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Does FDCPA Apply to Purported Business Debts?

Posted: Mon Dec 26, 2005 12:51 pm
by David A. Szwak
In Moore v. Principal Credit Corporation, 1998 WestLaw 378387 (U.S.D.C. N.D. Miss.1998), the obligation for computer programs was incurred for business use. However, the Moore court concluded that even if the debt was business related, collection efforts made to an individual converted the debt, placing it within the FDCPA's reach.

Posted: Mon Dec 26, 2005 12:55 pm
by David A. Szwak
In Wenrich v. Robert E. Cole, P.C., 2001 WestLaw 4994 [U.S.D.C. E.D. Pa. 2000], the court stated: “Defendants argue that the FDCPA does not apply to Parents because: They are not parties to the lease, Def. Mot. ¶¶ 30; they are not guarantors of obligations under the lease, Def. Mot. ¶¶ 31; any monies owed as a result of the lease can be owed only by Mattea, Def. Mot. ¶¶ 32; the FDCPA does not apply to guarantors, Def. Mot. ¶¶ 33; Parents are not debtors or consumers under the FDCPA, Def. Mot. ¶¶ 34; and defendants are not debt collectors as to Parents. Def. Mot. ¶¶ 35. Defendants' theory is that the FDCPA does not apply to persons who (1) are not obligated on a debt, or who (2) are guarantors. See Def. Mem. at 8, 9. The grant of a cause of action under the FDCPA is given to "any person." 15 U.S.C.A. 1692k(a) (West 1998) ("Except as otherwise provided by this section, any debt collector who fails to comply with any provision of this subchapter with respect to any person is liable to such person."). Federal courts interpret Section 1692k(a) as a broad grant available to persons who are not obligated or allegedly obligated to pay the debt that the defendant sought to collect. See Whatley v. Universal Collection Bureau Inc. (Florida), 525 F.Supp. 1204, 1206 (N.D.Ga.1981) (holding that not only the consumer, but his parents, who were not allegedly obligated on the debt, had standing to sue under the FDCPA). In that case, a debt collector allegedly left a threat on the answering machine at the family's home in an attempt to collect the consumer's debt to J.C. Penney Co. Inc. The court held that " 'any person,' as used in 15 U.S.C. 1692k(a) includes persons, such as [parents of the consumer], who claim they are harmed by proscribed debt collection practices directed to the collection of another person's debt." Whatley, 525 F.Supp., at 1206. See also Wright v. Finance Service of Norwalk, Inc., 22 F.3d 647, 650 (6th Cir.1994) (holding that executrix daughter of deceased had standing under FDCPA where daughter opened letters to her deceased mother that allegedly violated the FDCPA); Dutton v. Wolhar, 809 F.Supp. 1130, 1135 (D.Del.1992) (holding that son who received letter regarding a debt incurred by his father, who had the same name but lived at a different address, could sue the debt collector); 17 Am.Jur.2d. Consumer and Borrower Protection §§ 221 (West 1990) ("[T]he scope of the Act is not limited to consumers obligated or allegedly obligated to pay a debt, but includes any person allegedly harmed by proscribed debt collection practices directed towards the collection of another person's debt."). The legislative history of the statute supports extending the protection of the FDCPA to persons other than those obligated on a debt, who receive a communication from a debt collector: This bill also protects people who do not owe money at all. In the collector's zeal, collection efforts are often aimed at the wrong person either because of mistaken identity or mistaken facts. This bill will make collectors behave responsibly towards people with whom they deal. Another group of people who do not owe money, but who may be deliberately harassed are the family, employer and neighbors of the consumer. These people are also protected by ... this bill. Certainly a person who has a common name and is being hounded by a debt collector because of the debts of another person deserves the protection this legislation will offer." H.R.Rep. No. 95-131, at 8 (1977). [underlined emphasis added.].” 15 U.S.C. §1692k(a). Also see Wright v. Finance Service, Inc., 996 F.2d 820 (6th Cir.1993), reversed on other grounds, 22 F.3d 647 (6th Cir.1994) (en banc); Dutton v. Wolhar, 809 F.Supp. 1130 (U.S.D.C. Del. 1992); Riveria v. MAB Collections, Inc., 682 F.Supp. 174 (U.S.D.C. W.D. N.Y. 1988); Whatley v. Universal Collection Bureau, Inc., 525 F.Supp. 1204 (U.S.D.C. N.D. Ga. 1981). Plaintiff is a “consumer.” The FDCPA defines a "consumer" as being "any natural person obligated or allegedly obligated to pay any debt." 15 U.S.C. 1692a(3).

Posted: Mon Dec 26, 2005 12:59 pm
by David A. Szwak
Defendant contends that the FDCPA does not apply because the lease, under which defendants claim that plaintiff owes them anything, is a commercial lease. In Palazzolo v. Nitzkin, 2005 WestLaw 221431 [Mich. Cir. Ct. 2005], the court held that “[W]ith regard to the Fair Debt Collection Practices Act, Defendants' sole argument in support of summary disposition is that the present case does not come within the purview of the Fair Debt Collection Practices Act, and that Plaintiffs thus failed to state a claim under the Act. Specifically, Defendants assert that the underlying debt that was sought from Plaintiff Palazzolo did not arise out of personal, family, or household purposes as is required to trigger application of the Act, but rather was based upon a commercial lease agreement. However, as pointed out by Plaintiffs, recovery under the Fair Debt Collection Practices Act is not so limited as Defendants would have the Court believe. In 1977, Congress enacted the Fair Debt Collection Practices Act ("FDCPA") in response to national concern over the use of abusive, deceptive and unfair debt collection practices by many debt collectors. West v. Costen, 558 F.Supp 564, 569 (U.S.D.C. Va. 1983). The purpose of this Act was to protect consumers from a host of unfair, harassing, and deceptive debt collection practices without imposing unnecessary restrictions on ethical debt collectors. Hicken v. Arnold, Anderson & Dove, PLLP, 137 F.Supp.2d 1141, 1142 -1143 (U.S.D.C. Minn. 2001). To that end, the FDCPA proscribes certain conduct on the part of debt collectors in connection with their collection of a debt including, but not limited to, the use or threat of use of violence or other criminal means to harm the physical person, reputation, or property of any person, and the use of obscene or profane language. 15 U.S.C. 1692d. The FDCPA generally applies to consumer, rather than business, debts. Bloom v. I.C. Sys, Inc., 972 F.2d 1067, 1068 (9th Cir. 1992). The
term "debt" is defined in the FDCPA as: [A]ny 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 ..." 15 U.S.C. 1692a(5). This is not to say, however, that only consumers may recover under the FDCPA. Relevant to the instant matter, 15 U.S.C. 1292k provides that "any debt collector who fails to comply with any provision of this sub-chapter with respect to any person is liable to such person ..." According to Dutton v. Wolhar, 809 F.Supp 1130, 1134 (U.S.D.C. Del. 1992), the above
language indicates that recovery under the FDCPA is broad and imposes liability when a debt collector has failed to comply with the Act with respect to any person, not simply those whose obligation or alleged obligation arose out of a transaction concerning personal, family, or household purposes. The Dutton court cites to the legislative history behind the FDCPA, specifically, House Report 95-131, to support its broad reading of the Act: "This bill also protects people who do not owe money at all. In the collector's zeal, collection efforts are often aimed at the wrong person either because of mistaken identity or mistaken facts. This bill will make collectors behave responsibly towards people with whom they deal. Another group of people who do not owe money, but who may be deliberately harassed are the family, employer and neighbors of the consumer. These people are also protected by this ... bill." Based upon the language in the above House Bill, the Dutton court determined that it was Congress' intent to protect people other than debtors who are subject to harassment by debt collectors. Id. Furthermore, in Whatley v Universal Collection Bureau Inc., 525 F.Supp 1204 (U.S.D.C. Ga. 1981), the court found that, given the clear language in the Act, "any person," as used in 15 U.S.C. 1692k(a) specifically includes persons who claim they have been harmed by proscribed debt collection practices directed to the collection of another person's debt. As Plaintiffs in the present matter clearly asserted in their complaint that they were subject to unfair
debt collection practices stemming from attempted collection of another person's debt, they have sufficiently stated a cause of action for violation of the Fair Debt Collection Practices Act. Summary disposition in Defendants' favor would therefore be inappropriate on this cause of action. [only bolded and unlined emphasis added.].”

In Sibersky v. Borah, Goldstein, Altschuler & Schwartz, P.C., 2000 WestLaw 1448635
[U.S.D.C. S.D. N.Y. 2000], the court held: “The defendants also argue that Mr. Sibersky lacks standing to sue under the FDCPA because the Sept. 15, 1998 and Sept. 28, 1998 rent demands were addressed to, and served upon, Anita Sibersky only. However, the general civil liability section of the FDCPA is very broad: "...any debt collector who fails to comply with any provision of this subchapter with respect to any person is liable to such person...." 29 U.S.C. §§ 1692k(a). The language of Section 1692k "is couched in the broadest possible language." Conboy v. AT & T, 84 F.Supp.2d 492, 504-05 n .9 (S.D.N.Y.2000) (citing Riveria v. MAB Collections, Inc., 682 F.Supp. 174, 175 (W.D.N.Y.1988). In fact, "any person who comes in contact with the proscribed debt collection practices may bring a claim" under certain sections of the FDCPA. Riveria, 682 F.Supp. at 175 (citing Whatley v. Universal Collection Bureau, Inc., 525 F.Supp. 1204, 1206 (N.D.Ga.1981)); see also Wright v. Finance Service of Norwalk, Inc., 22 F.3d 647, 650 (6th Cir.1994) ("[T]he phrase 'with respect to any person' includes more than just
the addressee of the offending letters .... [and] at a minimum, includes those persons...who 'stand in the shoes of the debtor' or have the same authority as the debtor to open and read the letters of the debtor."). Likewise, persons who have been harmed by an "improper debt practice" may also bring suit. Dutton v. Wolhar, 809 F.Supp. 1130, 1134-35 (D.Del.1992) (noting that the legislative history of the FDCPA supports the notion that the statute protects people, such as family members of debtors, who may not owe money but who are harassed by debt collection practices).

The defendants are correct that certain sections of the FDCPA are violated only by certain conduct toward a "consumer." The FDCPA defines "consumer" as "any natural person obligated or allegedly obligated to pay any debt." 15 U.S.C. §1692a(3). Only Mrs. Sibersky was obligated on the lease. Because the lease is in Mrs. Sibersky's name alone, only she is a debtor to Felds.

Under New York law, where property is leased to a married woman, she alone is bound by the lease. "The fact that the husband in such a case makes payment of the rent for a period of time, which payments are accepted by the lessor, does not have the effect of creating an independent liability in the husband." 45 N.Y.Jur.2d Dom. Rel. §§ 235 (1995) (relying on Edgar A. Levy Leasing Co. v. Cohen, 261 N.Y.S. 145, 147-48 (1932)); NY Gen. Oblig. Law §§ 3- 305 (McKinney 1989)("A contract made by a married woman does not bind her husband or his property."). In this case, the plaintiffs allege that the defendants violated Sections 1692e(5), 1692e(11), and 1692g. Sections 1692e(11) and 1692g both specifically refer to obligations to consumers, while Section 1692e(5) contains no such limitation. In Conboy, Judge Ward found no violation of Section 1692e(11) because that section only makes it a violation to fail to disclose debt collection information in a communication "with the consumer," and it was undisputed that the plaintiffs were not consumers. Conboy, 84 F.Supp.2d at 504. See also Dewey v. Associated Collectors, Inc., 927 F.Supp. 1172 (W.D. Wis.1996) (non-debtor plaintiff not permitted to sue where there was no evidence that the non-debtor plaintiff saw the disputed letter). However, Judge Ward also noted that other sections of the FDCPA were not limited to communications with consumers and there may be liability to non-consumers for violation of one of these other sections. Conboy, 84 F.Supp.2d at 505. [only bolded and unlined emphasis added.].”