Call Me by Your Name – Or Risk an FDCPA Claim, Says Third Circuit

By Stephen J Shapiro

What’s in a name? For debt collectors, the answer potentially is years of litigation according to the Third Circuit’s recent opinion in Levins v. Healthcare Revenue Recovery Group LLC.

In Levins, Healthcare Revenue Recovery Group LLC (HRRG), a debt collector, attempted to collect a debt from the plaintiff debtors. HRRG, which had registered to do business in New Jersey under the name “ARS Account Resolution Services,” identified itself as “ARS” in several voicemail messages that it left for plaintiffs. Plaintiffs brought a putative class action alleging that HRRG violated the “true name” provision of the Fair Debt Collection Practices Act (FDCPA), which prohibits debt collectors from using “the name of any business, company or organization other than the true name of the debt collector’s business, company, or organization.” 15 U.S.C. § 1692e(14). The district court granted HRRG’s motion to dismiss the claim.

On appeal, the Third Circuit reversed the dismissal. The Court, adopting the Federal Trade Commission’s interpretation of the “true name” provision, held that the provision “permit[s] a debt collector to ‘use its full business name, the name under which it usually transacts business, or a commonly-used acronym[,]’ as long as ‘it consistently uses the same name when dealing with a particular consumer.’” The plaintiffs in the Levins case alleged that the acronym “ARS” is associated with hundreds of businesses, including an unrelated debt collector, and, therefore, was not an acronym commonly associated with HRRG. Given those allegations, the Court explained that “[n]othing in the information properly before us [on review of an appeal from an order granting a motion to dismiss] indicates that ‘ARS’ is HRRG’s full business name, the name under which it usually transacts business, or its commonly used acronym.” Therefore, the Court held that plaintiffs stated a plausible claim for violation of the FDCPA’s “true name” provision and remanded the case for further proceedings. The Court noted that HRRG’s challenge to plaintiffs’ allegation that “ARS” was not an acronym that HRRG commonly used would have to wait until summary judgment or trial.

The Third Circuit did, however, affirm the trial court’s rejection of two additional legal theories that plaintiffs asserted. First, the Court rejected plaintiffs’ argument that HRRG violated a provision of the FDCPA that prohibits debt collectors from failing to make a “meaningful disclosure of the caller’s identity” when they call debtors. 15 U.S.C. § 1692d(6). The Court held that “‘meaningful disclosure of the caller’s identity’ is not restricted to providing the name of the debt collector.” Rather, a debt collector that discloses during a call that it is a debt collector has made a “meaningful disclosure” of its identity under the FDCPA. Second, the Court held that, because HRRG’s messages adequately warned that it would use any information collected from the debtors to collect a debt, HRRG did not, as plaintiffs alleged, violate a section of the FDCPA that prohibits “the use of any false representation or deceptive means to collect or attempt to collect any debt or to obtain information concerning a consumer.” 15 U.S.C. § 1692d(10).

In light of the Third Circuit’s holding in Levins, debt collectors should consider using a name registered with a government agency or bureau when they communicate with debtors. Doing so will enable debt collectors to provide the courts with a public record, which the courts may consider on a motion to dismiss, to establish that they used their full business name or “transacting as” name to contact the debtor. Using any name other than an “official” name evidenced by a government record carries risk because it opens the door for debtors to allege that the name the debt collector used was a not a “true name,” which allegation the courts will be required to accept as true on a motion to dismiss.


The Third Circuit Holds that Highway Tolls are Not “Debts” Under the FDCPA

By Stephen J Shapiro

Drivers who use New Jersey’s toll roads can pat themselves on the back because the tolls they pay help fund a public benefit. But, as the Third Circuit recently held, that fact also means that tolls are not “debts” under the Fair Debt Collection Practices Act (“FDCPA”) and, therefore, debt collectors seeking to collect unpaid tolls need not comply with the FDCPA’s regulations governing debt collection.

In St. Pierre v. Retrieval-Masters Creditors Bureau, Inc., the plaintiff signed up for an E-ZPass account, which he used to pay tolls he incurred while travelling on toll roads in New Jersey. When the plaintiff’s E-ZPass account fell into arrears, E-ZPass assigned the debt to a private debt collection agency. The agency sent the plaintiff a letter demanding payment of the debt. The plaintiff’s E-ZPass account number and a “quick response” code was visible through a window in the envelope containing the collection letter.

The plaintiff brought a putative class action against the agency, alleging that it violated a provision of the FDCPA that prohibits debt collectors from including on an envelope containing a collection letter “any language or symbol, other than the debt collector’s address . . . .” 15 U.S.C. § 1692f(8). However, the prohibitions in the FDCPA only apply to the collection of a “debt,” which the Act defines as an “obligation . . . of a consumer to pay money arising out of a transaction in which the money, property, insurance, or services which are the subject of the transaction are primarily for personal, family, or household purposes.” 15 U.S.C. § 1692a(5). The district court concluded that a highway toll is not a “debt” within the meaning of the FDCPA. Therefore, the district court held that the FDCPA’s prohibitions did not apply to the agency’s collection efforts and dismissed the plaintiff’s complaint.

The Third Circuit affirmed the dismissal. After reviewing previous decisions analyzing the issue, the Third Circuit announced a three-part test for determining whether an obligation is a “debt” under the FDCPA:

First, ascertain “whether the underlying obligation ‘aris[es] out of a transaction,’ – that is, a consensual exchange involving an affirmative ‘request,’ and ‘the rendition of a service or purchase of property or other item of value, such as a contract—or whether, instead, it arises by virtue of a legal status—that is, an involuntary obligation attendant to the fact of having a specific legal status . . . .”

Second, if the obligation arises out of a transaction, “identify what ‘money, property, insurance, or services . . . [] are the subject of the transaction, i.e., what it is that is being rendered in exchange for the monetary payment.”

Third, “consider the characteristics of that ‘money, property, insurance, or services’ to ascertain whether they are ‘primarily for personal, family, or household purposes.’”

Applying this test to the facts before it, the Court first held that the obligation to pay tolls does arise out of a “transaction” because a driver can voluntarily choose whether to incur the obligation: “[Plaintiff] would have no obligation to pay highway tolls had he chosen to use alternative routes or to keep his car parked . . . .” The Court next observed that the purpose of tolls is to “‘compensate the state for the cost, maintenance and repair of its highways,’” and that, in exchange for tolls, “all drivers benefit from ‘safer, faster, and more convenient travel in and through the State.’” As such, the Court explained that “what [plaintiff] receives in exchange for the payment of highway tolls is not the private benefit of a ‘personal, family, or household’ service or good but the very public benefit of highway maintenance and repair.”

Having concluded that tolls are not “primarily for personal, family, or household purposes,” the Court held that tolls are not “debts” within the meaning of the FDCPA: “[T]he FDCPA is not implicated where, as here, the bulk, if not all of the services rendered, are made ‘without reference to peculiar benefits to particular individuals or property.’”

In light of the Third Circuit’s decision, debt collectors may want to consider factoring into their operational practices and pricing models the reduced risk of facing FDCPA claims when collecting obligations that debtors did not voluntarily choose to incur or obligations that primarily benefit the public over individual debtors.


The Third Circuit Holds that the FDCPA Applies to Debt Collectors that Are Collecting Debts They Own

By Stephen J Shapiro

The Fair Debt Collection Practices Act (“FDCPA”) regulates the conduct of debt collectors.  The Act defines a “debt collector” as (a) any entity whose “principal purpose . . . is the collection of any debts” (the “principal purpose” definition), or (b) any entity that “regularly collects or attempts to collect . . . debts owed or due . . . another” (the “regularly collects” definition).  15 U.S.C. § 1692a(6).  In a recent precedential opinion, the Third Circuit held that an entity whose principal purpose is the collection of debts is a debt collector even if it owns the debt it is collecting and, therefore, is not collecting a debt owed another.  In other words, an entity that meets the “principal purpose” definition is a debt collector even if it does not also meet the “regularly collects” definition.

In Tepper v. Amos Financial, LLC, a creditor sold a loan on which its borrower had defaulted to Amos Financial, whose sole business involved purchasing and attempting to collect debts originated by others.  The debtor sued Amos alleging that, during its efforts to collect the debt, Amos violated the FDCPA by making false representations about the debt in both its written and oral communications with the debtor.  After a bench trial, the district court held that Amos was a “debt collector” within the meaning of the FDCPA and that it actions violated the Act.

On appeal, Amos challenged the district court’s conclusion that it is a debt collector.  Amos argued that, because it owned the debt it was attempting to collect, it was not collecting a debt “owed or due . . . another” and, therefore, was not a debt collector.  The Third Circuit rejected this argument because in the “principal purpose” definition the phrase “‘[a]ny debts’ does not distinguish to whom the debt is owed” and the phrase “‘debts owed or due . . . another’ . . . limits only the ‘regularly collects’ definition.”  Because there was no dispute that Amos’ principal purpose was the collection of debts, the Court held that Amos was a debt collector under the “principal purpose” definition even if it would not also qualify as a debt collector under the “regularly collects” definition: “[A]n entity whose principal purpose of business is the collection of any debts is a debt collector regardless whether the entity owns the debts it collects.”

Amos also attempted to rely on the fact that the FDCPA does not apply to “creditors,” which the Act defines as entities “to whom [the] debt is owed.”  Amos argued that, because it owned the debt at issue, it was a “creditor” and not subject to the Act.  The Third Circuit rejected this argument as well, holding that “an entity that satisfies both [the definition of debt collector and creditor] is within the Act’s reach.”

The Court also noted that the Supreme Court recently rejected the test the Third Circuit previously applied when analyzing whether an entity that purchased a debt was a debt collector.  Specifically, in Pollice v. National Tax Funding, L.P., the Third Circuit, adopting what is referred to as the “default test,” held that “an assignee of an obligation is not a ‘debt collector’ if the obligation is not in default at the time of the assignment; conversely, an assignee may be deemed a ‘debt collector’ if the obligation is already in default when it is assigned.”  The Third Circuit explained that in 2017 the Supreme Court repealed the “default test” in Henson v. Santander Consumer USA Inc.

In light of the Third Circuit’s ruling, debt collectors should remain vigilant about complying with the FDCPA, whether they are attempting to collect debts that they own or debts owned by others.


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