But the FDCPA usually doesn't apply to your original creditor. And if the party who's calling you to try to collect is a debt buyer, it might—or might not—have to comply with the FDCPA. (A “debt buyer” is a person or business that regularly buys debts from creditors and tries to collect them).
The FDCPA defines a “debt collector” as:
Whether a debt buyer falls into the FDCPA’s definition of “debt collector” had long been a matter of contention. The U.S. Supreme Court addressed this issue in 2017 in the case of Henson et al. v. Santander Consumer USA Inc., 137 S.Ct. 1718 (2017).
In the Henson case, the Supreme Court applied a straightforward interpretation of the FDCPA. It decided that businesses like Santander that buy, and therefore own, the debts they’re trying to collect aren’t attempting to collect “debts owed or due…another.”
So, the court decided that companies like Santander that attempt to collect debts owed to themselves aren’t debt collectors under the FDCPA.
Following the Henson decision, the United States Court of Appeals for the Third Circuit addressed the "principal purpose" definition of a debt collector under the FDCPA. The Third Circuit held in Tepper v. Amos Financial, LLC, 898 F.3d 364 (3d Cir. 2018) that an entity whose principal purpose of business is the collection of any debts is a debt collector for purposes of the FDCPA.
Therefore, this court said that if a business’s principal purpose is debt collection, it must comply with the requirements of the FDCPA, even if the entity owns the debts it collects. (In Henson, Santander also convincingly argued its principal purpose was loan origination, which is different from debt buyers that primarily or exclusively buy and collect defaulted debts.)
To address this matter and reinforce the courts’ decisions, the Consumer Financial Protection Bureau (CFPB) issued a final rule amending Regulation F (12 C.F.R. § 1006 and following), which implements the FDCPA. As of November 30, 2021, based on the CFPB’s rule, the official interpretation to 12 C.F.R. § 1006.2(i) of Regulation F reads:
A person who collects or attempts to collect defaulted debts that the person has purchased, but who does not collect or attempt to collect, directly or indirectly, debts owed or due, or asserted to be owed or due, to another, and who does not have a business the principal purpose of which is the collection of debts, is not a debt collector ….
So, a debt buyer is not considered a "debt collector" for the purposes of the FDCPA if (1) it doesn't collect debts owed or due to another and (2) doesn't have a business with the principal purpose of collecting debts.
If you think a debt buyer has violated the FDCPA when trying to collect a debt from you, consider talking to an attorney to get advice about your options. If a debt buyer or debt collector violates the FDCPA, you might be able to use the violation to negotiate a favorable settlement or as a defense to a collections lawsuit.
Fortunately, there are defenses to debt buyer collection lawsuits that might help you defend against the lawsuit.
Debt buyers are companies that buy large numbers of debts from creditors for pennies on the dollar. The debt buyer purchases the debts cheaply, so it can make a profit even if it only collects a small amount on those debts.
Once a debt buyer buys your debt, the original creditor has no legal interest in the debt. Because the debt buyer now owns the debt, it has the right to sue you. Some debt buyers sue regularly, and some rarely or never sue consumers.
If a debt buyer sues you, several defenses might be available. Here are some of the most common defenses to a debt buyer lawsuit.
In many states, a debt buyer must have paperwork demonstrating the agreement between you and the original creditor to sue you or to add interest or attorneys' fees onto the balance.
This paperwork is often in the form of a cardmember agreement for credit card debts. Cardmember agreements have information about which state law applies to the case and how much the debt buyer can collect in interest and attorneys' fees.
Often a debt buyer doesn't have this paperwork and might never be able to get it from the original creditor. Many creditors do not cooperate when debt buyers ask for cardmember agreements, often because they have sold the debt "as is."
Some debt buyers will attach your regular billing statements to the lawsuit and try to pass them off as the cardmember agreement. But this isn't a sufficient substitute for the actual agreement.
"Standing" means a person or business has a legal interest in a case. In collection suits, it means a debt buyer must prove that it legally owns your debt.
Because the debt buyer didn't enter into a contract with you, it can only meet the standing requirement by demonstrating that the original creditor sold or assigned the debt to it. Many courts require that the debt buyer produce documents showing the assignment or purchase of the debt.
Because many debt buyers purchase debts “as is” from original creditors, they don't know if the original creditor properly credited your payments. They also might not have your billing statements or documents demonstrating when you incurred the debt.
The statute of limitations is the time period that a party has to bring a legal claim. After the time limit passes, the law bars the legal claim. The applicable time period to collect on a debt varies by state.
Determining the statute of limitation in your case can be complex for several reasons.
You might have a valid statute of limitations defense if it has been many years since your last payment. Often a debt buyer won't know when you made your last payment or what statute of limitation period applies to your debt.
If you can get your cardmember agreement and determine which state law applies, you have a good start on determining whether this is a valid defense in your case.
Because the debt buyer didn't make the contract with or extend credit to you, it often must rely on records or documents created by other parties, such as the original creditor, to prove its case. The debt buyer will have trouble getting the court to accept those documents as evidence in many situations.
If you think you may have an evidentiary defense or objection, contact an attorney who understands your state's evidence rules.
If you have another reason for now owing the debt, you should raise that defense in the collection lawsuit. Often, debt buyers sue for:
In the above instances, you would most likely have a defense to the collection lawsuit.
Consider talking to a local attorney to find out if you have one or more defenses to a debt lawsuit.
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