Eleventh Circuit Court of Appeals Holds That Assignee of Post-Default Credit Card Accounts Was Not a Debt Collector Under FDCPA

The United States Court of Appeals for the Eleventh Circuit recently held that a bank was not a debt collector under the Fair Debt Collection Practices Act (“FDCPA”) when it attempted to pursue a credit card debt that was in default at the time the bank obtained it.  See Davidson v. Capital One Bank (USA), N.A., 797 F.3d 1309 (11th Cir. 2015).  In the case, the bank acquired a number of credit card accounts from another lender, some of which were already in default.  Shortly thereafter, it initiated a lawsuit against one of the debtors, apparently unaware that the assignor had already obtained a judgment on the same account five years earlier.  The debtor then filed a putative class action against the bank, arguing that its initiation of the lawsuit constituted a “false, deceptive, or misleading representation or means in connection with the collection of any debt,” in violation of the FDCPA.  (15 USC 1692e).  The bank filed a motion to dismiss, arguing that it was not a debt collector subject to the FDCPA.  The debtor opposed, arguing that one of the FDCPA’s exclusions to the definition of a debt collector is one who is attempting to collect the debt of another if the activity “concerns a debt which was not in default at the time it was obtained by such person.”  The debtor argued that one who obtains the debt after default therefore falls under the FDCPA’s definition of a debt collector.

The District Court granted the motion to dismiss.  On appeal, the Eleventh Circuit agreed with the bank that the FDCPA provides two definitions of a “debt collector”, neither of which were met by the bank:   “[1] 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 [2] who regularly collects or attempts to collect, directly or indirectly, debts owed or due or asserted to be owed or due another.”  The post-default exclusion relied on by the debtor applied only if the bank had met one of the two definitions for a debt collector, and was not a “trap door” to subject additional entities to the FDCPA.  Moreover, the court held that the FDCPA’s second definition of a debt collector as one who regularly collects debt owed to “another” meant that the second definition did not apply to one who acquired the debt after default, as it then would be collecting the debt on its own behalf. This is contrary to the holdings of other courts, including the Third Circuit.  See, e.g.Evankavitch v. Green Tree Servicing, LLC, 793 F.3d 355, 358 (3d Cir. 2015) (“Ordinarily, creditors are not considered debt collectors under the FDCPA. However, an assignee of a loan ‘may be deemed a ‘debt collector’ if the obligation is already in default when it is assigned.’”).

For a copy of the decision, please contact Michael O’Donnell at modonnell@riker.com.