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Can a Bank be a Debt Collector Under the FDCPA?

The Fair Debt Collection Practices Act (“FDCPA”) is the federal statute that was enacted to protect consumers from abusive collection tactics of debt collectors.  Under the statute, only a debt collector can be liable for conduct that is in violation of the FDCPA.  If a creditor is contacting you to collect a debt that you owe, the safety belt of the FDCPA will not protect you.  However, The Federal Trade Commission (“FTC”), the agency of the US government responsible for promoting consumer protection, wants to change creditor liability.  In a recent opinion, the FTC responded to an 11th Circuit holding that a bank may be not considered a debt collector for purposes of the statute. 

In Davidson v. Capital One Bank, NA, on appeal, the 11th Circuit panel affirmed dismissal of the plaintiff’s claims stating that Capital One Bank was not a debt collector for purposes of the FDCPA and could not be liable under the statute for its conduct. While the FDCPA applies to a creditor that purchases a debt after it is already in default for the purposes of collecting, the court found that the bank was really not in the business of collecting debts, and that such collection was only a small fraction of its business.

Reviewing the dismissal, the FTC argues, that the court was too quick to dismiss plaintiff’s claims and should review the holdings of other circuits, including the 3rd, 5th, 6th and 7th, where a creditor may be considered a debt collector, depending on its conduct under the statute, and whether it purchased the account while already in default and ofr the purpose of collecting it.  The FTC further argues that refusal to hold certain creditors to this standard is putting consumers at great risk of abuse, which the statute would otherwise protect them from.    

According to the FTC, it wants to overturn the dismissal and rule that the bank is a debt collector as defined by the statute in all circumstances where it purchases a debt already in default for the purpose of attempting to collect the debt.  In Davidson, Capital One Bank purchased Davidson’s credit card account from another credit card company.  Davidson’s account was in default at the time of purchase and Capital One Bank immediately began collection efforts.  According to the FTC, Capital One’s position and conduct in collecting on the credit card debt characterized it as a debt collector under the statute.  However, Capital One argued that because it owned the debt and was collecting solely on its behalf, it was not accountable for conduct in violation of the FDCPA. Moreover, Capital One argued that it was not in the business of collecting debts, as required by the FDCPA. 

The issue at hands turns on whether the FDCPA’s exclusion of creditors from protection of the statute would preclude filing suit against Capital One Bank or whether the bank was in the business of collecting debts owed to another, making it liable under the statute.  The purpose of the FDCPA is to protect consumer debtors from deceptive business practices by third parties when attempting to collect debts which were sold solely for the purpose of collection.  The FTC argues in its brief that the Court should focus on the purpose of the statute.  Capital One acquired the debt once it was already in default and proceeded its collection efforts from the plaintiff.  Capital One’s position in collecting the debt, according to the FTC, should clearly warrant it being included in the definition of debt collector under the statute.   

If you believe your rights have been violated under the FDCPA and you would like the advice or assistance of counsel, contact SmithMarco P.C. for a completely free case review.

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