Assignee Vs. Purchaser - any insight??

[admin]

Today I received this email and wondered if anyone could maybe find any case law to help this guy out...do you think this is Michigan specific?

I respect your site very much and I even bought some of your information. However, I notice you are making a huge mistake on this page. You state the following :

So when a collection agency is assigned, or has purchased, your debt, they are NOT the creditor. They are the debt collector and the actions they take are all governed by the FDCPA.

If they do purchase the debt, this does not make them the creditor, they are still a debt collector and covered by the FDCPA.

Although this would seem rather clear cut, the courts are very clear that this is not the case. Currently, a "collection agency" is listed on my credit report (Asset Acceptance). I wanted to find out if they were licensed in my state so I did some research and found out that they were not. I thought I was home free until I did some research on some message boards. I found out that, the State of Michigan stated, they are not subject to being licensed if they purchase the debts even if the debtors they are trying to collect from also reside in the same state.

I decided to do some research to find out exactly why they would not be subjected to being licensed as a collection agency. I found this :

http://www.michbar.org/opinions/appeals/2001/030201/9546.pdf

This is about as clear as it gets....

Defendant maintains that plaintiff is a collection agency under the Act and has thus violated the above provisions. Plaintiff, on the other hand, contends that it is not a collection agency and purchased the debt in question outright and is not acting on behalf of a creditor.

A collection agency is defined as:

[a] person directly or indirectly engaged in soliciting a claim for collection or collecting or attempting to collect a claim owed or due or asserted to be owed or

due another, or repossessing or attempting to repossess a thing of value owed or due or asserted to be owed or due another arising out of an expressed or implied

agreement. . . . [MCL 339.901(; MSA 18.425(901)(.]

In the instant case, defendant purchased the vehicle from Repo Depo West, Inc. Repo Depo West, Inc. immediately sold sefendant’s account to Guardian National Acceptance Corporation.

On June 27, 1997, plaintiff purchased defendant’s account from GNA. The purchase agreement states that GNA conveyed all of its interests in the accounts to plaintiff for value.

This Court holds that plaintiff is not a collection agency as defined by the Act. The purchase agreement states that GNA conveyed all of its interest in defendant’s account for

valuable consideration. Moreover, the provisions of the Act clearly attempt to protect the debtor and the creditor from the potentially improper acts of a third-party collection agency.1 Here, plaintiff is not acting for the benefit of GNA, or any other party, in its suit to collect on the debt.

Therefore, plaintiff has standing to sue defendant on the outstanding debt.

Defendant next contends that despite plaintiff’s stance that it is not a collection agency under Michigan law, its actions are clearly prohibited by the MCPA, MCL 339.901 et seq.; MSA

18.425(901) et seq.

Specifically, as stated above, MCL 339.915a(f); MSA 18.425(915a)(f) provides that a licensee under the Act is prohibited from “soliciting, purchasing, or receiving an assignment of a claim for the sole purpose of instituting an action on the claim in a court.” Defendant argues that because plaintiff purchased a delinquent account from GNA, and filed suit

on the account, it must be subject to the Act. In support of this contention, defendant refers to the definition of creditor under the Act.

Creditor is defined as:

[a] person who offers or extends credit creating a debt or a person to whom a debt is owed or due or asserted to be owed or due. Creditor or principal shall not include a person who receives an assignment or transfer of a debt solely for the

purpose of facilitating collection of the debt for the assignor or transferor. In those instances, the assignor or transferor of the debt shall continue to be

considered the creditor or the principal for purposes of this article. [MCL 339.901(e); MSA 18.425(901)(e) (emphasis supplied).]

Thus, defendant argues that “an entity that receives a debt in default for the purpose of collecting the debt is not a creditor and is therefore a debt collector/collection agency subject to the act.”

However, this Court holds that, although plaintiff received an assignment or transfer of a debt, there is no evidence that plaintiff was “facilitating collection of the debt for the assignor or transferor” (GNA). MCL 339.901(e); MSA 18.425(901)(e). As noted, plaintiff purchased all interest in the account from GNA and cannot be acting on GNA’s behalf in collecting the debt.

I guess this greatly decreases my chances of obtaining validation from this company. I imagine it would be extremely difficult to sue them if they continue to report the debt and they don't validate it (since they are not subject to FDCPA). I would appreciate your opinion!!

[Edit by admin on Sunday, February 9, 2003 @ 06:43 PM]

[bingo]

This has been posted at creditnet under the Hurley Bank thread.

I read the case and I just don't understand why the lawyers screwed around with the Mi. version of the FDCPA when the FDCPA is pretty clear that unless you are the OC you're 3rd party? At first blush, I'd say the Mi. Act is worthless but, I don't think I'd let 'em off the FDCPA hook. The FDCPA says you can sue in a court of competent jurisdiction which means state or Federal. I just don't understand the legal reasoning behind this appeal.

All that being said, it's a legimate case from the Mich. Court of Appeals but it also seems like it can be side stepped.

[Swede]

Any third party collector obtaining an assignment or purchasing a debt that is in default is subject to the FDCPA. You're right, this is MI specific. We actually discussed this case in this thread http://www.debt-consolidation-credit-repair-service.com/cgi-local/cutecast/cutecast.pl?forum=4&thread=1291

I posted it a while back when TJ was having the same issues with Asset. The case the guy copied for you stated that no, they're not defined as a debt collector under MI collection law, but they are in fact a debt collector under the FDCPA and they even admit to that in the case. He needs to read the entire case:

ASSET ACCEPTANCE CORPORATION v. ROBINSON

Defendant also argues that, under the Fair Debt Collection Practices Act, 15 USC 1692 et seq. (FDCPA), plaintiff is a debt collector and is prohibited from suing on accounts it purchased after the debt was in default. Plaintiff concedes that it is a debt collector under the FDCPA.

Defendant relies on the following provisions to support his argument: The term creditor” means any person who offers or extends credit creating a debt or to whom a debt is owed, but such term does not include any person to the extent that he receives an assignment or transfer of a debt in default solely for the purpose of facilitating collection of such debt for another. [15 USC 1692a(4).]

* * *

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 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. [15 USC 1692a(6).]

As noted, GNA sold all of its rights and interests in defendant’s debt and thus plaintiff cannot collect the debt on behalf of GNA. In Kimber v Federal Financial Corp, 668 F Supp 1480 (MD Ala, 1987), the United States District Court addressed the issue of whether an entity that purchases a debt in default is a debt collector or a creditor under the Act. The court held, under analogous facts, that despite the defendant’s argument that it was not collecting the debt for another, “Congress merely intended that the debts should have originally belonged to another and that the creditor was therefore in effect a third-party or independent creditor.” Kimber, supra, 668 F Supp 1485 (emphasis in original). The court held that: even though FCC collects debts for itself, it is still a debt collector within the meaning of § § 1692a(4) and 1692a(6) of the Act, because the corporation regularly collects debts and debt collection is the principal purpose, and because the debts the corporation collects were already in default when they were assigned to the corporation and thus the corporation falls within the assignee exception to the definition of creditor. [Kimber, supra, 668 F Supp 1485.]

The Kimber court went on to hold that as the defendant was subject to the Act as a debt collector, it had violated several of the protective provisions under the Act. Kimber, supra, 668 F Supp 1488-1489.

In the instant case, plaintiff concedes, and we agree, that it is a debt collector under theAct. However, defendant does not allege how, if at all, plaintiff has violated any of the protective provisions of the Act.

http://www.milawyersweekly.com/micoa/215158.htm

Also check this:

FTC Opinion Letter

This responds to your letter dated December 2, 1993, inquiring whether Midland Credit Management, Inc. ("MCM") is a debt collector under the Fair Debt Collection Practices Act ("FDCPA" or "Act"). You report that MCM "purchases portfolios of delinquent accounts receivable for the purpose of profitable recovery, resale and cure. blah blah blahh blah.....

In sum, it is our view that a party that obtains consumer obligations in default for the purpose of collection is a "debt collector" under the FDCPA, even if that party actually purchases the accounts from the original creditor

http://www.ftc.gov/os/statutes/fdcpa/letters/arbuckle.htm

FAIR DEBT COLLECTION PRACTICES ACT UPDATE 1999

(Scroll down to PURCHASERS OF LOAN PORTFOLIOS INCLUDING DEFAULTED DEBTS to read more about purchasing delinquent debts.)

A company which acquires a block of receivables is a "debt collector" with respect to those receivables in default at the time of acquisition. The leading case is Kimber v. Federal Financial Corp., where the purchaser of credit card receivables from W.T. Grant, which had gone bankrupt, was held to be a "debt collector" with respect to those receivables which were delinquent at the time they were acquired.

http://www.edcombs.com/CM/News/news7.asp

[Edit by Swede on Sunday, February 9, 2003 @ 07:14 PM]

[admin]

Thanks guys!

Kristy

[bingo]

Why not a validation letter worded "by your own admission in this case you fall under the definition of debt collector per the FDCPA. I am formally demanding validation under the Federal FDCPA"? Or, words to that affect. It seems this is very state specific and the ruling relieves them of any bonding or liscensing requirements in Mi. but it doesn't exempt them {by their own admission} from complying with the FDCPA.

[SUNHAWK]

Hey everyone...thanks for your help. I was originally the one that posed the question to the Administrator who kindly posted it in this forum.

As I stated to her in my reply, although they do concede that they are a collector under the FDCPA, given the fact that I will be suing them in small claims court in Michigan, I would assume that they would use this case in their favor and the court would find that, a Michigan specific ruling, would hold and I would not be able to sue them.

The reason I may sue is because I requested validation which I received but it was a computer printout with just the amount of the original debt + interest and my information. What I find weird is the following....I requested a contract showing my signature which they can't provide..or for that matter any contract. Yet, in order for them to add on interest to my account, the original contract I signed has to give them the right to do so (15 USC 1692f).

So how can they possibly add on interest if they can't provide me with a contract that would give them the right to do so...its a big circle but I think either way you look at it..they lose (but only if they are a debt collector in the State of Michigan and the small claims court agrees).

[retmar]

Very interesting article. I had called there the other day to ask about A$$et. Besides getting bounced all over the state by "Gov't IMPS", I finally got a woman who told me that they do not require a license for buyers, only agencies. She was also not very professional or polite. My next call is to the AG. I will post my findings. My call is due to them placing a negative entry on my wife's report for an account she never had. By the way, no letters and we live in Calif. GOTCHA! As to your post, they are a debt collector and bound by the FDCPA. MI must have Judges who don't understand the laws they are supposed to uphold, or, don't know how to read or interpret them. DUH!

[Edit by retmar on Monday, February 10, 2003 @ 09:33 PM]

[LadynRed]

The FDCPA is not meant to hinder state laws, HOWEVER, FEDERAL law DOES trump state. Even though they somehow squirmed out of being a DC in MI, the FEDERAL GOVT and the ACT they are bound by should OVERRIDE this ridiculous state ruling.

"§ 816. Relation to State laws [15 USC 1692n]

This title does not annul, alter, or affect, or exempt any person subject to the provisions of this title from complying with the laws of any State with respect to debt collection practices, except to the extent that those laws are inconsistent with any provision of this title, and then only to the extent of the inconsistency. For purposes of this section, a State law is not inconsistent with this title if the protection such law affords any consumer is greater than the protection provided by this title.

§ 817. Exemption for State regulation [15 USC 1692o]

The Commission shall by regulation exempt from the requirements of this title 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 practices is subject to requirements substantially similar to those imposed by this title, and that there is adequate provision for enforcement."

Seems to me the MI decision is way off, as it IS inconsistent with the Act and the MI law does NOT exceed the protections provided by the FEDERAL Act.

My 2 cents

[Edit by LadynRed on Tuesday, February 11, 2003 @ 08:45 AM]

[retmar]

That was well written LadynRed. That definitely brings up a very good arguement in court. A very strong defense, at least in my opinion.

[SUNHAWK]

Thank you for your excellent research LadynRed...I appreciate it and will definately be using it in court if it comes down to that point.

[LadynRed]

Happy to help

Hope you beat 'em to a pulp !!

[123rich]

lol Im willing to bet that the creditor doesnt even show up for court anyways.... But good luck bro..

[fixerupper]

I've got a whole file on A$$et and am going to go back to see what their statements to DH say. I, too, requested validation (they've already got a judgment on him) and they sent me the photocopy of the judgment and the THREE sale agreements with no information as to cost. I belive this is a "partial" (using the term very loosely) validation and I am sending the attorney a new letter, as he's charging interest and there is no record of how much they paid for the acct and no info on interest.

Thank heavens for you guys, otherwise, we'd be up a creek!

[bingo]

OK, you're wasting your time trying validation on a judgment. A judgment is a factual matter. The CA does not have to prove anything to you except, send a copy of the judgment.

[fixerupper]

Why can't I validate a judgment? I've read that you can validate anything as long as it's not from an OC. And I've seen people have success with validation on a judgment. My big thing is that we have no idea where they're coming up with the amount that they keep sending us. I want an accounting of the account for verification that they aren't trying to screw us, which from what I've heard about A$$et, they would do in a heartbeat.

Our other big issue is that when we re-fied our house in 2000, we had a settlement offer that we paid through the refi. However, the 1st CA that had the debt is saying that the check bounced. This was a check from the Title Company, not a personal check from us. Now the amount has increased from $1557 in 5/00 to $1865 in 4/01 to $2476 in 4/03. And we keep getting settlement offers from them.

Since this is a very old account, I think I have an absolute right to validate the debt that they claim we owe. A judgment can be vacated if they are found to be in error. I have learned from many folks on this site that you don't take claims of debt lying down - you fight them every step of the way!

My other question is - since the check bounced, why the heck didn't they notify us that the check bounced, instead of sending it to yet another CA? We could have resolved all of this is a quick and painless fashion back then!

[Edit by fixerupper on Wednesday, May 28, 2003 @ 09:37 AM]

[Edit by fixerupper on Wednesday, May 28, 2003 @ 09:41 AM]