Opinion ID: 770271
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Heading: Whether the water, sewer and tax obligations constitute debts

Text: 67 The Fair Debt Collection Practices Act (FDCPA), 15 U.S.C. S 1692 et seq., provides a remedy for consumers who have been subjected to abusive, deceptive, or unfair debt collection practices by debt collectors. See Zimmerman v. HBO Affiliate Group, 834 F.2d 1163, 1167 (3d Cir. 1987). A threshold requirement for application of the FDCPA is that the prohibited practices are used in an attempt to collect a `debt.'  Id.; see 15 U.S.C. SS 1692e-f. The FDCPA defines debt as any obligation or alleged obligation of a consumer to pay money arising out of a transaction in which the money, property, insurance, or services which are the subject of the transaction are primarily for personal, family, or household purposes, whether or not such obligation has been reduced to judgment. 15 U.S.C. S 1692a(5). 68 Like the district court, we conclude that homeowners' water and sewer obligations meet the definition of debt; indeed, these obligations constituted debts from the time they initially were owed to the government entities, and they retained that status after their assignment to NTF. At the time these obligations first arose, homeowners (consumers of water and sewer services) had an obligation . . . to pay money to the government entities which arose out of a transaction (requesting water and sewer service) the subject of which was services. . . primarily for personal, family, or household purposes. 23 69 Defendants, relying on a statement in our Zimmerman decision, argue that the water, sewer and tax claims are not debts because there was no offer or extension of credit to homeowners. See Zimmerman, 834 F.2d at 1168 (We find that the type of transaction which may give rise to a `debt' as defined in the FDCPA, is the same type of transaction as is dealt with in all other subchapters of the Consumer Credit Protection Act, i.e., one involving the offer or extension of credit to a consumer.) (emphasis added). As the district court noted, see Pollice, 59 F. Supp. 2d at 484 n.9, this statement from Zimmerman has been widely disavowed by several other courts of appeals, which have taken the broader view that the FDCPA applies to all obligations to pay money which arise out of consensual consumer transactions, regardless of whether credit has been offered or extended. See, e.g., Romea v. Heiberger & Assocs., 163 F.3d 111, 114 n.4 (2d Cir. 1998) (noting that several circuits have disavowed the dicta in Zimmerman that the FDCPA applies only to transactions involving the offer or extension of credit); Brown v. Budget Rent-A-Car Sys., Inc., 119 F.3d 922, 924 n.1 (11th Cir. 1997) (rejecting Zimmerman [t]o the extent that it read an extension of credit requirement into the definition of debt); Bass v. Stolper, Koritzinsky, Brewster & Neider, 111 F.3d 1322, 1325-26 (7th Cir. 1997) (rejecting Zimmerman and indicating that [a]s long as the transaction creates an obligation to pay, a debt is created); see also Wayne Hill, Annotation, What Constitutes Debt for Purposes of Fair Debt Collection Practices Act, 159 A.L.R. Fed. 121, 131 (2000) (The term `debt' as used in the [FDCPA] has been construed broadly to include any obligation to pay arising out of a consumer transaction.). 70 We are not bound by the disavowed statement in Zimmerman, as it was dictum. 24 In our view, the plain meaning of section 1692a(5) indicates that a debt is created whenever a consumer is obligated to pay money as a result of a transaction whose subject is primarily for personal, family or household purposes. No offer or extension of credit is required. Accordingly, homeowners' original obligations to pay the government entities for water and sewer service constituted debts, even though the government entities did not extend homeowners any right to defer payment of their obligations. 71 We further agree with the district court's conclusion that homeowners' property tax obligations do not constitute debts under the FDCPA. In Staub v. Harris, 626 F.2d 275, we specifically held that a per capita tax obligation is not a debt for purposes of the FDCPA. Id. at 276-79. We stated that at a minimum, the statute contemplates that the debt has arisen as a result of the rendition of a service or purchase of property or other item of value. The relationship between taxpayer and taxing authority does not encompass the type of pro tanto exchange which the statutory definition [of `debt'] envisages. Id. at 278; see also Beggs v. Rossi, 145 F.3d 511, 512 (2d Cir. 1998) (following Staub and stating that in the tax situation [t]here is simply no `transaction' . . . of the kind contemplated by the statute). Staub is controlling here. Simply put, property taxes are not obligations arising out of a transaction in which the money, property, insurance, or services which are the subject of the transaction are primarily for personal, family, or household purposes. 72 The Houck plaintiffs contend that the property tax obligations are debts because they arise out of the transaction in which each property owner acquired his or her property. See reply br. of appellants/cross-appellees in Nos. 99-3858 and 99-3859 at 47-48. We reject this argument. Unlike a sales tax, for example, which arguably arises from the sale transaction, the property taxes at issue here arose not from the purchase of property but from the fact of ownership. In Beggs, the Court of Appeals for the Second Circuit rejected an argument similar to that of the Houck plaintiffs regarding a tax on automobiles. See Beggs, 145 F.3d at 512. The court stated that the tax is not levied upon the purchase or registration of the vehicle per se, but rather upon the ownership of the vehicle by the citizen; thus, the court held that there was no transaction for purposes of the FDCPA. Id. (emphasis added). We agree with this reasoning. 73 In attempting to distinguish Staub, the homeowners argue that the tax obligations changed in character and became debts when they were assigned to NTF. We disagree. Although the tax claims were transferred to a private entity, the homeowners' obligation to pay the claims still did not aris[e] out of a transaction in which the money, property, insurance, or services which are the subject of the transaction are primarily for personal, family, or household purposes. Rather, the obligation to pay arose from the levying of taxes upon the ownership of property. After assignment of the claims to NTF, there still had not been a transaction involving the homeowners; their obligation to pay NTF still arose from the levying of taxes. 25 74 The Houck plaintiffs contend that the creation of the payment plans distinguishes this case from Staub --that is, the payment plans for the tax obligations represent transactions giving rise to debts covered by the FDCPA. See reply br. of appellants/cross-appellees in Nos. 99-3858 and 99-3859 at 44-45, 49. While we do not doubt that the payment plans are transactions, we do not believe the plans serve to bring defendants within the coverage of the FDCPA with respect to the tax obligations. The FDCPA is aimed at the conduct of debt collectors who are seeking to collect debts. See 15 U.S.C. S 1692 (statement of congressional findings and purpose); Zimmerman , 834 F.2d at 1167. For purposes of the FDCPA, we view the payment plans simply as one aspect of defendants' course of conduct in attempting to collect the original water, sewer and tax obligations which were owed to the government entities and then assigned to NTF; that is, all of defendants' debt-collection activity (including the creation of the payment plans and subsequent conduct) has been directed toward the collection of the original obligations, not any obligations which may have arisen from the payment plans. As we have concluded, in their original form, the water and sewer obligations were debts under section 1692a(5) but the tax obligations were not. Accordingly, we hold that the FDCPA is inapplicable to all of defendants' conduct relating to the tax obligations, including conduct occurring after the creation of the payment plans. 75 In sum, we will affirm the dismissal of the FDCPA claims with respect to the tax obligations, and we further will affirm the district court's determination that the water and sewer obligations constitute debts under the FDCPA. 76