Source: http://masscases.com/cases/distapp/2017/2017massappdiv31.html
Timestamp: 2019-04-19 14:17:33+00:00

Document:
William T. Bogaert, Erik J. Tomberg and Sean M. Callahan for the plaintiff.
Elizabeth A. Miller and Roger Bertling for the defendant.
HAND, P.J. This case arises out of attempts to collect a consumer debt allegedly incurred to FIA Card Services, N.A. by defendant Judy Juba ("Juba"), and acquired by plaintiff Midland Funding, LLC, assignee of FIA Card Services, NA/Worldpoints ("Midland"), after Juba had defaulted on the debt. In answering Midland's complaint, Juba counterclaimed against Midland for unfair and deceptive debt collection practices under the Federal Fair Debt Collection Practices Act, 15 U.S.C. §1692 et seq.; the Massachusetts debt collection statute, G.Lc. 93, §§24-28 and 49; the Massachusetts Attorney General's debt collection regulations, 940 Code Mass. Regs. 7:00 et seq., the Massachusetts Banking Commissioner's regulations, 209 Code Mass. Regs. 18.00; and G.Lc. 93A. At the heart of Juba's amended counterclaims is the argument that Midland is a debt collector not licensed as state and Federal law require it to be. Midland's position is that it is merely a passive holder of Juba's debt, not subject to the licensing requirements that apply to debt collectors.
1. Whether Midland Funding is required to be licensed by the Massachusetts Division of Banks as a debt collector pursuant to M.G.L.c. 93, §24A.
2. Whether Midland Funding violated M.G.L.c. 93A.
3. Whether Midland Funding violated the Fair Debt Collection Practices Act, 15 U.S.C. §§1692e and/or 1692f.
Reviewing the trial court's rulings, we address each of these questions to the extent necessary to determine the correctness of the trial court's rulings on the parties' motions. See Maher v. Retirement Bd. of Quincy, 452 Mass. 517 , 522 n.9 (2008); B.O. v. F.C, 90 Mass. App. Ct. 345 , 346 n.4 (2016). Having done so, we answer each question, "yes," and so reverse the trial court's denial of Juba's motion for summary judgment on Midland's liability on Juba's counterclaims.
1. Standard of review. It is well settled that summary judgment is appropriate only in the absence of any genuine issue of material fact and where, viewing the evidence in the light most favorable to the nonmoving party, the moving party is entitled to judgment as a matter of law. Mass. R Civ. P., Rule 56(c). See Pederson v. Time, Inc., 404 Mass. 14 , 17 (1989). Once the moving party has established the absence of a triable issue of fact, the party opposing the motion must point to specific facts establishing the existence of a material fact in dispute in order to defeat the motion. Pederson, supra. We review a trial court's ruling on such a motion de novo, "consider[ing] the record and the legal principles involved without deference to the motion judge's reasoning." Donovan v. Mahoney, 2008 Mass. App. Div. 41 , 42, quoting Clean Harbors, Inc. v. John Hancock Life Ins. Co., 64 Mass. App. Ct. 347 , 357 n.9 (2005). See Nova Assignments, Inc. v. Kunian, 77 Mass. App. Ct. 34 , 35 (2010) (de novo standard of review of allowance of motion for summary judgment).
Juba's counterclaims in this case include: unfair and deceptive debt collection practices under the Federal Fair Debt Collection Practices Act, 15 U.S.C. §1692 et seq.; the Massachusetts debt collection statute, G.Lc. 93, §§24-28 and 49; the Massachusetts Attorney General's debt collection regulations, 940 Code Mass. Regs. 7:00 et seq.; the Massachusetts Barking Commissioner's regulations, 209 Code Mass. Regs. 18.00; and G.Lc. 93A. The counterclaims turn on whether Midland is, as Juba contends, a "debt collector" for the purposes of the Massachusetts Debt Collection Practices Act, G.Lc. 93, §24 ("MDCPA"), or instead, as Midland argues, merely a passive holder of Juba's debt, not subject to the requirements of the MDCPA. As we discuss below, we are persuaded that Midland is a debt collector that must, by statute, be licensed. Midland's failure to obtain the appropriate licensure is a violation of G.L. c. 93, §24 and is a per se violation of G.Lc. 93A. G.L. c. 93, §28 ("Failure to comply with any provision ... of section twenty-four to twenty-seven, inclusive, or any regulation promulgated in accordance with the provisions of section twenty-four shall constitute an unfair or deceptive act or practice under the provisions of paragraph (a) of section two of chapter ninety-three A."); McDermott v. Marcus, Errico, Emmer & Brooks, P.C., 775 F.3d 109, 117-118 (1st Cir. 2014) (where per se liability under G.Lc. 93A arises from the text of an independent statute, "it is a clear directive by the Legislature that a violation of that particular statute constitutes an automatic violation of Chapter 93A, without the need of showing the act was otherwise 'unfair or deceptive' or occurred in 'trade or commerce").
post a bond. [Note 10] The statute defines "debt collector" to include "any person who uses an instrumentality of interstate commerce or the mails in any business the principal purpose of which is the collection of a debt, or who regularly collects or attempts to collect, directly or indirectly, a debt owed or due or asserted to be owed or due another." G.L.c. 93, §24.
A debt collector's failure to be properly licensed and bonded is a per se violation of G.L.c. 93A. G.L.c. 93, §28.
Midland is not licensed, but argues that it need not be. Midland contends that it is not a "debt collector" for the purposes of the statute, despite its ownership of distressed debt, because it has contracted all collections activity on its defaulted debt accounts to the licensed and bonded servicer, MCM. On that basis, Midland argues that it is merely a passive holder of the debt, and so is not subject to the licensing requirements of the statute, or to liability under G.L.c. 93A for violation of the licensing requirements.
There is no controlling Massachusetts precedent on this issue, although the applicability of G.L.c. 93, §24 to buyers of defaulted consumer debt has been addressed thoughtfully in the trial court See, e.g., Gomes v. Midland Funding, LLC, Suffolk Superior Court, No. SUCV2011-01469 (Sept. 19, 2012) (denying 12(b)(6) motion to dismiss G.L.c. 93A claims against Midland where plaintiff alleged that Midland was "actively engaged in the debt collection business" through its directing its attorneys to attempt to collect on debts by filing lawsuits, obtaining judgments, and seeking to have judgments enforced). Given the similarities between the MDCPA and the federal corollary, we look to Federal law interpreting the FDCPA for guidance in interpreting our statute. See Modern Cont'l/Obayashi v. Massachusetts Comm'n Against Discrimination, 445 Mass. 96 , 107 n.15 (2005).
or extends credit creating a debt or to whom a debt is owed,' 15 U.S.C. §1692a(4), whereas a debt collector is one who attempts to collect debts 'owed or due or asserted to be owed or due another.' Id. §1692a(6)." Sullivan v. Ocwen Loan Servicing LLC, D.S. Dist. Ct., No. 08-CV-02079 (D. Colo. Jan. 14, 2009). An entity is a "creditor" if it is attempting to collect a debt that it generated, or that it acquired when it was not in default; if the debt was in default when the collecting party acquired it, the collecting party is a "debt collector." See, e.g., Check Investors, Inc., supra at 173; Schlosser v. Fairbanks Capital Corp., 323 F.3d 534,536 (7th Cir. 2003), citing Bailey v. Security Nat'l Serving corp., 154 F.3d 384, 387 (7th Cir. 1998), Whitaker v. Ameritech Corp., 129 F.3d 952, 958 (7th Cir. 1998), Pollice v. National Tax Funding, L.P., 225 F.3d 379, 403-404 (3d Cir. 2000), Wadlington v. Credit Acceptance Corp., 76 F.3d 103, 106-107 (6th Cir. 1996), and Perry v. Stewart Title Co., 756 F.2d 1197, 1208 (5th Cir. 1985) ("[T]he Act treats assignees as debt collectors if the debt sought to be collected was in default when acquired by the assignee, and as creditors if it was not."). See also Kasalo v. Trident Asset Mgt., LLC, 53 F. Supp. 3d 1072, 1077 (N.D. Ill. 2014) (same); In re: JPMorgan Chase Mtg. Modification Litigation, 880 F. Supp. 2d 220, 243 (1st Cir. 2012) (loan servicer will become debt collector under FDCPA if debt was in default when it was acquired).
The status, vis-a-vis the distinction between creditor and debt collector, of an entity that acquires defaulted debt becomes less clear when the owner of that debt delegates some or all of its collection activities to a separate, licensed debt collector, or to a licensed attorney. The issue has been heavily litigated, is very fact specific, and has not been answered with any bright-line test. Unsurprisingly, the more control the purchaser or assignee of the defaulted debt maintains over efforts to collect that debt, the more likely the owner is to be a "debt collector" for the purposes of the FDCP A. See, e.g., Ruth v. Triumph Partnerships, 577 F.3d 790, 796-799 (7th Cir. 2009) (holding that where purchaser of defaulted debt hired others to collect debt, but purchaser drafted notice to debtor and directed that notice be included and mailed with collection letter, that drafting and direction "constituted affirmative conduct with regard to collecting a debt," and owner was "debt collector"); Harrison v. NBD Inc., 968 F. Supp. 837, 843 (E.D.N.Y 1997) (creditor's approval of debt collector's actions do not transform creditor into "debt collector" for purposes of FDCPA). Conversely, where the purchaser of the defaulted debt delegates all responsibility for collection to another entity, it may be exempt from the FDCPA licensing requirements. See, e.g., Kasalo, supra at 10781079 ("An entity that acquires a consumer's debt hoping to collect it but that does not have any interaction with the consumer itself does not necessarily undertake activities that fall within [the category of abusive debt-collections activities policed through the FDCPA]."); Scally v. Hilco Receivables, LLC, 392 F. Supp. 2d 1036, 1041 (N.D. Ill. 2005) (holding owner of defaulted debt that delegates to separate servicing entity all contact with debtors, not vicariously liable for conduct of servicing entity).
not "collection activity" under FDCPA); Sayyed v. Wolpoff & Abramson, 485 F.3d 226, 230 (4th Cir. 2007).
"On request of any interested person, an agency may make an advisory ruling with respect to the applicability to any person, property or state of facts of any statute or regulation enforced or administered by that agency. In issuing the advisory ruling, the agency need not comply with the requirements of this chapter with respect to regulations."
cannot claim to have relied on that opinion here. While G.L.c. 93A, §3 states, "Nothing in this chapter shall apply to transactions or actions otherwise permitted under laws as administered by any regulatory board or officer acting under statutory authority of the commonwealth or of the United States," it also provides that " [f] or the purpose of this section, the burden of proving exemptions from the provisions of this chapter shall be upon the person claiming the exemptions." Midland has not met this burden.
In this case, Midland exists only to own defaulted debt and, presumably, to receive any money collected on those obligations: [Note 12] While MCM does much of the legwork and nearly all the prelitigation consumer contact intended to make Midland's holdings profitable, its actions are subject to Midland's approval and oversight If, as presumably happened here, MCM decides that litigation is appropriate, then Midland becomes the plaintiff in the lawsuit seeking to collect on the account that Midland owns. Lastly, Midland is at least the nominal reporter of Juba's debt to three national credit reporting agencies. In our view, it is clear that despite its agreement with MCM to handle the majority of collections efforts, Midland regularly participates indirectly in MCMs attempts to collect Midland-owned defaulted consumer debt. Accordingly, Midland is, in our view, required to submit to the licensure requirements and corresponding oversight and supervision mandated under G.L.c. 93, §24B and 209 Code Mass. Regs., and subsequent sections. Its failure to be licensed is, under these circumstances, a violation of the MDCPA and the FDCPA. Its bringing suit, even through counsel, without the required license is a per se violation of G.L.c. 93A. See Games, supra, and cases cited. We answer, "yes," to each of the questions reported to us by the trial judge, and so reverse the trial court's denial of Juba's motion for summary judgment on Midland's liability on Juba's counterclaims. The case is returned to the trial court for further hearing on the issue of Juba's damages.
[Note 1] As Assignee of FIA Card Services, NA/Worldpoints.
[Note 2] Juba also moved to strike the affidavits of Cristina Ordonez and Kyle Hannan filed in support of Midland's motion.
[Note 3] Rule 5, pursuant to G.L.c. 231, §108, permits a judge, within his or her discretion, to report "a judgment, interlocutory or other ruling, finding or decision for determination by the Appellate Division." Dist./Mun. Cts. R. A. D. A., Rule 5.
[Note 4] Both Midland and MCM are wholly-owned subsidiaries of a third entity that is not a party here.
[Note 5] Additionally, while granting MCM "the full power and authority to conduct its servicing, administration and collection activities for and on behalf of [Midland]," it also provides "that the authority granted above shall not be exercised by [MCM] unless consistent with"other provisions of the Servicing Agreement, including section 2.6. That section, which provides that "[MCM] shall have authority to compromise, settle or cooperate with [Midland] in selling any Account or other Asset," suggests that Midland had not entirely surrendered to MCM its control over the sales of the defaulted debt that it owns.
[Note 6] "Section 4.5 Reporting and Processes. Servicer will cooperate and assist Owner in the implementation of any reasonably requested changes to its processing or handling of the Services and with any reporting required or requested by Owner in connection with any Services."
[Note 7] LHR, Inc., which had, in turn, purchased that debt from FIA Card Services, NA.
[Note 8] It is not clear from the wording of the undisputed facts provided by the parties here whether Midland or MCM actually submitted the information about Juba's overdue account to the credit reporting agencies. SF, pars. 9-10 ("This debt was reported in Midland Funding's name. ...").
[Note 9] The term "creditor" means "any person who offers or extends credit creating a debt or to whom a debt is owed, but the term shall not include a person to the extent that he receives an assignment or transfer of a debt in default solely for the purpose of facilitating collection of the debt for another." G.L. c. 93, §24.
The term "debt collector" means "any person who uses an instrumentality of interstate commerce or the mails in any business the principal purpose of which is the collection of a debt, or who regularly collects or attempts to collect, directly or indirectly, a debt owed or due or asserted to be owed or due another." Id.
(a) No person shall directly or indirectly engage in the commonwealth in the business of a debt collector, or engage in the commonwealth in soliciting the right to collect or receive payment for another of an account, bill or other indebtedness, or advertise for or solicit in print the right to collect or receive payment for another of an account, bill or other indebtedness, without first obtaining from the commissioner a license to carry on the business, nor unless the person or the person for whom he or it may be acting as agent has on me with the state treasurer a good and sufficient bond.
[Note 11] We are aware of the fact that in this case, Midland alleges that it acquired title to Juba's defaulted debt, and so is the owner of that debt. We read the reference in G.L.c. 93, §24 to "a debt owed or due or asserted to be owed or due to another" to mean a debt originally incurred to a creditor other than the current owner, and on which the debtor defaulted before the debt was sold. Even if that were not the case, the fact that Midland "indirectly engage[s] ... in the business of a debt collector," G.L.c. 93, §24A, by "us[ing] an instrumentality of interstate commerce or the mails in any business the principal purpose of which is the collection of a debt," G.L.c. 90, §24, would, in light of the fact that Midland is the plaintiff in the collection action and receives the money recovered, mean that Midland was a "debt collector" for the purposes of that section.
[Note 12] While Midland's answers to interrogatories in this case state that Midland purchases defaulted debt using loans from MCM, the accounts are held in the name of Midland. Midland Funding LLC's Answers to Defendant's Third Set of Interrogatories to Midland Funding, LLC, Answer No. 1. As Midland is the owner of Juba's account, it is the real party in interest, and so must be named as the plaintiff in a suit brought to collect the debt. See Mass. R. Civ. P., Rule 17. See also J.W. Smith and H.B. Zobel, Rules Practice §17.5, at 290 (2d ed. 2006).

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