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Sunday, February 25, 2024 | Back issues
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Debt Collector Is as Debt Collector Does, 3rd Circuit Says

A company that tapped a debt collector to go after delinquent accounts is still itself a debt collector, the Third Circuit ruled Friday.

PHILADELPHIA (CN) — A company that tapped a debt collector to go after delinquent accounts is still itself a debt collector, the Third Circuit ruled Friday.

In the underlying case, Mary Barbato received voicemails and letters about a credit card debt from Turning Point Inc., under a contract with Crown Asset Management, which in turn had bought Barbato’s debt from GE Electric Capital Corp.

Crown Asset sought summary judgment, denying that it can be considered a debt collector under the Fair Debt Practices Collections Act, but the Third Circuit rejected its appeal Friday, five months after holding oral arguments in Philadelphia.

“The existence of a middleman does not change the essential nature—the 

‘principal purpose’ — of Crown’s business,” U.S. Circuit Judge Cheryl Ann Krause wrote for a three-member panel.

The 21-page opinion emphasizes that the only business of Crown is to purchase debts for the purpose of collecting them, and that without the collection of said debts, Crown would cease to exist. 

Crown failed to sway the court that the FDCPA does not apply to “passive debt owners” like itself, but only to a repo man. 

“An independent debt collector like Crown has only one need for consumers: for them to pay their debts,” Krause wrote. “As market-based incentives go, that makes it far more like a repo man than a creditor and gives it every incentive to hire the most effective repo man to boot.” 

The opinion looks to parts of speech to shutdown the argument over indirectly or directly collecting in the “regularly collects” definition in the FDCPA.

“In the ‘regularly collects’ definition, the ‘directly or indirectly’ qualification is necessary because one could reasonably interpret ‘collect’ to refer to only direct efforts to collect — it is, after all, ‘a verb that requires action,’” Krause added.

While the Third Circuit concluded that Crown is a debt collector, it remanded to the District Court to determine liability.

Crown was represented on appeal by the firm Taylor English Duma in Atlanta. Barbato was represented by the Chicago firm Edelman Combs.

Neither firm has responded to emails seeking comment.

Categories / Appeals, Business, Financial

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