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Assett, Credigy, etc. are NOT Collection Agencies...


SRussell
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...or, they might be.

This is the legal mumbo jumbo I'm receiving from attorneys, specifically from www.naca.net.

Why is this important? Because if they are NOT considered collection agencies, then the FDCPA doesn't apply to them - at all.

What's the difference? According to the attornies: If someone is assigned a debt by an OC, they are a CA. If someone buys a debt from an OC (or another CA), they are not a CA, but a debt collector. Debt collectors are not covered by the FDCPA. Why? Because they own the debt; they bought it. They weren't assigned the debt.

Does this make sense? Please... there's gotta be someone that can straighten this out.

*arghhh*

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huh!?!!? It doesn't matter if they own it or not, bought it or not, they still say they are collecting a debt. The FDCPA refers to all 3rd parties, whether they purchased the debt or not. If they are NOT the OC, then they fall under the FDCPA for all. Even the OC has to abide by the law, they cannot abuse you, harrass you, or threaten illegal actions to collect.

Plus: These guys NEVER have proof that they bought from the OC. Credigy bought its stuff from the old First Select. Then, they waited for the items to go to SOL and then they hit you with a lawsuit. But, since Credigy has been successfully sued in several class action lawsuits for violations of the FDCPA, then YES, they fall under its jurisdiction. What idiot told you otherwise? The NACA lawyer I dealt with in Houston was great. Jim McMillen. Or, in Dallas, Dean Malone is great too!

Does this make sense?

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Agree with AaS (better than a$$) 8-)

JDB's can usually get around licensing laws designed for CA's because they aren't collecting for the OC (this is how A$$et gets around CA licensing laws in Michigan, where they are based).

However, if they are attempting to collect a debt, then they do meet the definition of a debt-collector. There is a case citing that they do need to meet the requirements of the FDCPA. Use search to find it.

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JDB's can usually get around licensing laws designed for CA's because they aren't collecting for the OC (this is how A$$et gets around CA licensing laws in Michigan, where they are based).

However, if they are attempting to collect a debt, then they do meet the definition of a debt-collector. There is a case citing that they do need to meet the requirements of the FDCPA. Use search to find it.

There lies the contradiction. I've been told that Debt collectors are NOT the same as CA's, and there for do NOT have to be held accountable to the FDCPA.

If there is case law which contradicts this, then why in da' heck didn't the "experts" say so?

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huh!?!!? It doesn't matter if they own it or not, bought it or not...

According to TWO attornies that "specialize" in this stuff, it does matter.

Well, still, if they are attempting to collect a debt, they have to follow the law. They can't harrass or abuse you, or threaten you with illegal acts (taking your house if your state law doesn't allow for that, etc). So, in that regard, yes, they fall under it. But, maybe, since they are the new owner, they can keep charging interest. But thats it I would think.

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See, all that you've stated isn't my concern... and I get the "abuse over the phone" stuff.

I appreciate Master P's explanation... thanks.

But without case law, what exempts CA's from the FDCPA? And if case law (just the "act" of attempting to collect a debt and not being an OC means FDCPA applies) exists...

Why are attornies who specialize in this stuff contradicting the info here?

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This is the definition of a debt collector under Section 803 of the FDCPA:

(6) 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. Notwithstanding the exclusion provided by clause (F) of the last sentence of this paragraph, the term includes any creditor who, in the process of collecting his own debts, uses any name other than his own which would indicate that a third person is collecting or attempting to collect such debts. For the purpose of section 808(6), such term also includes any person who uses any instrumentality of interstate commerce or the mails in any business the principal purpose of which is the enforcement of security interests. 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;

© 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; and

(F) 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.

The FDCPA says NOTHING about 'collection agencies' , it refers ONLY to 3rd party DEBT COLLECTORS. Further, I believe there is case law that clearly states that if a debt was delinquent when it was assigned or purchased, then that asignee or "new owner" is then considered a "debt collector".

It's scary that a NACA lawyer would not know this. :shock:

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What's the difference? According to the attornies: If someone is assigned a debt by an OC, they are a CA. If someone buys a debt from an OC (or another CA), they are not a CA, but a debt collector. Debt collectors are not covered by the FDCPA. Why? Because they own the debt; they bought it. They weren't assigned the debt.

Bull-nuts.

"[A] company which takes an assignment of a debt in default, and is a business the principal purpose of which is to collect debts, may be subject to the Act, even if the assignment is permanent and without any further rights in the assignor". As long as the purchaser asserts that the debt was in default when acquired, the FDCPA applies, even if the assertion proves to be false. Schlosser v. Fairbanks Capital Corp., 323 F.3d 534 (7th Cir. 2003)

The ONLY time a successor in interest can claim to not be a debt collector under the FDCPA upon acquiring delinquent debt is if 1) they buy the entire company out...all assets, and 2) the company bought out was not already classified as a debt collector under the law.

So if, for example, Asset were to buy out Household Finance's (an originator) entire business operations to the last shred of paper then any delinquent debts acquired in that transaction would not be covered under the FDCPA. But if Asset buys a portfolio of debts from Household, not the entire business, then those accounts are covered by the FDCPA.

By the same token, any CA that bought up the now defunct NCO's outstanding accounts CANNOT claim to be a successor in interest because the accounts were already classified as covered under the FDCPA before they were acquired.

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Well, NC must have some grip on Asset b/c they are licensed as a CA in the state of NC; thus, they are treated as such, being bound to the FDCPA. How a "debt collector" can choose which states to be a CA & which to be a "debt collector" is beyond me.

When I talked to the CA licensing gal in Lansing, she told me that it's strictly defined by the legislature of the state in question. In Michigan, CA is defined as a third party collector, as opposed to the debt owner. Therefore, A$$et doesn't need a license in the state.

NC may have a different interpretation of what a CA is, and therefore require licensing.

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People!!! Put down the crack pipe!

I'm in the middle of another project right now, but will post case law DEFINITELY establishing JDB as debt collectors and subject to FDCPA.

Just went through this a few months ago with idiot JDB in FLA who tried to rely on Florida Statutes claiming they weren't debt collectors. They now know that they are. Period. Paragraph!

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I believe if you follow the cites of both Kimber and Holmes, you'll find that these cases are still good law.

UNITED STATES OF AMERICA

FEDERAL TRADE COMMISSION

WASHINGTON, D.C. 20580

Division of Credit Practices

Bureau of Consumer Protection

~

Clarke W. Brinckerhoff

Attorney

December 22, 1993

Ms. Kimberlee Arbuckle

MIDLAND CREDIT MANAGEMENT

500 West First Street

Post Office Box #576

Hutchinson, Kansas 67504

Dear Ms. Arbuckle:

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. These accounts are owned solely by MCM . . ."

Section 803(6) of the FDCPA defines the term "debt collector" as "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." In our view, a party that purchases delinquent accounts from the party to which the debts were originally owed and attempts to collect them from the consumer debtors fits clearly within that definition. The party is attempting to collect debts that were "owed or due another" and the fact that title to the accounts is passed to the collector in no way changes that fact.

In the leading case on point, involving a company whose business included the purchase of large volumes of checks that had been dishonored and subsequent collection of the checks from their makers (in the same manner as MCM buys defaulted accounts and thereafter attempts to collect from the account debtors), the court wrote persuasively that the purchaser is covered by the FDCPA. It gave short shrift to the fact that the party had actually purchased the checks in question:

By use of the language "owed or due another" Congress was attempting to exclude those entities that extend credit from the effects of the Act. Congress intended to protect borrowers from "third persons who regularly collect debts for others." (Italics by court; citation omitted). (The purchaser) is a third party collecting a debt originally owed to another. . . . It cannot escape the spirit of the Act by the technicality of purchasing the debt upon default so that title technically rests in itself.

Holmes v. Telecredit Service Corp., 736 F. Supp. 1289, 1293 (D. Del. 1990)

The only theory for exclusion of a party such as MCM from the "debt collector" definition (and thereby from coverage under the FDCPA) is that it is a "creditor."(1) Section 803(4) defines "creditor" as "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 trans-fer of a debt in default solely for the purpose of facilitating collection of such debt for another." Since the accounts that MCM buys are delinquent when purchased and are being transferred for the purpose of collection, we believe that MCM is within the class that the "creditor" definition expressly "does not include."(2) The words "for another" at the end of the clause excepting assignees from the definition of creditor in no way changes this result:

(T)he excluding factors in the exception are that the debts are the result of an assignment or transfer and that the debts were already in default at the time of assignment or transfer. With the phrase "for another" at the end of the exception, 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. (Italics by court)

Kimber v. Federal Financial Corp., 668 F. Supp. 1480, 1485 (M.D.Ala. 1987). Accord, Holmes, supra, at 1293.

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.

The views set forth in this informal staff opinion letter are not binding on the Commission.

Sincerely yours,

Clarke W. Brinckerhoff

--------------------------------------------------------------------------------

1. Section 803(6)(A) only specifically exempts creditors' officers and employees. However, it "seems clear from the legislative history of the Act that Congress intended that this exclusion cover creditors themselves as well as their employees." Holmes v. Telecredit Service Corp., 736 F. Supp. 1289, 1291n.3 (D.Del. 1990), citing Kimber v. Federal Financial Corp., 668 F. Supp. 1480, 1484 (M.D.Ala. 1987).

2. See the comment on this subsection in our Staff Commentary on the Fair Debt Collection Practices Act. 53 Fed. Reg. 50097, 50101 (Dec. 13, 1988.)

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Well, NC must have some grip on Asset b/c they are licensed as a CA in the state of NC; thus, they are treated as such, being bound to the FDCPA. How a "debt collector" can choose which states to be a CA & which to be a "debt collector" is beyond me.

When I talked to the CA licensing gal in Lansing, she told me that it's strictly defined by the legislature of the state in question. In Michigan, CA is defined as a third party collector, as opposed to the debt owner. Therefore, A$$et doesn't need a license in the state.

NC may have a different interpretation of what a CA is, and therefore require licensing.

Master P,

You are talking about licensing requirements unser state jurisdiction. Each state has it' own rules as to when or who requires a licenses to operate. This thread is about who is subject to FDCPA under federal law. Apples vs oranges. :)

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I too am worried that a NACA lawyer wouldn't know the FDCPA, but they may not be a specialist in that area. But, I believe that Ladynred made it quite clear. If the debt was in default when whichever agency attempts to collect it, they are a debt collector. If ANYBODY other than the company who gave you the credit (IE Discover, Chase, MBNA etc) is calling you about the debt, they are a debt collector.

For example, you are 3 months behind on your Chase card, and Chase calls you to tell you this, they are NOT debt collectors. But, if NCO calls for Chase, they are a debt collector. Any attempt to collect a debt that is considered "in default" rather than "late" is covered under FDCPA.

Comments?

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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.

I think the important part of this section that the JDB lawyers are laching onto are the words "or due another."

If they claim that they are not seeking payment of the debt for another, but for themselves, then they can argue that they are not a CA and thus not bound by the rules and regulations of the FDCPA. A slick arguement to be sure, but really boils down to sematics. (sp)

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but, its not WHO they collect for, but WHETHER they attempt to collect. If the debt was in default, then whether they bought it or not, unless they are the OC (and they are not the OC by way purchasing the debt) they are collecting a debt, which makes them debt collectors, which puts them under the FDCPA. They can't weasel out of the law. And, the courts have all ruled against the big guys (NCO, Unifund, Credigy, etc) so the little guys have no legs to stand on.

Enough said on this topic.

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For example, you are 3 months behind on your Chase card, and Chase calls you to tell you this, they are NOT debt collectors. But, if NCO calls for Chase, they are a debt collector. Any attempt to collect a debt that is considered "in default" rather than "late" is covered under FDCPA.

Comments?

I wonder about this statement. An example from my past:

I had a Chase mortgage I habitually paid late (never 30 days, although sometimes 28, 29). Everytime I made that payment, I would have to listen to the mini miranda, which I believe is part of the FDCPA.

If Chase was not required to give the mini miranda, why would they? Cover their butts?

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If Chase was not required to give the mini miranda, why would they? Cover their butts?

yes. The mortgage industry is overly careful in this regard because the penalties are so much more extreme. So they overdo it rather than risk not doing enough.

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