Ninth Circuit Holds Company Collecting Debts for Hospital Did Not Violate FDCPA Because It Was Meaningfully Involved in the Process

The United States Court of Appeals for the Ninth Circuit recently affirmed a district court’s grant of defendants’ motion for summary judgment and held that the defendant debt collection agency was meaningfully involved in the debt collection process and, as such, did not violate the Fair Debt Collection Practices Act (“FDCPA”).  See Echlin v. PeaceHealth, 887 F.3d 967 (9th Cir. 2018).  There, defendant Computer Credit, Inc.  (“CCI”) worked with a hospital to collect on the hospital’s debts.  The hospital would refer delinquent accounts to CCI, who would screen the files for any barriers for collection and, assuming there were none, would mail up to two letters to debtors demanding payments.  CCI would handle phone calls and correspondence from the debtors, but did not have the authority to process or negotiate payments.  If CCI did not get a response after the two letters, it would send the account back to the hospital for further collection.  Plaintiff, who had been a patient at the hospital and had received collection letters from CCI, brought a putative class action under the FDCPA.  In the complaint, plaintiff alleged that CCI’s letters “created a false or misleading belief that Defendant CCI was meaningfully involved in the collection of a debt prior to the debt actually being sent to collections,” a process known as “flat-rating” that violated the FDCPA.  See 15 U.S.C. 1692j.  Defendants moved for summary judgment and, in opposition, plaintiff made the additional argument that CCI also violated the FDCPA by threatening further action when it had no authority to do so.  The district court granted defendants’ motion for summary judgment, finding both that CCI meaningfully participated in the collection of the debt and that plaintiff could not allege new violations in her opposition papers because defendants had no notice of the claim and would be prejudiced by its introduction so late into the litigation.

On appeal, the Ninth Circuit affirmed.  First, it agreed that defendants were not involved in flat-rating.  The Court held that “[t]he key is whether, in consideration of all that an entity does in the collection process, it genuinely contributes to an effort to collect another’s debt, or instead does little more than act as a mailing service for the creditor.”  Although CCI did not have full control over the debt collection process and could not negotiate the debt, it still screened the accounts, independently composed and sent the letters, handled debtor responses, and maintained a website allowing debtors to access information about their debts.  Second, the Court held that the complaint did not allege that CCI had threatened to take an action that was not intended or legally authorized and that this new argument could not be raised in opposition to a summary judgment motion because it failed to give CCI fair notice of the claim.  Additionally, plaintiff could not amend her complaint to add this allegation because the FDCPA’s one-year statute of limitations had run and these new allegations did not relate back to the original complaint.  Accordingly, the Court affirmed the district court’s grant of defendants’ motion for summary judgment.

For a copy of the decision, please contact Michael O’Donnell at, Michael Crowley at, or Dylan Goetsch at