When is a bank collecting a debt not a debt collector? According to a newly issued opinion from the Eleventh Circuit, when that bank is collecting its own debt—even if the account was in default at the time it was acquired.
In Davidson v. Capital One Bank (USA) N.A., plaintiff filed an action on behalf of himself and other similarly situated consumers, alleging that Capital One violated the Fair Debt Collection Practices Act ("FDCPA"), 15 U.S.C. § 1692a, when it attempted to collect on accounts it acquired from HSBC Bank after the accounts were already in default. Under the FDCPA, a debt collector is defined as:
(6)... any person who uses any instrumentality of interstate commerce or the mails in any business the principal purpose of which is the collection of any debts, or who regularly collects or attempts to collect, directly or indirectly, debts owed or due or asserted to be owed or due another... The term does not include—
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(F) any person collecting or attempting to collect any debt owed or due or asserted to be owed or due another to the extent such activity... (iii) concerns a debt which was not in default at the time it was obtained by such person;...
Capital One moved for summary disposition, arguing that it was not a debt collector under the FDCPA because it was collecting its own debt. In response, plaintiff argued that the FDCPA applied because his account was in default at the time it was transferred to Capital One. The trial court granted Capital One's motion, and on appeal, the Eleventh Circuit affirmed, holding that:
Section 1692a(6) clearly, plainly, and directly states that a person who is engaged in any business the principal purpose of which is debt collection or a person who regularly collects or attempts to collect debts owed or due another qualifies as a "debt collector." See § 1692a(6). So, if subsection (F)(iii)'s exclusion is inapplicable because, for example, the subject debt was in default at the time it was acquired or the subject person is not collecting for another, the person may be a debt collector, but the person is not undoubtedly a debt collector; one of two statutory standards still must be met. See § 1692a(6). Davidson cannot rely on § 1692a(6)(F)(iii) to bring entities that do not otherwise meet the definition of "debt collector" within the ambit of the FDCPA solely because the debt on which they seek to collect was in default at the time they acquired it. Section 1692a(6)(F)(iii) is an exclusion; it is not a trap door.
Thus, because the principal purpose of Capital One's business was not to collect debts, and because it was not collecting debts due to another, Capital One did not meet the substantive requirements to be labeled a debt collector—regardless of the fact that plaintiff's account was in default at the time it was acquired.
The Davidson decision is a significant departure from decisions issued in both the Sixth and Seventh Circuits, which held that banks were considered debt collectors under the FDCPA if the debt was acquired after default: Bridge v. Ocwen Fed. Bank, FSB, 681 F.3d 355, 362 (6th Cir. 2012); Ruth v. Triumph P'ships, 577 F.3d 790 (7th Cir. 2009). With such a split in the circuits, it may not be long before the Supreme Court takes a definitive stance on the issue.
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