Court rules debt purchaser qualifies as a “debt collector” and “collector” under federal and state law

Courts State Issues Debt Collection FDCPA Consumer Finance

On April 2, the U.S. District Court for the District of Maryland denied a defendant debt purchaser’s motion for summary judgment, ruling that the company qualifies as a “debt collector” and “collector” under the FDCPA, the Maryland Consumer Debt Collection Act (MCDCA), and the Maryland Consumer Protection Act (MCPA). The plaintiff had filed suit against three entities, including the defendant, alleging the entities violated the FDCPA, MCDCA, and MCPA by (i) threatening to file criminal charges; (ii) falsely implying that she committed a crime for which charges could be filed; and (iii) revealing information about the debts to her daughter and on voice mails with her employer. The defendant, who relied on the two other entities to conduct the actual debt collection, argued that it does not qualify as a debt collector under the FDCPA, and that it is not a “collector” under the MCDCA, and therefore cannot be held liable under the MCPA. The defendant further argued that, “regardless of whether it meets one these statutory definitions,” it cannot be held vicariously liable for actions taken by the other two entities.

The district court disagreed, ruling that the defendant qualifies as a debt collector under the “principal purpose” prong of the FDCPA and cannot evade liability “simply by outsourcing the specific collection activities to third parties.” With respect to whether it qualifies as a “collector” under the MCDCA and MCPA, the court noted that while the defendant argued that “it [did] not itself, or through in-house debt collectors, undertake any actions to collect [the plaintiff’s] debts, the definition of ‘collector’ is not limited only to persons or entities that directly engage with consumers to collect the debt.” As such, because the defendant qualifies as a debt collector and collector under federal and state law, it could be held vicariously liable. Moreover, the court stated there is “genuine dispute of material fact” regarding whether the defendant had a “principal-agent relationship” with the other two entities that subjects it to vicarious liability. In particular, contracts entered between the three entities allowed the defendant to, among other things, “exercise a great degree of control over consumer complaints” regarding collection actions.