Capital One Bank: Debt Collection

David A. Szwak

Capital One Bank: Debt Collection

Postby David A. Szwak » Sun Dec 11, 2005 4:25 pm

Capital One is a Debt Collector Under These Circumstances

The court in Wallace v. Capital One Bank, 168 F.Supp.2d 526 [U.S.D.C. Md. 2001], published its opinion in which, inter alia, it explained the relationship between “Capital One,” Capital One Bank, and “The Westmoreland Agency.” The court stated that: “Wallace defaulted on a debt she owed. Capital One Bank purchased the debt, and it was assigned to the Westmoreland Agency ["Westmoreland"] for collection. Capital One Financial is a holding corporation that owns Capital One Bank and Westmoreland.” Thus, Westmoreland is “owned” by Capital One Financial Corp., the apparent holding corporation for Capital One Bank, Westmoreland and Capital One Services, Inc., as well. Westmoreland and Capital One Bank, in Wallace, were debt collectors as Capital One Bank had purchased Wallace’s debt from another lender after the debt was delinquent and Westmoreland, of course, is engaged in acts of debt collection. [[fn - Necessarily the court did not find any application of the affiliate exception under section 1692a[6][B]. In ***********, the court noted: “In order for the corporate affiliate exclusion to apply, the following two conditions must be satisfied: "(1) the affiliate collects debts only for entities with which it is affiliated or related; and (2) the principal business of the affiliate is not debt collection." Aubert v. American Gen. Fin., 137 F.3d 976, 978 (7th Cir.1998). Thus, to determine whether Provena Health satisfies these two conditions, the court must examine Provena Health's business relationship with Sacor Systems Collection Agency. Unfortunately, the defendants do not address this relationship in either their joint memorandum or joint reply...”]]

In Carbajal v. Capital One, F.S.B., et al, 2003 WestLaw 22595265 [U.S.D.C. N.D. Ill. 2003], the court stated: “Most FDCPA cases involve the dunning of a debtor, by letter or otherwise, by a collection agency. This case is somewhat is different. Defendant Capital One, FSB is a major issuer of credit cards. It also regularly acquires delinquent credit card accounts from other issuers and attempts to collect them. This case concerns one of the ways in which Capital One [FN1: We use "Capital One" to refer to all the defendants,[[fn-The defendants listed in the lawsuit and opinion are: Capital One, F.S.B., Capital One Services, Inc., and Westmoreland Agency, Inc.]] which are alleged to be affiliated entities that act together in making the solicitations.] does that. It sends to the debtor what amounts to a solicitation to pay off the debt by obtaining a Capital One Visa card. According to the solicitation, once the debtor obtains the credit card, his prior debt will be transferred to the new credit card account, and no interest will be charged on that part of the debt. In addition, interest and fees that have accrued since the debt was charged off by the prior creditor will be forgiven. The solicitation states that once Capital One receives the debtor's first payment, credit bureaus will be notified that the charged-off debt has been paid in full. However, if the debtor does not make a payment for three billing cycles, the new Visa account will be closed, and collection activities will resume, including the previously-accrued interest and fees. Capital One's solicitation also contains several other documents: a letter from the prior creditor or collection agency further explaining the offer, and the disclosures legally mandated by the Truth in Lending Act and other laws in connection with the offer of a new credit card. Plaintiffs allege that Capital One is a debt collector within the meaning of the FDCPA....On the reverse side there were a series of questions and answers regarding the credit card offer. At the top of the page, in smaller-point type than the rest of the page, but enclosed in a box, was the validation notice, which read as follows: If this is the first letter you have received from us, please be aware that this communication is from a debt collector, and it and others from us are an attempt to collect a debt.”

The court denied Capital One’s motion to dismiss the FDCPA count and found that Capital One’s actions, which are directly on point with our case, are that of a “debt collector” and implicate FDCPA, 15 U.S.C. 1692, issues.

The Carbajal facts are fairly close on point and the court held that: “They [CapOne] have offered no authority supporting the proposition that the requirement they thereby assumed to comply with TILA can be used to diminish their obligations under the FDCPA.”

A debt collector is "any person who uses any instrumentality of interstate commerce or the mails in any business, the principal purpose of which is the collection of debts, or who regularly collects or attempts to collect, debts owed or due or asserted to be owed or due another". A creditor attempting to collect its own debts becomes a "debt collector" under the FDCPA in certain circumstances.

"The FDCPA was passed to protect consumers from deceptive or harassing actions taken by debt collectors." Kropelnicki v. Siegel, 290 F.3d 118, 127 [2d Cir. 2002]; 15 U.S.C. 1692[e]. The FDCPA "establishes certain rights for consumers whose debts are placed in the hands of professional debt collectors for collection, and requires that such debt collectors advise the consumers whose debts they seek to collect of specified rights." Kropelnicki, 290 F.3d, at 127. Among other things, a debt collector must inform the consumer in writing that he has thirty days in which to dispute the validity of the debt; that upon written request, the consumer will be provided with the name and address of the original creditor; and that, if the consumer disputes the debt, the debt collector will obtain verification of the debt and mail a copy of such verification to the consumer. 15 U.S.C. 1692[g]. Debt collectors are held strictly liable for failing to comply with any of the provisions of the statute.

Generally, creditors do not qualify as debt collectors, and thus are not subject to the FDCPA. Maguire v. Citicorp Retail Services, Inc., 147 F.3d 232, 235 [2d Cir.1998]. The Maguire court held that a creditor's in-house collection division is not considered a debt collector so long as "it collects its own debts in the true name of the creditor or a name under which it has consistently done business." Id. As the statutory language indicates, however, a creditor or its in-house collection division becomes subject to the FDCPA if the creditor "uses a name other than his own" which might lead a debtor to believe that a third party has become involved in collecting the debt. [[fn - 15 U.S.C. 1692[a][6]; Powell v. Bay View Bank, 2003 WestLaw 22839814 [U.S.D.C. N.D. Ill. 2003]; Ekinici v. GNOC Corp., 2002 WestLaw 31956011 [U.S.D.C. E.D. N.Y. 2002] [if it leaves the impression that a third party is acting to collect the debt, then they are a debt collector].]] "A creditor uses a name other than its own when it uses a name that implies that a third party is involved in collecting its debts, pretends to be someone else, or uses a pseudonym or alias." Maguire, 147 F.3d, at 235. FDCPA violations are reviewed under the "least sophisticated consumer" standard. A disputed collection communication "must be assessed in terms of the impression likely to be left upon" such an "unsophisticated" consumer. Maguire, 147 F.3d at 236 [citation omitted]. This standard: "[1] ensures the protection of all consumers, even the naive and the trusting, against deceptive debt collection practices, and [2] protects debt collectors against liability for bizarre or idiosyncratic interpretations of collection notices." Kropelnicki, 290 F.3d at 127 [citation omitted].

The Actions Here By Capital One Constitute Debt Collection

In Stepney v. Outsourcing Solutions, Inc., 1997 WestLaw 722972, 1997 U.S.Dist.Lexis 18264 at *14 [N.D. Ill.1997] and in Kimber v. Federal Fin. Corp., 668 F.Supp. 1480 [M.D. Ala.1987], and its progeny, the courts have consistently held that FDCPA claims are viable where they are premised on a debt collector's knowing attempts to collect time-barred debts. In these cases lawsuits were filed to collect the debts or lawsuits were threatened or "further collection action" was threatened. That is precisely what defendant has done here. Defendant knowingly and fraudulently transferred a prescribed debt onto another account then refused to heed disputes by plaintiff and his counsel. Worse yet, defendant has initiated collection actions, including dunning plaintiff, based on the new account which balance is solely consisting of the prescribed account balance. This plainly falls under the “further collection action” prong of this analysis.

In Harry W. Brink v. First Credit Resources, 185 F.R.D. 567, 1999 U.S.Dist.Lexis 15121 [U.S.D.C. Ariz. 1999], the court certified a class action against the defendant for precisely the conduct alleged by Deaville. The Brink plaintiff filed his suit under the FDCPA as defendant used false representation and deceptive means to collect or attempt to collect a debt, it improperly attempted to collect a time-barred debt, the mailing were false communications, and the mailings failed to contain required debt collection warnings.

Of course, the latest line of cases hold that collection of a time-barred debt is deceptive as a matter of law regardless of whether a lawsuit is filed or a lawsuit is threatened or whether “further collection action” was threatened. Taylor v. Unifund, No. 98-C-5921, 1999 U.S.Dist.Lexis 13651 [U.S.D.C. N.D. Ill. 1999]. The Taylor lines of cases [fn - Wright v. Asset Acceptance Corp., C-3-97-375, 1999 U.S. Dist. Lexis 20675 [U.S.D.C. S.D. Ohio 2000]; Martinez v. Albuquerque Collection Servs., Inc., 867 F.Supp. 1495, [U.S.D.C. N.M.1994]; Canterbury v. Columbia Gas of Ohio, 2001 WestLaw 1681132 [U.S.D.C. S.D. Ohio 2001]. The cases consistently find efforts to collect a time-barred debt to violate the FDCPA and to constitute deceptive practices.]] hold that a debt collector engages in fraudulent misrepresentation by trying to collect a time-barred debt even if no lawsuit has been filed to collect the debt, or a lawsuit or further collection action threatened.

Courts have likewise held that even a phone call to the consumer in an attempt to collect a time-barred debt stated a claim under the FDCPA. Parretta v. Capital Acquisitions & Mngt. Co., 2003 WestLaw 21383757, 2003 U.S.Dist.Lexis 10070 [U.S.D.C. N.D. Cal. 2003] [also a CapOne case where CapOne used another one of its other aliases in a time-barred debt collection scheme].

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Postby HelpMe2006 » Sun Feb 26, 2006 9:36 am

So is Capital One a "debt collector" and subject to FDCPA as well as FCRA?

David A. Szwak

Postby David A. Szwak » Sun Feb 26, 2006 6:33 pm

[quote="HelpMe2006"]So is Capital One a "debt collector" and subject to FDCPA as well as FCRA?

The best answer for this is: it depends. I think you need to review the Deaville v. Capital One, et al, WD La., Shreveport Division, case pleadings. I represent Horace Deaville. Do a search for Capital One or "CapOne" in these forum folders. I posted a lot of stuff on CapOne [pron. "Cah-Pone;" like the gangster]. Fitting, huh?