Could 1692c(b) make some JDB account assignments illegal?

[Optimus_SubPrime]

Recently, I've been in legal negotations with a JDB that appears to be the fourth possessor of an account. I got to thinking that if the JDB wanted to defend the chain of title in court, it may have to obtain testimony from previous JDB owners in the chain, and contacting them would violate 1692c(. Looking at the Bill of Sale documents, I started to wonder whether the documents themselves were prima facie proof of violation. [Warning: This gets a little long.]

Apparently, from what I can determine, the standard process when a JDB attempts to sell title to a series of accounts is to include an exhibit with those account numbers and their associated Social Security numbers, amounts, and potentially other identifying information as part of the agreement.

1692c( states:

...a debt collector may not communicate, in connection with the collection of any debt, with any person other than a consumer, his attorney, a consumer reporting agency if otherwise permitted by law, the creditor, the attorney of the creditor, or the attorney of the debt collector.

"Communication" is defined in 1692a(2) as:

...the conveying of information regarding a debt directly or indirectly to any person through any medium.

Taken together, a fuller interpretation of 1692c( would be:

...a debt collector may not convey information regarding a debt directly or indirectly through any medium, in connection with the collection of any debt, to any person other than a consumer, his attorney, a consumer reporting agency if otherwise permitted by law, the creditor, the attorney of the creditor, or the attorney of the debt collector.

It has already been determined that a JDB is a debt collector for the purposes of the FDCPA. The question is whether the sale of an account from a JDB to another party to collect is an act "in connection with the collection" of a debt.

I would say it is. The standard is not "in the collection of a debt" but "in connection with the collection of a debt" -- a much broader standard that would seem to include acts related to collection other than direct collection attempts.

In the FTC's Staff Commentary on the FDCPA, they state, "A debt collector may discuss the debt only with the parties specified in this section (consumer, creditor, a party's attorney, or credit bureau). For example, unless the consumer has authorized the communication, a collector may not discuss the debt (such as a dishonored check) with a bank, or make a report on a consumer to a non-profit counseling service."

A JDB interested in buying new debt doesn't fit any of those exemptions, and negotiating a purchase of a specific account is reasonably considered "discussing a debt".

At any rate, I think it's at least a question worth being decided by a judge.

Some might argue that this interpretation would be ruled against because it would impede commerce by forbidding anyone other than the original creditor to assign a debt. I don't believe that's the case. Under this interpretation, a JDB assignor would only be prohibited from conveying information regarding individual debts until they had been purchased by the assignee. Instead of including a list of individual accounts as an exhibit attached to the agreement, which would necessarily be conveyed before signing, the total value of the accounts could be described in the agreement and the list of individual accounts and their identifying information could be delivered separately after consideration.

I don't see myself having a chance to use this theory of violation anytime soon, but someone else might. If, for instance, you see on your credit report that an account previously being reported by one JDB is now being reported by another, or you send off a DV letter to one JDB, only to get a new dunning letter a few months later from another JDB, you would have a year from the sale of the account to file an FDCPA violation claim against the seller. You would have to pursue discovery in order to obtain the agreement itself, but the JDB that sold the debt would no longer have any course of action against you.

This may sound like a strange theory of violation, but once upon a time, so did the idea that legal pleadings or summons forms were required to include the mini-Miranda warning. At any rate, I thought I would throw it out there to be picked apart or to be utilized by anyone who thinks it might apply to them.

[IHateCAs]

I dunno about that. You're reaching.

[nascar]

The question is whether the sale of an account from a JDB to another party to collect is an act "in connection with the collection" of a debt.

In the end, I guess it is; but I don't think a court would ever follow that line of reasoning.

[Optimus_SubPrime]

I don't think it's reaching. The FDCPA protects the privacy of the debtor, and the debtor's privacy is breached when his account is listed along with identifying information in a document that may be shown to multiple members of the public before purchase. All that compliance with the Act would require is that information which could identify the debtor not be disclosed until the purchase is made. This seems reasonable to me.

At any rate, there are any number of FDCPA theories of violation that I've found a lot more outlandish than this one which have ultimately been accepted by a court. *shrug*

[nascar]

there are any number of FDCPA theories of violation that I've found a lot more outlandish than this one which have ultimately been accepted by a court. *shrug*

Yep, I guess you just never know what will fly and what won't. You can bet that success or failure depends a lot on the quality of the argument.

[direred]

The FCRA does permit other agencies to pull your credit when considering a portfolio for purchase. I realize the FDCPA does not, but that definitely constitutes an interesting possible cause of action.

There's also the provision about not selling lists of debtors (1692d(3)), which may be your stronger argument.

[unusualsuspect]

It's a very good theory.

Keep in mind though it will be fought tooth and nail by the JDB industry. There's way too much money at stake for them to roll over and let a court kill their business.

On the other hand--all it would take is a judge to buy into it and you've killed their livliehood.

[Optimus_SubPrime]

There's also the provision about not selling lists of debtors (1692d(3)), which may be your stronger argument.

That's actually what I thought initially, but after a closer look, I'm not so sure.

The Ronick-Brinkerhoff letter deals with a situation vaguely similar to this one. It states:

In our opinion, a debt collector's sale of a list of the names of its accounts clearly constitutes "publication of a list of consumers who allegedly refuse to pay debts" and thus violates Section 806 (3) of the FDCPA.

However, in this situation, the debt collector was trying sell a mailing list of debtor information as a product to marketers. I'm not sure the printing of a single list, even if shopped around to multiple buyers, would be interpreted as publication. Maybe it would be. I know that many states required to publish lists of unclaimed property holders do so by having a single list in a main office. If you were filing suit anyway, you might as well make both claims and see if either stuck.

You'd also need better case law. I hate that the FTC Opinion Letters have no legal weight.

all it would take is a judge to buy into it and you've killed their livliehood.

Well, as I stated before, I don't think it would present any bar to assignment in general, just assignment agreements that identify the debtor before purchase of the accounts has been made.

If a judge did rule these sorts of agreements in violation of 1692c(, though, any debtor whose chain of assignment included an agreement like this might be able to raise an unclean hands defense. If the assignment agreement violated the law, the assignee may not be able to maintain an action on it.

But this is putting the cart before the horse.

[unusualsuspect]

Well someone would have to be willing to make this a test case in Federal court. No doubt that it would go to the Appeals and probably Supreme Court.

Any volunteers?