The 7th Circuit Court of appeals posted a decision on a topic near and dear to my heart, the Fair Debt Collections Practices Act (FDCPA). In the case of Catencamp v. Cendant Timeshare Resort, Judge Easterbrook writes an opinion holding that a creditor is a “debt collector” under the FDCPA if, in the course of collection, it holds itself out as a 3rd person.
Typically, the FDCPA does not apply to entities trying to collect on their own debts. But, if you refer it out to a third person, the third person is typically bound by the requirements of the FDCPA. In this case, Cendant Timeshare Resort was trying to collect on its own debt, but for whatever reason, it wrote the demand letter under a trade name, “Resort Financial Services.” The demand letter itself suggested that Resort Financial Services was a different entity than Cendant. So, the FDCPA applies and Cendant is probably on the hook if its alter ego Resort Financial Services did anything that violated the technical requirements of the FDCPA.
Doug,
How do you feel about the decision? I read it, and it looks to me like the creditor was attempting to mislead Catencamp, and the district court judge was irrationally hostile to him (in the appeals court’s words, the district court managed to misconstrue “pellucid” regulatory language, inappropriately discarding Catencamp’s second cause of action, unrelated to the FDCPA).
I do not understand why one’s status of debtor should make one a fair target for misrepresentation or fraud, nor for hostility to civil plaintiffs on the part of presumptively neutral judges.
The FDCPA part of the decision seemed correct to me. I didn’t really read the tail end about the real estate claim.
I can’t presume to know what was going on at the district court level. Personally, I can’t get too worked up over the injustice done to the debtor. Probably too much time on the creditor side of the fence. Certainly it appears that the creditor misrepresented its identity for some reason. Whether that was something nefarious intended for the debtor, or just part of some byzantine corporate bureaucracy, I couldn’t say. I didn’t see any fraud from the facts of the case. The misrepresentation was enough to get them tagged under the FDCPA, and I have no problem with that.
At a practical level, it shouldn’t really matter to the debtor. If they have the money, they should pay the debt. If they don’t, then it doesn’t matter who is asking for it. The debtors would be acting inappropriately, in my opinion, if they were inclined to withhold money from the original creditor but would go ahead and pay their debts if it were a third party collection agency.
Doug,
Well, it’s pure conjecture on my part, but I’m guessing the FDCPA only applies to third-party creditors because to make it apply to all debts would impose a lot of overhead on small-scale creditors. I’m thinking here of private, non-corporate landlords among other entities.[*]
But I’m guessing the reasoning is, if you care enough about a debt you’re owed to assign it to a third party for collection, you should know enough about it the debt to be able to describe it accurately, and — perhaps more importantly — give that third party collector some impression of due diligence so that they don’t have reason to fear they’re trying to collect on a nonexistent debt.
Without the policing of third-party debt collection practices, an avenue for get-rich-quick schemes through the fraudulent claims of one’s creditor status is broadened. We all know how alluring the notion of unearned income is. I’d suggest that any worldview that would have us looking at only one side of the debtor-creditor relationship for signs of indulged temptation is a distorted one.
[*] Landlord/tenant law is another regulatory scheme altogether, and for all I know collection of overdue rents is excepted from the FDCPA, so this might be a bad example. Corrections welcome.