Circuit Judges.

SYKES, Circuit Judge. For 40 years Illinois regulators and

debt collectors have played a kind of cat-and-mouse game. The

legislature has gradually expanded the scope of the business

activities that triggerthe requirements of the Illinois Collection

Agency Act (“ICAA” or “the Act”), 225 ILL. COMP. STAT. 425/1

et seq., and the industry has responded by finding ways to do

business without engaging in those activities. The question in

this case is whether passive debt buying was covered by the

Act before the most recent revision in 2013. The district court

said “no,” but the Illinois Supreme Court recently held

otherwise. In LVNV Funding, LLC v. Trice (“Trice II”), 32 N.E.3d

553, 559 (Ill. 2015), the state high court concluded that a passive

debt buyer “clearly qualifies as a ‘collection agency’ as defined

in section 3 of the Act.” That holding resolves the sole issue in

this appeal. We reverse and remand for further proceedings.
Nos. 13-2264 & 13-2266 3

I. Background

From June 2006 to June 2011, NCO Portfolio Management,

Inc.,purchasedlarge quantities of Illinois consumers’ defaulted

debt and referred the collection of this debt to its sister corporation NCO Financial Systems, Inc., an Illinois-licensed debt

collector, and also to outside attorneys, who are exempt from

the ICAA. See 225 ILL. COMP. STAT. 425/2.03(5). NCO Portfolio

carefully avoided direct collection activities and did not

communicate with debtors or credit-reporting agencies,

leaving those tasks to NCO Financial and outside counsel. As

such, NCO Portfolio did not consider itself a ”collection

agency” subject to the registration requirement of the ICAA,

see id. § 425/4, and did not in fact register with the licensing

authorities. During this time period, NCO Financial engaged

in various efforts to collect the debts NCO Portfolio referred to

it, and outside lawyers filed 2,749 lawsuits on NCO Portfolio’s

behalf.

The named plaintiffs in this class action are two Illinois

consumers whose debts NCO Portfolio bought and referred to

NCO Financial or outside counsel for collection during the

relevant time period. They sued in state court alleging that

NCO Portfolio engaged in unlawful unlicensed debt collection

in violation of the ICAA. NCO Portfolio removed the case to

federal court underthe Class Action Fairness Act. See 28 U.S.C.

§ 1332(d). In a second case filed in federal court following

removal, the same plaintiffs alleged that NCO Financial

violated the Act because it knew or should have known that

NCO Portfolio was an unlicensed debt collector and could not

lawfully collect debts in Illinois.
4 Nos. 13-2264 & 13-2266

The district court consolidated the two cases and certified

a class of Illinois consumers whose debts NCO Portfolio

purchased and referred for collection to NCO Financial or

outside counsel between June 8, 2006, and June 28, 2011. The

defendants moved for summary judgment, arguing that NCO

Portfolio was not a collection agency under the ICAA during

the class period and thus was not required to register. The

district judge agreed, relying in part on deposition testimony

from a lawyer in the Illinois Department of Financial and

Professional Regulation, the agency chargedwithenforcing the

ICAA, who offered his opinion that the Act did not apply to

passive debt buyers like NCO Portfolio until 2013, when it was

amended to add an explicit definition of “debt buyer.” The

court entered judgment for the defendants, and the plaintiffs

appealed. We heard oral argument and then held the case

pending the Illinois Supreme Court’s decision in Trice II.

II. Discussion

The sole issue on appeal is whether NCO Portfolio was a

collection agency underthe ICAA andthus required to register

during the relevant time period—June 2006 to June 2011. As

originally briefed by the parties, the question was complicated

by a series of amendments to the Act beginning in 2008. The

state supreme court’s decision in Trice II has greatly simplified

matters. Still, a little history is helpful. 

The ICAA regulates the activities of “collection agencies”

operating in Illinois. Two separate statutory provisions bear on

the meaning of that term. Section 2.02 defines the term

“collection agency,” and section 3 provides a list of discrete
Nos. 13-2264 & 13-2266 5

acts that constitute “act[ing] as a collection agency.” 225 ILL.

COMP. STAT. 425/2.02, 3. Confusingly, the provisions are not

synonymous, and neither the Act nor any decision of the

Illinois Supreme Court clarifies the relationship between the

two. (We’ll address the import of Trice II in a moment.) Adding

to the confusion, the provisions were revised in several

important respects in 2008 and 2013. The general thrust of

these amendments has been to expand the scope of the

regulatory scheme. 

Before 2008, section 2.02 defined “collection agency” as

“any person, association, partnership, corporation, or legal

entity who, for compensation, either contingent or otherwise, or

for other valuable consideration, offers services to collect an

alleged delinquent debt.” § 425/2.02 (emphases added). This

definition limited the Act’s application to persons or entities

offering collection services to others for compensation.

Section 2.03 provides that the ICAA “does not apply to

persons whose collection activities are confined to and are

directly related to the operation of a business otherthan that of

a collection agency.” § 425/2.03. This section goes on to list

persons and entities that are specifically exempt, including

licensed attorneys, public officials and judicial officers, and

certain kinds of businesses (e.g., banks, insurance companies,

retail stores acting on their own account). Id. As relevant here,

the exemption language of the Act has remained the same.

Section 3 defines what it means to “act[] as a collection

agency.” Before 2008, this section provided as follows:
6 Nos. 13-2264 & 13-2266

A person, association, partnership, corporation,

or other legal entity acts as a collection agency

when he or it:

... 

(b) Receives, by assignment or otherwise, accounts, bills, or other indebtedness from any

person owning or controlling 20% or more of the

business receiving the assignment, with the

purpose of collecting monies due on such account, bill or other indebtedness; [or]

... 

(d) Buys accounts, bills[,] or other indebtedness

with recourse and engages in collecting the

same; ... . 

§ 425/3.

Effective January 1, 2008, the legislature amended the

definition of “collection agency” in section 2 and also added a

definition of “debt collection.” See An Act Concerning Regulation, 2007 Ill. Laws 6460, 6460. In relevant part, section 2 now

provides:

“Debt collection” means any act or practice in

connection with the collection of consumer debts.

“Debt collector”, “collection agency”, or

“agency” means anyperson who, in the ordinary

course of business, regularly, on behalf of himself

or herself or others, engages in debt collection.

225 ILL. COMP. STAT. 425/2 (2008) (emphases added).
Nos. 13-2264 & 13-2266 7

The 2008 amendments also removed the phrase “with

recourse” from subsection 3(d). That subsection now states: “A

person, association, partnership, corporation, or other legal

entity acts as a collection agency when he or it: ... (d) Buys

accounts, bills[,] or other indebtedness and engages in collecting the same.” § 425/3.

The 2008 amendments thus eliminated any requirement

that a collection agency offer services to collect debts for others

for compensation. A business that buys consumer debt and

engages in collecting it “acts as a collection agency” under

section 3(d), and the amended section 2 clarifies that this

includes acting on one’s own behalf.

In 2013 the ICAA was amended again, adding an explicit

definition of “debt buyer” to section 2. Effective January 1,

2013, the term “debt buyer” under the Act

means a person or entity that is engaged in the

business of purchasing delinquent or charged-off

consumer loans or consumer credit accounts or

other delinquent consumer debt for collection

purposes, whether it collects the debt itself or

hires a third-party for collection or an attorneyat-law for litigation in order to collect such debt.

§ 425/2. The 2013 amendments also added a provision explicitly stating that debt buyers “shall be subject to all of the terms,

conditions, and requirements of this Act, except as otherwise

provided for in subsection (b) of Section 8.6 of this Act.”

225 ILL. COMP. STAT. 425/8.5. Section 8.6, in turn, provides that

debt buyers need not comply with certain parts of the
8 Nos. 13-2264 & 13-2266

regulatory scheme, such as the requirement to file a surety

bond and maintain a trust account. Id. § 425/8.6.

In their original briefs, the parties debated whether a

passive debt buyer like NCO Portfolio qualified as a collection

agency under the ICAA before the 2008 amendments, after the

2008 amendments, or never during the class period(because the

Act did not specifically define the term “debt buyer” until

2013). The debate centered on the relationship between the

definitions in section 2 and the language in section 3, which

explains what it means to “act[] as a collection agency” and

includes the act of “buy[ing] ... indebtedness and engag[ing]

in collecting the same.” § 425/3(d). The main interpretive

question was whether section 3 expands the coverage of the

Act beyond the definitions in section 2. Stated differently, the

statutory puzzle was whether section 3 activity is independently sufficient to trigger the regulatory duties of the Act.

Secondarily the parties debated the import of the 2008 amendment removing the “with recourse” language from

subsection 3(d).

The Illinois Supreme Court’s decision in Trice IIresolves the

interpretive issue, making it unnecessary for us to address the

nuances of the parties’ arguments. Although the court’s

holding is straightforward, the case has a convoluted procedural history and requires some unpacking. 

Matthew Trice defaulted on his Citibank credit-card debt.

Citibank sold the delinquent debt to LVNV Funding, LLC,

which in turn hired an Illinois lawyer to collect it. Trice II,

32 N.E.3d at 556. The lawyer sued Trice and obtained a

judgment in favor of LVNV. Trice, who was then proceeding
Nos. 13-2264 & 13-2266 9

pro se, did not appeal. Id. Sometime later he hired a lawyer,

who filed a petition to vacate the judgment, see 735 ILL. COMP.

STAT. 5/2-1401, alleging that LVNV was a collection agency

underthe ICAA and had not registered as required by the Act,

Trice II, 32 N.E.3d at 556. Trice’s attorney argued that the

judgment was void as an unlawful act of debt collection by an

unregistered collection agency. The circuit court concluded

that even if LVNV was a collection agency and thus required

to register under the Act, its failure to do so did not render the

judgment void. Id.

The Illinois Appellate Court reversed. The court held that

if LVNV was in fact unlicensed, then the judgment was void.

Id. at 556–57; see also LVNV Funding, LLC v. Trice (“Trice I”),

952 N.E.2d 1232, 1237 (Ill. App. Ct. 2011). The court said that a

debt buyer acts as a collection agency when it purchases a debt

and sues to collect it, and absent registration commits a crime

when it does so. Trice I, 952 N.E.2d at 1237. The court remanded the case for a hearing to determine whether, as Trice

alleged in his petition, LVNV was not registered at the time it

filed suit. Id. The court also said that LVNV would be permitted to raise constitutional challenges to the ICAA on remand.

Id.

Sure enough, on remand LVNV argued that parts of the

Act were unconstitutionally vague and violated its rights to

due process and equal protection, and the circuit court agreed.

Trice II, 32 N.E.3d at 558. The court’s constitutional ruling made

the judgment directly appealable to the Illinois Supreme Court,

see ILL. SUP. CT. R. 302(a)(1)), and Trice duly appealed to the

state high court.
10 Nos. 13-2264 & 13-2266

On February 27, 2015, the state supreme court vacated the

circuit court’s judgment, sidestepping the constitutional

arguments and resolving the case on other grounds. Trice II,

32 N.E.3d at 558–59. First, the court held that LVNV qualified

as a collection agency under the ICAA in two respects:

(1) under subsection 3(b) as the “assignee” of Citibank; and

(2) under subsection 3(d) as a “debt buyer,” id. at 559 (or to use

the statutory language, as an entity that “buys ... indebtedness

and engages in collecting the same,” § 425/3(d)). “[I]n either

case,” the court said, “[LVNV] clearly qualifies as a ‘collection

agency’ as defined in section 3 of the Act and is thus subject to

the registration requirement of section 4.” Trice II, 32 N.E.3d at

559.

Second, the state high court held that “any error in failing

to register did not deprive the circuit court of jurisdiction.” Id.

at 563. As such, “the circuit court’s judgment is not

void ... [and] the appellate court erred in reversing the circuit

court’s initial denial of Trice’s section 2-1401 petition.” Id. The

court remanded with instructions to reinstate and confirm the

judgment in favor of LVNV. Id. at 565. Rehearing was denied

on May 26, 2015, and the opinion in Trice II became final on

June 30, 2015. See ILL. SUP. CT. R. 368(a).

In light of Trice II, the original briefs in this case are now

largely obsolete. The parties have filed Rule 28(j) letters

agreeing that the state supreme court’s decision in Trice II

means that NCO Portfolio acted as a collection agency during

the class period. We add our agreement to theirs. The state

high court’s decision makes it clear that passive debt buyers

using third parties to collect the debt do indeed qualify as
Nos. 13-2264 & 13-2266 11

collection agencies under section 3 of the Act—under either

subsection 3(b) or subsection 3(d)—and this was so even before

2013, when the ICAA was amended to add a specific definition

of “debt buyer” to section 2. (Trice II was decided under the

pre-2013 version of the Act.)

In their Rule 28(j) letter, the defendants raise several

reasons why they should nonetheless prevail, but these

arguments are new and thus undeveloped and should be

fleshed out in the district court in the first instance. A remand

is in order.

Accordingly, based on Trice II, we hold that NCO Portfolio

qualified as a collection agency under the ICAA during the

class period. We REVERSE the judgment of the district court and

REMAND for further proceedings.