Exceptions When a Creditor Becomes a Debt Collector

[David A. Szwak]

However, there are two exceptions where the creditor qualifies as a debt collector:
First, one who accepts assignment of a debt, which is then in default, for the purpose of collecting the debt is excluded from the definition of "creditor" and falls within the coverage of the FDCPA. Kimber v. Federal Financial Corp., 668 F.Supp. 1480 (U.S.D.C. N.D. Ala. 1987); Cirkot v. Diversified Financial Systems, Inc., 839 F.Supp. 941 (U.S.D.C. Conn. 1993); Commercial Service of Perry, Inc. v. Fitzgerald, 856 P.2d 58 (Colo.App. 1993). Thus, check guaranty agencies and check authorization services, which purchase dishonored checks from merchants and seek to collect them from consumers, are "debt collectors." Winterstein v. CrossCheck, Inc., 149 F.Supp.2d 466 (U.S.D.C. N.D. Ill. 2001); Holmes v. Telecredit Service Corp., 736 F.Supp. 1289 (U.S.D.C. Del. 1990). The FDCPA's definitional language, "owed or due another," means originally owed or due to another. Kimber, supra. However, if the check collector has the right to return checks which it was unsuccessful in collecting, it could not take advantage of the bad check law. Gearing v. Check Brokerage Corp., 233 F.3d 469 (7th Cir. 2000).

Second, a creditor who uses a name other than its own also falls within the coverage of the FDCPA. Maguire v. Citicorp Retail Servs., 147 F.3d 232 (2d Cir. 1998); Supan v. Medical Bureau of Economics, Inc., 785 F.Supp. 304 (U.S.D.C. Conn. 1991). The Federal Trade Commission Staff Commentary to 15 U.S.C. 1692e(3) states that "If a creditor falsely uses an attorney's name rather than his own in his collection communications, he both loses his exemption from the FDCPA's definition of 'debt collector' [15 U.S.C. 1692a(6)] and violates this provision." 53 F.R. 50097, 50102. Pursuant to the "false name" exception to the creditor exclusion, a creditor will be deemed a debt collector if "in the process of collecting his debts, [the creditor] uses any name other than his own which would indicate that a third person is collecting or attempting to collect such debts." Nielsen v. Dickerson, 2002 U.S. App. LEXIS 21098 (7th Cir. 2002). Whether a creditor has used a name other than its own depends on whether the name used is sufficiently identified with the name used by the creditor in conducting the underlying transactions. Dickenson v. Townside TV & Appliance, Inc., 770 F. Supp. 1122 (U.S.D.C. S.D. W.Va. 1990) (creditor which consistently used its assumed business name in dealing with customers, rather than its incorporated name, did not thereby become a "debt collector" as defined by 15 U.S.C. 1692a(6)); Britton v. Weiss, 1989 WestLaw 148663 (U.S.D.C. N.D. N.Y. 1989) (attorney who was employed by creditor and who included creditor's name as part of his street address in collection letter was a "debt collector" because intent and tendency of letter was to convey impression that a private attorney had intervened); Young v. Lehigh Corp., 1989 WestLaw 117960 (U.S.D.C. N.D. Ill. 1989)(affiliated entity's similar name was sufficiently identified with creditor so as not to convey the impression that a third party was involved); Cramer v. First of America Bank Corp., 1993 WestLaw 478997, 1993 U.S.Dist. LEXIS 16276 (U.S.D.C. N.D. Ill. 1993) (bank holding company sent collection letter on behalf of subsidiary which had dealt with consumer under name not in any way similar to that of holding company).