Tort Obligation is Not a "Debt": Hawthorne

[David A. Szwak]

Tort obligation does not constitute debt under FDCPA
Law Reporter, Oct 1998

Tort obligation does not constitute debt under FDCPA.

Hawthorne v. Mac Adjustment, Inc., 140 F.3d 1367 (11th Cir. 1998).

The Eleventh Circuit Court of Appeals held a tort obligation does not constitute a debt under the Fair Debt Collection Practices Act (FDCPA), 15 U.S.C. 1692 et seq. Here, a collection agency attempted to collect tort damages from a driver who had allegedly caused an accident. The driver sued the agency, alleging it had used false, deceptive, or misleading representations in an attempt to collect the debt, in violation of 1692e( 10). The trial court entered judgment for the agency, concluding the tort-based obligation did not constitute a debt under the FDCP4.

Affirming, the Eleventh Circuit noted that under the FDCPA, a debt is any obligation of a consumer to pay money arising out of a transaction. The ordinary meaning of "transaction" implies some type of business dealing between parties or other consensual obligation, the court said. Here, because the driver's alleged obligation to pay did not arise out of a consensual or contractual agreement, it does not constitute a transaction under the FDCPA.

Moreover, the court found, the statutory language further limits application of the FDCPA to debts arising from consumer transactions. The driver's alleged obligation arises from a tort, not a consumer transaction.

The court rejected plaintiff's argument that defendant had waived exemption from the act by including FDCPA language in its collection letter. Noting that defendant's letter did not expressly refer to the act, the court said even though defendant may have chosen to govern itself according to certain FDCPA principles, it could not make the act applicable by waiver.

Consequently, the trial court properly granted judgment for the agency.