978-1285770178 Case Printout Case CPC-24-08 Part 2

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and Hutchins now argue that since the payors on its NSF checks were also

In Zimmerman, we explained that the FDCPA was enacted to protect people who

administrative holds on the account of which the drawer is unaware, bank error,

and the drawer’s reliance on deposited checks that themselves are dishonored,

abusive practices in collecting tort settlements from alleged tortfeasors through

subject to criminal or tort liability, Zimmerman compels the conclusion that the

fraud was rebuttable under Wisconsin law, and because the debt collector had

not made the showing required to establish fraudulent intent under state law. Id.

In rejecting the defendants’ argument, the court commented that, even if the

exempt debt collectors from following the Act if they could prove that the

consumer intended his check to be dishonored or accepted credit from a

merchant intending default. No section of the Act requires an inquiry into

worthiness of the debtor, or purports to protect only “deserving” debtors. To the

contrary, Congress has clearly indicated its belief that no consumer deserves to

intended a fraud exception to the Act, the wrong occasioned by debtor fraud is

more appropriately redressed under the statutory and common law remedies

already in place, not by a judicially-created exception that selectively gives a

green light to the very abuses proscribed by the Act.

Id. at 1330.

Bass, and it is time we put to rest any lingering doubts as to the nonexistence of

a fraud exception to the FDCPA.

Id. at 595 (citation omitted). The court’s analysis continued:

[T]he FDCPA’s legislative history reflects that Congress acknowledged there

may be a “number of persons who willfully refuse to pay just debts,” but

We agree that, given the legislative history of the FDCPA, its structure and text,

we could not craft the kind of fraud exception that underlies the arguments of

Check Investors without amending the statute.

B. The Payors of the NSF Checks are “Consumers” under the FDCPA.

[5] Link to KeyCite Notes[6] Link to KeyCite Notes As noted earlier, “[t]he FDCPA

they argue that

[a]n individual’s conduct, when taken as a whole, determines whether he or she

qualifies as a consumer for FDCPA purposes. An individual who issues a NSF

check or a closed account check, in exchange for money, goods, services or

insurance, and who subsequently fails to make restitution within the criminal

and tortfeasors, those labels would advance neither our inquiry, nor Appellants’

position, because “any” is all inclusive and does not exclude criminals or

tortfeasors. Rather, it unambiguously includes them. As noted above in our

discussion of the analysis in Bass and Keele, it is clear that Congress realized

that some people who write “bad checks” do so knowingly and willfully and that

remains obligated to pay, see Duffy, 133 F.3d at 1123 (“[A] check written by a

consumer in a transaction for goods or services evidences the “drawer’s

obligation to pay” and this obligation remains even if the check is dishonored

….”), the payors of those checks are “consumers” within the meaning of the

FDCPA.

be owed or due another,” 15 U.S.C. § 1692a(6). A “creditor” is one who “offers or

extends to offer credit creating a debt or to whom a debt is owed.” 15 U.S.C. §

1692a(4).

[8] Link to KeyCite Notes[9] Link to KeyCite Notes The district court held that

Check Investors and Hutchins FN11 are “debt collectors” as defined by the

was a “debt collector” and that the district court should not have dismissed

FDCPA claims against it. We explained:

FN11. Attorneys who regularly engage in debt collection or debt collection

litigation are covered by the FDCPA, and their litigation activities must comply

with the requirements of the FDCPA. Heintz v. Jenkins, 514 U.S. 291, 292, 115

default when purchased. Holmes v. Telecredit Service Corp., 736 F.Supp. 1289,

1293 (D.Del.1990).

Courts have indicated that an assignee of an obligation is not a “debt collector” if

the obligation is not in default at the time of assignment; conversely, an assignee

may be deemed a “debt collector” if the obligation is already in default when it is

they are “debt collectors” was error because they are actually “creditors” FN13

collecting debts actually owed to them, as opposed to “debt collectors” collecting

obligations owed to someone else. The FDCPA defines “creditor” as

FN13. The district court held that Check Investors and Hutchins were “debt

collectors” as defined in the FDCPA. It did not address their claim that they were

Investors bought the NSF checks from Telecheck, Check Investors is the actual

owner of those checks and is therefore not collecting “debts of another,” as a

debt collector would. Rather, according to Appellants, Check Investors is actually

the entity “to whom a debt is owed.” They claim further that because Check

Investors is owed the debt, it did not “receive[ ] an assignment or transfer” of the

legislation.

Admittedly, Check Investors appears at first blush to satisfy the statutory

definition of a creditor. As the Court of Appeals for the Seventh Circuit noted in

Schlosser v. Fairbanks Capital Corp., 323 F.3d 534, 536 (7th Cir.2003), “for

debts that do not originate with the one attempting collection, but are acquired

the other hand, if it simply acquires the debt for collection, it is acting more like a

debt collector.” Id. Thus, in determining if one is a “creditor” or a “debt collector,”

courts have focused on the status of the debt at the time it was acquired. 15

U.S.C. § 1692a controls that inquiry. That provision provides in relevant part:

(6) The term “debt collector” means any person who uses any instrumentality of

debt which was not in default at the time it was obtained by such person….

15 U.S.C. § 1692a(6)(F)(iii). In Pollice, we relied on this provision of the FDCPA

to hold that one attempting to collect a debt is a “debt collector” under the

FDCPA if the debt in question was in default when acquired. Conversely, we

concluded that § 1692a means that an entity is a creditor if the debt it is

Admittedly, focusing on the status of the debt when it was acquired overlooks the

fact that the person engaging in the collection activity may actually be owed the

debt and is, therefore, at least nominally a creditor. Nevertheless, pursuant to §

1692a, Congress has unambiguously directed our focus to the time the debt was

acquired in determining whether one is acting as a creditor or debt collector

creditors, “who generally are restrained by the desire to protect their good will

when collecting past due accounts,” independent collectors are likely to have “no

future contact with the consumer and often are unconcerned with the consumer’s

opinion of them.” Id. at 1696.

Thus, as the court explained in Schlosser:

is, for purposes of regulating communications and collections practices,

effectively the same as that between originator and the debtor. If the loan is in

default, no ongoing relationship is likely and the only activity will be collection.

323 F.3d at 538.

Here, Check Investors acquired the defaulted checks only for collection

adds to each check. Their tactics then allow them a remarkable measure of

success even though prior debt collection efforts have failed. The result is a very

profitable enterprise.

The fact that the NSF checks were purchased and owned outright by Check

Investors, rather than Check Investors merely receiving an assignment of the

or the future of his/her business would have engaged in the kind of conduct that

was the daily fare of the collectors at Check Investors. Neither Check Investors

nor Hutchinson intended any future contact with the payees of the NSF checks

they acquired, and their collection practices reflected as much. The collectors

working there resorted to whatever harassment appeared likely to succeed; the

Congress has directed us to focus on whether a debt was in default when

acquired to determine the status of “creditor” vs. “debt collector.”

D. The Federal Trade Commission Act.

[10] Link to KeyCite Notes As noted earlier, Hutchins and Check Investors do not

dispute the FTC’s claim that their collection practices constituted unfair and

Nevertheless, Check Investors argues that

[t]his is not a case where consumers are being solicited to buy time-shares in

non-existent condos or swamp land in Florida, and that the district court erred in

determining that the Check Investors’ practices were, in fact, deceptive as to a

consumer.

circumstance requiring us to consider it. Srein v. Frankford Trust Co., 323 F.3d

214, 224 n. 8 (3d Cir.2003). Check Investors does not allege the existence of any

compelling circumstance, and we can think of none. Thus, we will not consider its

argument that the district court erred in finding that its practices were deceptive

to a consumer.

VI. CONCLUSION

For all of the above reasons, we will affirm the district court.