Can a Creditor Be a Debt Collector? Part 2

[David A. Szwak]

The creditor itself is excluded from the definition of "debt collector," except in two incidents (1) it uses a name which suggests that a third-party debt collector is involved in the collection process (the false name exception) [Lester E. Cox Med. Ctr. v. Huntsman, 408 F.3d 989 (8th Cir. 2005); Nielsen v. Dickerson, 307 F.3d 623 (7th Cir. 2002).], Id., or (2) it obtains the debt after default [Alibrandi v. Financial Outsourcing Services, Inc., 2003 U.S. App. LEXIS 12015 (2d Cir. 2003) Default does not occur the day following when the payment is due] for the purpose of collection, 15 U.S.C. 1692a(4). In selling the obligation. a debt buyer did not directly or indirectly attempt to collect the debt and was, therefore, not a debt collector. Neff v. Capital Acquisitions and Management Company, _ F.3d -, 2003 U.S. App. LEXIS 25222 (7th Cir. 2003). A district court has held that the debt buyer was not a debt collector nor was it indirectly attempting to collect debts where it did not attempt to contact the consumer or direct or control the company it employed to attempt to its collect debts. However, the court did note that the debt buyer would qualify as a debt collector had it acted through retained counsel. Scally v. Hilco Receivables, LLC, 2005 WestLaw 1520808, 2005 U.S. Dist. LEXIS 13122 (U.S.D.C. N.D. Ill. 2005). Note that the common law tort of negligent hiring and supervision of a debt collector has been recognized. Colorado Capital v. Owens, 227 FRAT 181 (U.S.D.C. E.D. N.Y. 2005). However, although the collector was collecting on its own behalf, it was in a business with its principal purpose being collection of debts, and thus was a "debt collector," within the meaning of the FDCPA. Durkin v. Equifax Check Servs., 2001 U.S.Dist.LEXIS 15474 (U.S.D.C. N.D. Ill. 2001).