FDCPA/FCRA Applied to Business Debt

[David A. Szwak]

FCRA/FDCPA liability where the consumer was allowed to sue even though the debt was a business debt. Palazzolo v Nitzkin, 2005 WestLaw 221431 (Mich. Cir. Ct.).

[David A. Szwak]

Defendant contends that the FDCPA does not apply because the lease, under which defendants claim that plaintiff owes them anything, is a commercial lease. In Palazzolo v.
Nitzkin, 2005 WestLaw 221431 [Mich. Cir. Ct. 2005], the court held that “[W]ith regard to the Fair Debt Collection Practices Act, Defendants' sole argument in support of summary disposition is that the present case does not come within the purview of the Fair Debt Collection Practices Act, and that Plaintiffs thus failed to state a claim under the Act. Specifically, Defendants assert that the underlying debt that was sought from Plaintiff Palazzolo did not arise out of personal, family, or household purposes as is required to trigger application of the Act, but rather was based upon a commercial lease agreement. However, as pointed out by Plaintiffs, recovery under the Fair Debt Collection Practices Act is not so limited as Defendants would have the Court believe. In 1977, Congress enacted the Fair Debt Collection Practices Act ["FDCPA"] in response to national concern over the use of abusive, deceptive and unfair debt collection practices by many debt collectors. West v. Costen, 558 F.Supp 564, 569 [U.S.D.C. Va. 1983]. The purpose of this Act was to protect consumers from a host of unfair, harassing, and deceptive debt collection practices without imposing unnecessary restrictions on ethical debt collectors. Hicken v. Arnold, Anderson & Dove, PLLP, 137 F.Supp.2d 1141, 1142 -1143 [U.S.D.C. Minn. 2001]. To that end, the FDCPA proscribes certain conduct on the part of debt collectors in connection with their collection of a debt including, but not limited to, the use or threat of use of violence or other criminal means to harm the physical person, reputation, or property of any person, and the use of obscene or profane language. 15 U.S.C. 1692d. The FDCPA generally applies to consumer, rather than business, debts. Bloom v. I.C. Sys, Inc., 972 F.2d 1067, 1068 [9th Cir. 1992]. The term "debt" is defined in the FDCPA as: [A]ny obligation or alleged 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]. This is not to say, however, that only consumers may recover under the FDCPA. Relevant to the instant matter, 15 U.S.C. 1292k provides that "any debt collector who fails to comply with any provision of this sub-chapter with respect to any person is liable to such person ..." According to Dutton v. Wolhar, 809 F.Supp 1130, 1134 [U.S.D.C. Del. 1992], the above language indicates that recovery under the FDCPA is broad and imposes liability when a debt collector has failed to comply with the Act with respect to any person, not simply those whose obligation or alleged obligation arose out of a transaction concerning personal, family, or household purposes. The Dutton court cites to the legislative history behind the FDCPA, specifically, House Report 95-131, to support its broad reading of the
Act: "This bill also protects people who do not owe money at all. In the collector's zeal,
collection efforts are often aimed at the wrong person either because of mistaken identity or mistaken facts. This bill will make collectors behave responsibly towards people with whom they deal. Another group of people who do not owe money, but who may be deliberately harassed are the family, employer and neighbors of the consumer. These people are also protected by this ... bill." Based upon the language in the above House Bill, the Dutton court determined that it was Congress' intent to protect people other than debtors who are subject to harassment by debt collectors. Id. Furthermore, in Whatley v Universal Collection Bureau Inc., 525 F.Supp 1204 [U.S.D.C. Ga. 1981], the court found that, given the clear language in the Act, "any person," as used in 15 U.S.C. 1692k[a] specifically includes persons who claim they have been harmed by proscribed debt collection practices directed to the collection of another person's debt. As Plaintiffs in the present matter clearly asserted in their complaint that they were subject to unfair debt collection practices stemming from attempted collection of another person's debt, they have sufficiently stated a cause of action for violation of the Fair Debt Collection Practices Act. Summary disposition in Defendants' favor would therefore be inappropriate on this cause of action. [only bolded and unlined emphasis added.].â€