9.1 FAIR DEBT COLLECTION PRACTICES ACT
9.101 In General.
Congress enacted the Fair Debt Collection Practices Act (FDCPA) 5737 in 1977, amending the 1968 Consumer Credit Protection Act, 5738 to eliminate "abusive, deceptive, and unfair debt collection practices" by debt collectors. 5739 As originally enacted, the FDCPA exempted from its requirements an attorney "collecting a debt as an attorney on behalf of and in the name of a client." 5740 In 1986, Congress eliminated the exemption for attorneys. 5741 In 1996, the FDCPA was again amended, this time to increase its disclosure requirements and to provide an exception for "formal pleadings made in connection with a legal action." 5742 A formal pleading does not constitute an initial communication under the Act. 5743
Attorneys must also become familiar with the provisions of the Consumer Financial Protection Bureau's Regulation F, which "implements the . . . FDCPA." The final rule in some ways subsumes the plain text of the FDCPA and the case law developed before November 30, 2021, which is the effective date of Regulation F. 5744 In the short term, Regulation F promulgates Form B-1, the "Model Form For Validation Notice," which would replace validation notices formerly warranted by practice or case law. 5745 The longer-term implications of Regulation F are beyond the scope of this chapter.
9.102 Applicability.
A. Consumer Debts.
1. In General.
The FDCPA defines "debt" as "any 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, whether or not such obligation has been reduced to judgment." 5746 A "consumer" is "any natural person obligated or allegedly obligated to pay any debt." 5747 For this reason, the applicability of the FDCPA is not affected by questions concerning the validity of the debt being collected. 5748
2. Bad Checks.
The prevailing line of cases has held that a bad check is a "debt" within the meaning of the FDCPA. 5749 It has been held, however, that statutory civil penalties are not "debts" within the meaning of the Act. 5750 The FDCPA was amended to create an exception for bad check enforcement programs operated by private entities under the auspices of a criminal prosecutor's office. 5751
3. Administrative and Other Fees.
The Eleventh Circuit applied the reasoning of the Seventh Circuit to extend the definition of "debt" to include administrative and other fees in a rental car contract. 5752
4. Homeowners' Association and Condominium Assessments and Taxes.
The Seventh and Tenth Circuits and the Eastern District of Virginia have held that an assessment owed to a homeowners' or condominium association is a "debt" under the FDCPA. 5753 A federal district court in the Eastern District of Virginia has held, without analysis, that the FDCPA applies to a homeowners' association assessment collection. 5754 A Virginia case decided in the Western District reached a contrary result, based on the analysis that the debt in question was not incurred for "personal, family or household purposes." 5755 The Third Circuit has held that taxes are not "debts" within the meaning of the FDCPA. 5756
5. Foreclosures.
In Wilson v. Draper & Goldberg, P.L.L.C., 5757 the Fourth Circuit held that attorneys conducting foreclosures are "debt collectors" within the meaning of the FDCPA. 5758 A substitute trustee under a deed of trust may be a "debt collector" under the FDCPA and is not exempted as a fiduciary under 15 U.S.C. § 1692a(6)(F)(i). 5759 The Supreme Court in 2019 went some distance toward resolving the split among the circuits, holding that "[a] business engaged in no more than nonjudicial foreclosure proceedings is not a 'debt collector' under the FDCPA, except for the limited purpose of [15 U.S.C.] § 1692f(6)." 5760
6. Child Support Payments.
The Fourth Circuit has held that child support obligations are not "debts" under the FDCPA because they are not incurred to receive consumer goods or services. 5761
7. Back Rent.
The Second Circuit has held that the requirements of the FDCPA applied to an attorney's delivery of the three-day rent demand notice required by New York law as a condition precedent to a summary eviction proceeding. 5762
8. Medical Bills.
The Second Circuit and at least one Virginia court have held that the requirements of the FDCPA apply to the collection of medical bills. 5763
9. Insurer's Subrogation Claims.
In Hamilton v. United Healthcare of Louisiana, Inc., 5764 the court held that an insurance company's subrogation claim for medical bills paid to its insured is a "debt" under the FDCPA.
10. Municipal Utility Bills.
In Piper v. Portnoff Law Associates, 5765 the court held that municipal water and sewer bills are subject to the FDCPA.
11. Civil Penalties.
Statutory civil penalties are not "debts" within the meaning of the FDCPA. 5766
12. Tort Claims.
The Ninth Circuit has held that a tort claim for wrongful conversion does not constitute a debt under the FDCPA. 5767
13. PayPal Obligations.
The Eleventh Circuit has held that a consumer's PayPal obligations are subject to the FDCPA. 5768
14. Taxes.
The Second and Third Circuits have held that taxes are not "debts" within the meaning of the FDCPA. 5769
15. Debt Resulting from Theft.
The Second Circuit has held that debt resulting from the theft of unmetered natural gas was not subject to the FDCPA. 5770
B. Subsequent Debt Collectors.
The FDCPA's requirements apply to debt collectors, not to the debt itself. Each subsequent debt collector, therefore, must comply with "initial communications" and "subsequent communications" requirements of the FDCPA.
C. Attorneys.
1. In General.
The FDCPA no longer exempts attorneys from the definition of "debt collectors." Much discussion and litigation has focused on whether an attorney is acting as a "debt collector" in various circumstances, particularly in "communications" related to litigation by attorneys who qualify as debt collectors under the statutory definition.
The FDCPA has been broadly applied to all aspects of litigation, even those aspects in which the debtor is represented by counsel. In Sayyed v. Wolpoff & Abramson, 5771 the Fourth Circuit applied the FDCPA to a state court motion for summary judgment and interrogatories and held that the FDCPA preempts state law litigation immunity for statements made during litigation.
2. United States Supreme Court.
The United States Supreme Court has held unanimously that the FDCPA "applies to a lawyer who 'regularly,' through litigation, tries to collect consumer debts." 5772 The 1996 amendment exempting "formal pleading made in connection with a legal action" was in part a Congressional response to this decision.
3. FTC Official Staff Commentary.
The Federal Trade Commission (FTC) Official Staff Commentary on the FDCPA states that "[a]ttorneys or law firms that engage in traditional debt collection activities (sending dunning letters, making collection calls to consumers) are covered by the [FDCPA], but those whose practice is limited to legal activities are not covered." 5773 In Heintz v. Jenkins, 5774 the Court criticized this commentary, citing among other cases Scott v. Jones. 5775 The staff commentary goes on to say that "[s]imilarly, filing or service of a complaint or other legal paper (or transmission of a notice that is a legal prerequisite to enforcement of a debt) is not a 'communication' covered by the FDCPA, but traditional collection efforts are covered." 5776
4. FTC Informal Staff Opinion.
The FTC staff has generally followed the terms of its own official commentary in interpreting the applicability of the FDCPA. 5777
5. Debt Collection as Percentage of Practice.
The FDCPA applies regardless of whether debt collections do not constitute a significant portion of an attorney's work. 5778
6. Attorneys May Be Held to a Higher Standard.
In Nielsen v. Dickerson, 5779 a class action suit involving a Virginia attorney, the court held that dunning letters from the attorney's firm were misleading because an "unsophisticated consumer" would assume that the lawyer had exercised professional judgment in preparing the letter, had assessed the validity of the debt, and was prepared to take legal action. The Fourth Circuit, however, has stated in an unpublished opinion that "we will not combine Rule 11 with the FDCPA to create a heightened duty of investigation for lawyer-debt collectors engaging in ordinary debt collection activity." 5780
D. Limited to "Debt Collectors."
1. In General.
The FDCPA defines "debt collector" as "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." 5781 A person is therefore a "debt collector" if he or she meets either prong of this disjunctive definition.
2. Exclusions.
The FDCPA explicitly exempts or excludes the following categories of persons from the definition of "debt collector":
a. Creditors' employees collecting in the name of the creditor. 5782 The exemption may not apply if (i) the debt collector uses a false name; 5783 (ii) the debt collector uses a name designed to create the false impression that an independent debt collector is involved; 5784 (iii) the debt collector is collecting debts owed to another; 5785 or (iv) the debt was in default when assigned; 5786
...b. Commonly owned or affiliated corporations collecting only for their affiliates if the principal business of the corporation is not the collection of debts. 5787 This exemption may not apply if (i) the debt collector uses a false or misleading name; (ii) the debt collector creates a false impression that an independent debt collector is involved; or (iii) the
