Opinion ID: 770271
Heading Depth: 3
Heading Rank: 2

Heading: Whether NTF and CAH are debt collectors under the FDCPA

Text: 77 The district court accepted defendants' argument that NTF and CAH cannot be considered `debt collectors' because they are not in the business of collecting debts and do not in fact collect debts. Pollice 59 F. Supp.2d at 486. The court agreed with defendants' contention that CARC is the sole defendant which has contracted with the [government entities] to service and collect the claims owned by [NTF]. Id. Accordingly, the court dismissed the FDCPA claims against NTF and CAH. Id. at 491. The Houck plaintiffs argue on appeal that NTF and CAH, along with CARC, are debt collectors under the FDCPA. 78 The FDCPA's provisions generally apply only to debt collectors. Pettit v. Retrieval Masters Creditors Bureau, Inc., 211 F.3d 1057, 1059 (7th Cir. 2000). Creditors--as opposed to debt collectors--generally are not subject to the FDCPA. See Aubert v. American Gen. Fin., Inc. , 137 F.3d 976, 978 (7th Cir. 1998) (Creditors who collect in their own name and whose principal business is not debt collection . . . are not subject to the Act . . . . Because creditors are generally presumed to restrain their abusive collection practices out of a desire to protect their corporate goodwill, their debt collection activities are not subject to the Act unless they collect under a name other than their own.); Staub, 626 F.2d at 277 (The [FDCPA] does not apply to persons or businesses collecting debts on their own behalf.); Hon. D. Duff McKee, Liability of Debt Collector to Debtor under the Federal Fair Debt Collection Practices Act, 41 Am. Jur. Proof of Facts 3d 159, at S 3 (1997) [hereinafter McKee] ([I]nterestingly, the term `debt collector' does not include the creditor collecting its own debt.). 79 The FDCPA contains a detailed definition of debt collector. See 15 U.S.C. S 1692a(6). The term means any person who uses any instrumentality of interstate commerce or the mails in any business the principal purpose of which is the collection of any debts, or who regularly collects or attempts to collect, directly or indirectly, debts owed or due or asserted to be owed or due another. Id. The definition excludes several categories of persons, including officers or employees of government. See id. 80 We conclude that NTF is a debt collector, and accordingly the district court should not have dismissed the FDCPA claims against it. Courts have indicated that an assignee of an obligation is not a debt collector if the obligation is not in default at the time of the assignment; conversely, an assignee may be deemed a debt collector if the obligation is already in default when it is assigned. 26 See Bailey v. Security Nat'l Servicing Corp., 154 F.3d 384, 387-88 (7th Cir. 1998); Whitaker v. Ameritech Corp., 129 F.3d 952, 958-59 (7th Cir. 1997); Wadlington v. Credit Acceptance Corp., 76 F.3d 103, 106-07 (6th Cir. 1996); McKee S 3 ([O]ne who acquires the debt after it is in default is deemed a debt collector, and is subject to the provisions of the Act. Conversely, the assignee of a debt who acquires it before default is considered the owner of the debt and may pursue collection without concern for the limitations of the FDCPA.). Here, there is no dispute that the various claims assigned to NTF were in default prior to their assignment to NTF. Further, there is no question that the principal purpose of NTF's business is the collection of any debts, namely, defaulted obligations which it purchases from municipalities. 27 81 As mentioned, the district court was influenced by the fact that only CARC contracted to undertake debt-collection activity in connection with the assigned claims. We believe, however, that NTF may be held vicariously liable for CARC's collection activity. Although there is relatively little case law on the subject of vicarious liability under the FDCPA, there are cases supporting the notion that an entity which itself meets the definition of debt collector may be held vicariously liable for unlawful collection activities carried out by another on its behalf. In Fox v. Citicorp Credit Services, Inc., 15 F.3d 1507 (9th Cir. 1994), the court indicated that a company which had been asked to collect a defaulted debt could be held vicariously liable for its attorney's conduct which was in violation of the FDCPA. See id. at 1516. By contrast, in Wadlington , supra, the Court of Appeals for the Sixth Circuit declined to impose vicarious liability on a company for the actions of its attorney; in the court's view, vicarious liability could not be imposed because the company itself did not meet the definition of debt collector: 82 We do not think it would accord with the intent of Congress, as manifested in the terms of the [FDCPA], for a company that is not a debt collector to be held vicariously liable for a collection suit filing that violates the Act only because the filing attorney is a `debt collector.' Section 1692k imposes liability only on a `debt collector who fails to comply with [a] provision of this subchapter . . . .' The plaintiffs would have us impose liability on non-debt collectors too. This we decline to do. 83 Wadlington, 76 F.3d at 108 (citation omitted) (emphasis added). The Wadlington court specifically distinguished Fox because in Fox the entity allegedly vicariously liable for the attorney's conduct was itself a debt collector. See id. The rule to be gleaned from Fox and Wadlington has been summarized by a state court decision as follows: 84 [F]ederal courts that have considered the issue have held that the client of an attorney who is a `debt collector,' as defined in S 1692a(6), is vicariously liable for the attorney's misconduct if the client is itself a debt collector as defined in the statute. Thus, vicarious liability under the FDCPA will be imposed for an attorney's violations of the FDCPA if both the attorney and the client are debt collectors as defined in S 1692a(6). First Interstate Bank of Fort Collins v. Soucie , 924 P.2d 1200, 1202 (Colo. Ct. App. 1996) (emphasis added). 85 Although these cases involved the attorney-client situation, we believe they may be applied here. Thus, we conclude that NTF--which itself meets the definition of debt collector--may be held vicariously liable for CARC's collection activity. We believe this is a fair result because an entity that is itself a debt collector--and hence subject to the FDCPA--should bear the burden of monitoring the activities of those it enlists to collect debts on its behalf. 86 We now turn to the status of CAH as a debt collector. As mentioned, CAH is the common general partner of CARC and NTF, both of which are limited partnerships. App. at 1355. Some district courts have indicated that a general partner of a debt collector partnership may be vicariously liable for the partnership's FDCPA violations under general principles of partnership law. 28 See Peters v. AT&T Corp., 43 F. Supp.2d 926, 930 (N.D. Ill. 1999); Randle v. GC Servs., 25 F. Supp.2d 849, 850-52 (N.D. Ill. 1998); see also Miller v. McCalla, Raymer, Padrick, Cobb, Nichols, and Clark, 214 F.3d 872, 876 (7th Cir. 2000) (stating in an FDCPA case that [t]he liability of a partnership is imputed to the partners, and so the plaintiff was entitled to sue the partners as well as the partnership). The Houck plaintiffs, however, indicate that they do not rely on [CAH's] vicarious liability in this case. See reply br. of appellants/cross-appellees in Nos. 99-3858 and 99-3859 at 57. Instead, they argue that CAH is directly liable because it is involved [in the collection of debts] through the corporations[sic] it has set up and fully control. Id. 87 Despite the Houck plaintiffs' conclusory statement that they do not rely on vicarious liability, in effect their argument that CAH is directy liable seems to us in fact to implicate vicarious liability principles because they contend that CAH's involvement in the debt collection is through the other defendants. Thus, we consider the case on that basis and conclude that the general partner of a debt collector limited partnership may be held vicariously liable for the partnership's conduct under the FDCPA. In light of the general partner's role in managing the affairs of the partnership, we see no reason why the general partner should not be responsible for conduct of the partnership which violates the FDCPA. Liability for the general partner is particularly appropriate under the facts of this case--NTF has no employees, app. at 514, and accordingly we presume that its actions are taken through the personnel of CAH. Indeed, an officer of CAH executed the Purchase Agreements on behalf of NTF, as well as the Servicing Agreements on behalf of CARC. See app. at 540, 874, 906, 1113. Accordingly, we conclude that CAH may be held liable for any conduct of NTF and CARC which violated the FDCPA. 29 88 In sum, we conclude that NTF and CAH may be held liable under the FDCPA, and accordingly we will reverse the grant of summary judgment in their favor. 89