Tepper v. Amos Fin., LLC

• Decision Date: 07 August 2018
• Docket Number: No. 17-2851,17-2851
• Citation: 898 F.3d 364
• Parties: James TEPPER; Allison Tepper v. AMOS FINANCIAL, LLC, Appellant
• Court: U.S. Court of Appeals — Third Circuit

898 F.3d 364

James TEPPER; Allison Tepper

v.AMOS FINANCIAL, LLC, Appellant

No. 17-2851

United States Court of Appeals, Third Circuit.

Argued June 5, 2018

Opinion filed: August 7, 2018

Erik M. Helbing (Argued), Helbing Law, LLC, 1328 Second Avenue, Berwick, PA 18603, Counsel for Appellant

Michael J. Palumbo, Anthony J. Gingo, Gingo Palumbo Law Group, 4700 Rockside Road, Suite 440, Independence, OH 44131, Matthew R. Rosenkoff, Taylor English Duma LLP, 1600 Parkwood Circle, Suite 200, Atlanta, GA 30339, Counsel for Amicus Appellant

Gleb Epelbaum, John J. Jacko, III (Argued), Fellheimer & Eichen, 50 South 16th Street, Two Liberty Place, Suite 3401, Philadelphia, PA 19102, Counsel for Appellee

Carlo Sabatini, Brett Freeman, Sabatini Law Firm, 216 North Blakely Street, Dunmore, PA 18512, Daniel A. Edelman, Francis Greene, Edelman, Combs, Latturner & Goodwin LLC, 20 S. Clark Street, Suite 1500, Chicago, IL 60603, Counsel for Amicus Appellee

Before: AMBRO, JORDAN, and VANASKIE, Circuit Judges

OPINION OF THE COURT

AMBRO, Circuit Judge

Many would gladly pay Tuesday for a hamburger today. Of course, not all of those who fall into debt make payments timely, and debt collection has become a professional trade. The Fair Debt Collection Practices Act (the "FDCPA" or "Act"), 15 U.S.C. § 1692, et seq. , regulates their efforts. Under it, debt collectors are prohibited from engaging in deceptive, abusive, or otherwise unfair practices to collect debts. When these practices occur, the Act gives debtors a private right of action to seek recourse, with the possibility of receiving statutory damages.

The Act does not apply, however, to all entities who collect debts; only those whose principal purpose is the collection of any debts, and those who regularly collect debts owed another, are subject to its proscriptions. Those entities whose principal business is to collect the defaulted debts they purchase seek to avoid the Act’s reach. We believe such an entity is what it is—a debt collector. If so, the Act applies.

I. Background

A. "Debt Collectors" Under the Fair Debt Collection Practices Act

The FDCPA is a "remedial legislation" aimed, as already noted, "to eliminate abusive debt collection practices by debt collectors."

Kaymark v. Bank of Am., N.A. , 783 F.3d 168, 174 (3d Cir. 2015) (quoting § 1692(e) ; Caprio v. Healthcare Revenue Recovery Grp., LLC , 709 F.3d 142, 148 (3d Cir. 2013) ). Importantly, it applies only to "debt collectors," Pollice v. Nat’l Tax Funding, L.P. , 225 F.3d 379, 403 (3d Cir. 2000), defined as any person: (1) "who uses any instrumentality of interstate commerce or the mails in any business the principal purpose of which is the collection of any debts" (the "principal purpose" definition); or (2) "who regularly collects or attempts to collect, directly or indirectly, debts owed or due or asserted to be owed or due another" (the "regularly collects for another," or "regularly collects," definition).¹ § 1692a(6). Specifically excluded from the definition’s reach are, in relevant part, a creditor’s officers and employees collecting debts for the creditor, a company collecting debts only for its non-debt-collector sister company, an entity collecting a debt it originated, and one collecting a debt it obtained that was not in default at the time of purchase. § 1692a(6)(A), (B), (F).

"Creditors—as opposed to ‘debt collectors’—generally are not subject to the [Act]." Pollice , 225 F.3d at 403. A "creditor" is any person: (1) "who offers or extends credit creating a debt[;] or" (2) "to whom a debt is owed." § 1692a(4). Excluded is "any person to the extent that he receives an assignment or transfer of a debt in default solely for the purpose of facilitating collection of such debt for another." Id. Notably, the Act, by its terms, contemplates that an entity may be both a debt collector and a creditor, stating that "debt collector" also includes "any creditor who, in the process of collecting his own debts, uses any name other than his own which would indicate that a third person is collecting or attempting to collect such debts." § 1692a(6).

The landscape of debt collection has changed since the FDCPA’s enactment in 1977, and not all those who collect debt look like the classic "repo man." The Federal Trade Commission reported in 2009 that "[t]he most significant change in the debt collection business in recent years has been the advent and growth of debt buying." Federal Trade Commission, Collecting Consumer Debts: The Challenges of Change—A Workshop Report 13 (2009). No longer do creditors simply hire debt collectors to serve their named role; rather, with increased frequency creditors sell debt to purchasers, who may again resell the debt, hire outside debt collectors to undertake collection efforts, or attempt to collect on their own. See Federal Trade Commission, The Structure and Practices of the Debt Buying Industry 1 (2013). Since this shift, courts have had to find new ways to distinguish "debt collectors" from "creditors" to determine whether the FDCPA applies to a particular entity.

In Pollice we followed the "default" test to make that determination. Per that test, "an assignee of an obligation is not a ‘debt collector’ if the obligation is not in default at the time of the assignment; conversely, an assignee may be deemed a ‘debt collector’ if the obligation is already in default when it is assigned." 225 F.3d at 403. Applying the test to an entity alleged to be a "debt collector," we held that because "there [was] no dispute that the various claims assigned to [it] were in default prior to their assignment[,] ... [and] there [was] no question that the ‘principal purpose’ of [its] business [was] the ‘collection of any debts,’ " the entity was a debt collector. Id. at 404.

In Federal Trade Commission v. Check Investors, Inc. , 502 F.3d 159 (3d Cir. 2007), we applied Pollice to similarly situated entities whose principal business was the collection of debts. Id. at 172. The alleged debt collectors argued they were "creditors" because they collected debts owed to themselves as opposed to "debt collectors" who collect debts owed to another. Id. Because they owned the debt they collected, they claimed they were not subject to the Act. Id. We noted in a dictum that the entities "appear[ed] at first blush to satisfy the statutory definition of a creditor," yet, "as to a specific debt, one cannot be both a ‘creditor’ and a ‘debt collector,’ as defined in the [Act], because those terms are mutually exclusive." Id. at 173.

We again followed the "default" test to determine whether the entity was a creditor or instead a debt collector, but pointed out that "focusing on the status of the debt when it was acquired overlooks ... that the person engaging in the collection activity may actually be owed the debt and is, therefore, at least nominally a creditor." Id. We justified our use of the "default" test by reasoning that "Congress ... unambiguously directed our focus to the time the debt was acquired in determining whether one is acting as a creditor or debt collector under the [Act]." Id. We noted that the Act’s legislative history explained the term "debt collector" as "intended to cover all third persons who regularly collect debts," id. , because independent debt collectors, unlike creditors, are not "restrained by the desire to protect their good will when collecting past due accounts." Id. (quoting S. Rep. No. 95–382, at 2, 1977 U.S.C.C.A.N. 1695, 1696). Instead, they likely will have "no future contact with the consumer and often are unconcerned with the consumer’s opinion of them." Id.

The Supreme Court, in Henson v. Santander Consumer USA Inc. , ––– U.S. ––––, 137 S.Ct. 1718, 198 L.Ed.2d 177 (2017), has recently repealed the "default" test we followed. Debtors claimed that Santander Bank, which had purchased their loans already in default and attempted to collect on them, met the second definition of "debt collector," i.e. , one who "regularly collects or attempts to collect ... debts owed or due ... another." Id. at 1721 (quoting § 1692a(6) ). They asserted as well that the Bank met the "principal purpose" definition, but the Court did not review that claim because it was not litigated in the District Court. Id.

The Supreme Court began "with a careful examination of the statutory text," in particular the definition’s limitation to debts "owed ... another." Id. It reasoned that "by its plain terms this language seems to focus our attention on third party collection agents working for a debt owner—not on a debt owner seeking to collect debts for itself." Id. This language does not suggest that "whether the owner originated the debt or came by it only through later purchase" determines if it is a debt collector. Id. "All that matters is whether the target of the lawsuit regularly seeks to collect debts for its own account or does so for ‘another.’ " Id. Hence the Bank, which collected debts for its own account, did not meet the "regularly collects for another" definition. Id. at 1721–22.

The debtors in Henson further argued that the "default" test ought to apply because the statute excludes from the definition of "debt collector" those who obtain debts before default, and therefore those who obtain debts after default must fit the definition. Id. at 1724 (citing § 1692a(6)(F)(iii) ). The Court held that argument untenable because "it doesn’t necessarily follow that the [‘regularly collects’] definition [of ‘debt collector’] must include anyone who regularly collects debts acquired after default;" to meet that definition, those debts must be "owed another ." Id. (emphasis in original).

The Court also addressed the suggestion that everyone who attempts to collect debt is either a "debt collector" or a "creditor" with respect to a particular debt, but cannot be both. Id. "[S]potting (without granting) th[at] premise," it stated that a company such as the Bank, which collects on debt it purchased for its own account, "would...