Court Opinion

ID: 9468730
Source: CourtListenerOpinion
Date Created: 2023-08-05 02:22:19.33066+00
Date Added: 2024-06-11T17:38:45.788705
License: Public Domain

GIBBONS, Circuit Judge,
dissenting.
The Fair Debt Collection Practices Act, Pub.L. 95-109, 91 Stat. 874, 15 U.S.C. § 1692 (FDCPA), passed in 1977 as an amendment to the Consumer Credit Protection Act of 1968, Pub.L. 90-321, 82 Stat. 146,15 U.S.C. § 1601 et seq., is designed “to protect consumers from a host of unfair, harassing, and deceptive debt collection practices without imposing unnecessary restrictions on ethical debt collectors.” Senate Report No. 95-382, 95th Cong., 1st Sess. 1-2, reprinted in [1977] U.S.News Cong. & Admin.News 1695,1696. The legislation includes congressional findings that “[t]here is abundant evidence of the use of abusive, deceptive, and unfair debt collection practices by many debt collectors” and that “[e]xisting laws and procedures for redressing these [resulting] injuries are inadequate to protect consumers.” 15 U.S.C. § 1692(a), (b). Congress announced its purpose “to eliminate abusive debt collection practices by debt collectors, to insure that those debt collectors who refrain from using abusive debt collection practices are not competitively disadvantaged, and to promote consistent state action to protect consumers against debt collection abuses.” 15 U.S.C. § 1692(e). In reporting on the bill which became law, the Senate Committee on Banking, Housing, and Urban Affairs noted that “[t]he primary reason why debt collection abuse is so widespread is the lack of meaningful legislation on the State level.” Senate Report No. 95-382, supra, 2. See also Hearings Before the Subcommittee on Consumer Affairs of the Committee on Banking, Housing, and Urban Affairs on S. 656, S. 918, S. 1130 and H.R. 5294, 95th Cong., 1st Sess. 23-24 (1977) (Remarks of Sen. Annunzio). Both from the text of the FDCPA and from its legislative history it is clear that Congress intended to supplant unsatisfactory state regulatory schemes with a set of national minimum standards.
The FDCPA provides not only for private enforcement, 15 U.S.C. § 1692k, but also for administrative enforcement by the Federal Trade Commission. 15 U.S.C. § 16921. Moreover, the Commission is given authority “by regulation to exempt from the requirements of this subchapter any class of debt collection practices within any State if the Commission determines that under the law of that State that class of debt collection practice is subject to requirements substantially similar to those imposed by this subchapter, and that there is adequate provision for enforcement.” 15 U.S.C. § 1692o. Under the statutory scheme any local exemption must first be passed upon by the Federal Trade Commission. The report of the House Committee on Banking, Finance and Urban Affairs on H.R. 5294, in which originated the provisions relating to state exemptions, explains:
Concern has been voiced by some that the passing of Federal legislation in the debt collection area might infringe on States’ rights. The committee has considered this matter and has taken steps to minimize any such infringement. For example, under Section 816, relation to State laws, the laws of any State with respect to debt collection practices will not be preempted except to the extent that those laws are inconsistent with any provision of this bill.
In addition, section 817 provides for exemption for State regulation. If a State has a debt collection law and would like an exemption, the State need only apply to the Federal Trade Commission and if the Commission determines that under the law of that State any class of debt collection practices is subject to requirements substantially similar to those imposed by this bill, and there is adequate provision for enforcement, an exemption would be granted.
*398The committee does not intend to preclude legislative experimentation by the States in the area of debt collection practices. Any State wishing to so experiment in passing strong legislation in this area will have a free hand to do so and may apply for an exemption under section 817.
H. R.Rep.No.95-131, 95th Cong., 1st Sess., 7, 8 (1977). Pennsylvania has neither sought nor obtained Federal Trade Commission approval for the collection practices of Landlord and Tenant Officers such as defendant Green. If an application were to be made the Commission would not approve it, because while 15 U.S.C. § 1692n preserves a role for state law not inconsistent with FDCPA, the saving clause is qualified by the provision that “[f]or purposes of this section, a State law is not inconsistent with this subchapter if the protection such law affords any consumer is greater than the protection provided by [FDCPA]” (emphasis supplied). The Pennsylvania statutes and court rules governing Landlord and Tenant Officers fall far short of meeting that standard.
Under the Act the term “debt collector” means “any person who uses any instrumentality of interstate commerce or the mails in any business the principal purpose of which is to collect, directly or indirectly, debts owed or due or asserted to be owed or due another.” 15 U.S.C. § 1692a(6). Defendant Green falls squarely within this definition, for he uses the mails in a business the principal purpose of which is the collection, on behalf of landlords other than himself, of rents owed or asserted to be owed by tenants. Thus prima facie Green is one of the class whose activities Congress intended to regulate.
The majority opinion holds that Green’s collection business is not covered by the FDCPA because, although he acts as a rent collector for landlords, he has been designated by the Municipal Court of Philadelphia as an “official” and is thus within the exemption clause of 15 U.S.C. § 1692a(6). That opinion explains that the “official” designation was devised by the municipal court as a means for diverting from its doors the large number of eviction actions which resulted when the judgment in Santiago v. McElroy, 319 F.Supp. 284 (E.D.Pa.1970), put an end to ex parte distraints for rent. Thus the very purpose of the “official” designation was to increase the efficiency of private debt collectors so as to reduce the incidence of resort to the formal processes of the court. In considering whether the mere designation of a private debt collector as an “official” should place him outside the reach of the FDCPA it should be noted that the Federal Trade Commission Guides and Trade Practice Rules dealing with debt collection deception include this prohibition:
An industry member shall not use any trade name, address, insignia, picture, emblem, or other means which creates a false impression that such industry member is connected with or is an agency of government.
16 C.F.R. § 237.3 (1981). What the Municipal Court has done is to clothe Green with a designation which is intended to permit him to pretend that he is acting on behalf of the Court, when in fact he is acting, in his collection activities, solely on behalf of his principals, the landlords. The Philadelphia scheme1 operates as a plain subversion of the Federal Trade Commission regulation. Moreover, the majority’s interpretation of FDCPA cannot be confined to debt collectors who collect for landlords. The majority reasons that because the Municipal Court had an interest in stemming the flow of eviction actions it could, under Pennsylvania law, encourage rent collection outside the court system by designating the landlords’ agent as an “official”. Obviously all the state courts have the same caseload interest with respect to all debt collection cases. Thus all private debt collections can, under the majority’s reasoning, be made *399“official” merely by prescribing a form and designating its user an “official.” And if a state should do so, according to the majority, all debt collectors in that state would be exempt from the FDCPA and from the enforcement and regulatory jurisdiction of the Federal Trade Commission. Such a construction of a federal regulatory statute designed to remedy perceived defects in state regulation is simply irrational.
In arriving at a plainly irrational result the majority relies on a part of the definitional section of the statute. That section is hardly a model of clarity. In reading it, however, one cannot take a clause out of context and give it a meaning which is inconsistent with the overall purpose of the legislation. Rather, if the definitional section is ambiguous our effort should be to interpret it in a manner which preserves rather than destroys the legislative purpose; which preserves the role of the Federal Trade Commission in passing on state regulation rather than permits states to bypass that agency by subterfuge. The definitional section can be and should be so interpreted. Following the broad definition of “debt collector” quoted above, the Act provides:
The term does not include—
(A) any officer or employee of a creditor while, in the name of the creditor, collecting debts for such creditor;
(B) any person while acting as a debt collector for another person, both of whom are related by common ownership •or affiliated by corporate control, if the person acting as a debt collector does so only for persons to whom it is so related or affiliated and if the principal business of such person is not the collection of debts;
(C) any officer or employee of the United States or any State to the extent that collecting or attempting to collect any debt is in the performance of his official duties;
(D) any person while serving or attempting to serve legal process on any other person in connection with the judicial enforcement of any debt;
(E) any nonprofit organization which, at the request of consumers, performs bona fide consumer credit counseling and assists consumers in the liquidation of their debts by receiving payments from such consumers and distributing such amounts to creditors;
(F) any attorney-at-law collecting a debt as an attorney on behalf of and in the name of a client; and
(G) any person collecting or attempting to collect any debt owed or due or asserted to be owed or due another to the extent such activity (i) is incidental to a bona fide fiduciary obligation or a bona fide escrow arrangement; (ii) concerns a debt which was originated by such person; (iii) concerns a debt which was not in default at the time it was obtained by such person; or (iv) concerns a debt obtained by such person as a secured party in a commercial credit transaction involving the creditor.
15 U.S.C. § 1692a(6). The Senate Report explains what Congress intended by the definition and the exclusions:
The committee intends the term “debt collector,” subject to the exclusions discussed below, to cover all third persons who regularly collect debts for others. The primary persons intended to be covered are independent debt collectors. The requirement that debt collection be done “regularly” would exclude a person who collects a debt for another in an isolated instance, but would include those who collect for others in the regular course of business. The definition would include “reciprocal collections” whereby one creditor regularly collects delinquent debts for another pursuant to a reciprocal service agreement, unless otherwise excluded by the act.
The term debt collector is not intended to include the following: “in house” collectors for creditors so long as they use the creditor’s true business name when collecting; Government officials, such as marshals and sheriffs, while in the conduct of their official duties; process servers; nonprofit consumer credit counsel*400ing services which assist consumers by apportioning the consumer’s income among his creditors pursuant to a prior arrangement; and attorneys-at-law while acting in that capacity. One subsidiary or affiliate which collects debts for another subsidiary or affiliate is not a “debt collector” so long as the collecting affiliate collects only for other related entities and its principal business is not debt collection.
Finally, the committee does not intend the definition to cover the activities of trust departments, escrow companies, or other bona fide fiduciaries; the collection of debts, such as mortgages and student loans, by persons who originated such loans; mortgage service companies and others who service outstanding debts for others, so long as the debts were not in default when taken for servicing; and the collection of debts owed to a creditor when the collector is holding the receivable account as collateral for commercial credit extended to the creditor.
Sen.Rep.No.95-382, 95th Cong., 1st Sess. 3 — 4, reprinted in [1977] U.S.Code Cong. & Admin.News 1695, 1697-98. (Emphasis supplied). The quoted discussion in the Senate Report suggests that exemptions (C) and (D) were intended to be read in pari materia, and to exempt the activities of court officials engaged in the enforcement of judicial process.2 That interpretation is consistent with exemption (F) dealing with lawyers. The broad definition, the overall scheme of the statute, and the limited purposes of the exemptions all strongly suggest that subsection (C) was not intended to exempt debt collectors operating at the stage of the collection process before a lawsuit is commenced. Certainly the definitional section cannot have been intended to permit a state to circumvent the Federal Trade Commission’s jurisdiction by designating private debt collectors as “officials.” In F.T.C. v. Shaffner, 626 F.2d 32, 36 (7th Cir. 1980), the court dealt with a similar effort to read one of the definitional exceptions in a manner that would defeat the Commission’s jurisdiction. In that case an attorney who operated a collection agency resisted enforcement of an agency subpoena on the ground that exemption (F) applied. The court observed:
While the statute clearly excludes “any attorney-at-law collecting a debt as an attorney on behalf of one in the name of a client” from the definition of “debt collector,” it does not state that an attorney, by reason of mere possession of a license to practice law, is not subject to the compulsory process of the FTC. The statutory exclusion does not merely say “any attorney-at-law,” it says “any attorney-at-law collecting a debt as an attorney on behalf of a client.” While the exclusion is not a narrow one, it is readily apparent that Congress did not intend to vest in every attorney a right to be free from investigation. Needless to say, many who hold licenses to practice law, do not practice law, but engage in other businesses. We do not believe Congress intended to shield one debt collection business from investigation simply because it is owned by an attorney, while subjecting other debt collectors to scrutiny by the FTC.
I would interpret exemption (C) similarly. Congress intended to exempt court personnel engaged in enforcement of the court’s processes, because except for 15 U.S.C. § 1692i, which fixes the venue in which legal actions by debt collectors may be brought, the FDCPA makes no attempt to regulate the legal process. But while Congress left incidents of the judicial process other than venue to state regulation, it did not intend to shield from the FDCPA court “officials” who collect debts without resort *401to judicial process, any more than it intended to shield from the FDCPA attorneys who run collection agencies.
Green also urges that he falls within exemption (D) because the form demand letter he uses is “legal process.” Neither the district court nor the majority accept that argument. It is plainly without merit. The demand letter may have legal significance if Green’s collection efforts are unsuccessful, and the landlord decides to proceed with an eviction, because a landlord seeking a writ of possession must have sent a notice to quit. Pa.Stat.Ann. tit. 68, § 250.501 (Purdon 1965). But whether that notice is sent by the landlord or by his agent, it is not process. Moreover, although in a form prescribed by the Municipal Court, the letter has no legal significance whatever in those cases in which Green succeeds in collecting the rent. Nothing in Pennsylvania law authorizes Landlord and Tenant Officers, or constables outside Philadelphia County, to collect rent for a landlord before a suit has been filed. In sending a demand letter and in collecting rent, the Landlord and Tenant Officer derives his authority solely from his principal, the landlord. Cf. Pa.Stat.Ann. tit. 68, § 250.504 (Purdon 1965) (authorizing constables to receive rental arrearages after judgment but prior to execution of a writ of possession).
The plaintiffs also urge that in devising a set of forms which permit the Landlord and Tenant Officers to identify themselves with the Municipal Court of Philadelphia, the Presiding Judge of that Court acted inconsistently with the Pennsylvania law which abolished the office of constable in Philadelphia. They point out that in 1964 and 1965 the Pennsylvania Attorney General’s Office conducted a major investigation of the Philadelphia magistrate system. Part of that inquiry focused on abuses by constables acting as private debt collectors. The Attorney General’s Report notes that many constables operated as collection agents without registering as such and that many of them advertised their connection with the magistrate court in soliciting landlord-tenant collection business. Report of the Attorney General on the Investigation of the Magisterial System 27, 362 (1965). The Report noted that
constables are engaging in practices designed to terrify the average citizen and to make it clear that by reason of the constable’s close association with the magistrate who will hear the case, any attempt to resist collection is futile. This is a fact of life in the magistrate’s civil court even though the debtor has a valid defense. These practices include vicious dunning letters, [and] harassing and abusive phone calls....
Id. at 27. The Report recommended legislation abolishing the constable system in Philadelphia and the transfer of constables’ duties in civil actions to the sheriff’s office. Id. at 44-45. In response the Pennsylvania legislature abolished the constable system in Philadelphia and transferred constable duties under the Landlord and Tenant Act of 1951 to Landlord and Tenant Officers. Pa.Stat.Ann. tit. 13, § 15 (Purdon Supp. 1981-82). Outside Philadelphia, where constables still function, they are prohibited by Court Rule from engaging in the collection business. Rule 10, Rules Governing Standards of Conduct of Constables, Pa.Stat. Ann. tit. 13, App. (Purdon Supp. 1981-82). Thus, plaintiffs note, the legislative reforms resulting from the 1965 Report of the Attorney General have been interpreted in Philadelphia so as to put the Landlord and Tenant Officers in Philadelphia in the same position as the constables were in prior to those reforms.
In light of the foregoing history, the majority’s reliance on 42 Pa.Cons.Stat.Ann. § 2301 as authority for allowing the President Judge of the Municipal Court to cloak bill collectors with the mantle of an “official” status in their bill collecting, as distinguished from their process serving functions, is highly dubious. There is no need, however, to pass upon that question of state law. The history of the constable system in Philadelphia discloses the very evils against which the FDCPA and 16 C.F.R. § 237.3 were aimed. These federal laws were enacted because Congress found that state *402law was .not uniformly effective. Assuming the President Judge does have the authority he claims to cloak his Landlord and Tenant Officers with an “official” mantle when they engage in the business of private debt collection without resort to legal process, the situation in Philadelphia demonstrates how right Congress was about the inutility of relying on state law to prevent undesirable debt collection practices.3 The unrealistic interpretation of the FDCPA announced by the majority unfortunately puts the states in the position of perpetuating one of the principal evils against which the legislation was directed.
I would reverse.

. The scheme exists only in Philadelphia County. See Rules Governing Standards of Conduct of Constables, Pa.Stat.Ann. tit. 13, App. (Purdon Supp. 1981-82). It was adopted prior to the enactment of the FDCPA.

. Another reasonable interpretation of exemption (C) is that it applies to employees of the United States or a State whose official duties include the collection of debts in the interest of the government which employs them. There is some language in House Report No. 95-131 indicating that this may have been intended, H.R.Report No. 95-131, 95th Cong., 1st Sess. 11, and if so, exemption (C) would be consistent with exemptions (A) and (B), exempting collection by employees of the creditor. The Senate Report, however, does not support this interpretation.

. When the FDCPA was considered in the Senate the inadequacy of Pennsylvania’s law was referred to specifically. 123 Cong.Rec. S 13854 (Aug. 5, 1977) (Remarks of Senator Riegel). So also was the evil of “impersonating public officials and attorneys, and simulating legal process.” Excerpt of Senate Report 95-382 inserted in the record by Senator Byrd. Id. at S 13855.