Saturday, September 7, 2013

FYI: 10th Cir Clarifies "Regularly Collects" Standard in FDCPA, Follows 2nd Cir Rule

The U.S. Court of Appeals for the Tenth Circuit recently confirmed that an attorney did not qualify as a debt collector under the federal Fair Debt Collection Practices Act, where debt collection activities were only an incidental part of the attorney's practice. 


A copy of the opinion is available at


An attorney ("Attorney") filed a debt collection action against a consumer.  The consumer filed counterclaims.  The Attorney failed to timely respond to the consumer's counterclaims, and the lower court entered a default judgment against the Attorney. 


The Attorney then retained another attorney to represent her who, apparently not knowing of the order for default, filed an untimely response to the consumer's counterclaims, and served him with amended initial disclosures, which included an estimate of legal fees.  These disclosures were inaccurate, which the Attorney's counsel acknowledged in a later response to the consumer's discovery requests. 


The consumer then filed the instant action under the federal Fair Debt Collection Practices Act ("FDCPA"), alleging that the Attorney's counsel's conduct in the debt collection action violated the FDCPA.  The Attorney's counsel moved for summary judgment, arguing that she was not a "debt collector" under the FDCPA, and therefore that its provisions did not apply to her.  The lower court agreed, and granted the Attorney's counsel's motion.  The consumer appealed. 


As you may recall, the FDCPA defines "debt collector" as "any person who uses any instrumentality of interstate commerce or the mails in any business the principal purpose of which is the collection of any dates, or who regularly collects or attempts to collect, directly or indirectly, debts owed or due or asserted to be owed or due another."  15 U.S.C. Sec. 1692(a)(6). 


The Tenth Circuit noted that the resolution of this matter hinged on what constitutes "regularly" collecting debts for the purposes of the FDCPA, which it described as an issue of first impression.  Accordingly, the Tenth Circuit scrutinized the applicable legislative history, and based on that analysis determined that "this much seems clear: [regular collection of debts] cannot be isolated or incidental but must, to varying degrees, be a significant aspect of an attorney's business." 


The Tenth Circuit next considered the Second Circuit's analysis concerning how to determine whether debt collection activity is regular.  It noted that the Second Circuit determined that the relevant considerations include, among others, "the absolute number of debt collection communities;" "the frequency of such communications and/or litigation activity;" "whether the entity has personnel specifically assigned to work on debt collection activity;" and "whether the entity has systems or contractors in place to facilitate such activity." Goldstein v. Hutton, Ingram, Yuzek, Gainen, Carroll & Bertolotti, 374 F.3d 56, 62-63 (2d Cir. 2004) 


The Tenth Circuit adopted the Second Circuit's standard, and held that "courts must consider these factors in determining whether an attorney or law firm 'regularly' engages in debt collection..." 


With that standard in place, the Tenth Circuit had little difficulty in affirming the lower court's decision.  To reach that conclusion, the Tenth Circuit relied on the Attorney's counsel's affidavit indicating that matters related to debt collection constitute a small fraction of her caseload, and that the Attorney's counsel had no employees hired for the purpose of debt collection.  Therefore, the Tenth Circuit noted that "[t]he record does not demonstrate that [the Attorney's counsel] engages in debt collection with any sort of regularity..."


Accordingly, the Tenth Circuit held that the Attorney's counsel "does not qualify as a 'debt collector' under the FDPCA," and affirmed the lower court's ruling.  





Ralph T. Wutscher
McGinnis Wutscher Beiramee LLP
The Loop Center Building
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Chicago, Illinois 60602
Direct: (312) 551-9320
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