Under the Fair Debt Collection Practices Act (FDCPA) civil liability is imposed on debt collectors who engage in prohibited debt collection practices. It is an important Act that every consumer should be aware of; for an overview of the FDCPA, please click here. The FDCPA does not impose this liability on all creditors.
However, a creditor will be treated as a debt collector when “in the process of collecting his own debts, uses any name other than his own which would indicate that a third person is collecting or attempting to collect such debts.” This is known as the “false name” exception and it limits “creditor liability to those creditors who collect their own debts while operating under a pseudonym or name of another.” The theory behind this exception is that “creditors, by freeing themselves of any motivation to protect their own names, have become sufficiently like debt collectors as to merit FDCPA regulation.”
Vincent v. The Money Store
In a decision out of the United States Court of Appeals for the Second Circuit on November 13, 2013 it has expanded the “false name” exception, holding that a creditor can be liable under the FDCPA even when the creditor hires a third party for the purpose of collecting debts. Specifically if the third party hired by the creditor “engages in no bona fide efforts to collect [on the] debts.”
In Vincent v. The Money Store, the defendant hired a law firm to send collection letters to consumers who had not paid their debts. The law firm allegedly did not have any role in the debt collection apart from printing and mailing the letters on their letterhead. The Money Store was the one in control of the methods and means of collecting the debts.
In their efforts to collect on the defaulted mortgages, The Money Store retained a law firm to send collection letters to the debtors. These letters stated the law firm had been “retained” to collect the debt for their client and that all communication about the debt needed to be made through The Money Store.
While creditors are generally not considered to be debt collectors and therefore not subject to the FDCPA, the plaintiffs used and exception found in 15 U.S.C. Section 1692a(6). Under this provision creditors face potential liability if the creditor “in the process of collecting [its] own debts, uses any name other than [its] own which would indicate that a third person is collecting or attempting to collect such debts.” The plaintiff contended that by using the law firm’s name to send out the letters The Money Store was collecting itself, the defendants used a name other than its own in debt collection efforts.
The lower federal court dismissed the lawsuit after refusing to apply the false name exception. However, the Second Circuit reversed the decision, interpreting the false name exception to find that The Money Store was liable. The court “reformulated [the] test for determining whether a creditor has used another’s name so as deceptively to suggest this third party’s involvement in collecting the creditor’s debts as ‘whether the third party is making bona fide attempts to collect the debts of the creditor or whether it is merely operating as a ‘conduit’ for collection process that the creditor controls.’”
By applying this standard, the court found that generating and mailing the letters alone was not collecting or trying to collect the debts of The Money Store’s. In fact the law firm essentially had no role in the process of collecting the debts. Therefore the court concluded that the law firm “acted as a mere ‘conduit’ for a collection process that The Money Store controlled.”
Were you the victim of a “false name” debt collection attempt? We understand the frustration you may have when dealing with an aggressive debt collector. We have been successfully representing those abused and taken advantage of by debt collectors for years, and have a long list of successful stories to share with you. We offer a FREE CASE REVIEW for you to assess whether we can assist you with your matter. Please do not hesitate to contact us toll free at 1-800-875-3666 if you prefer to talk to a trained professional over the phone instead, or of course, visit our website at http://www.krohnandmoss.com/.