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Judge Rules Passive Debt Buyer Meets FDCPA’s ‘Primary Purpose’ Definition of Debt Collector

In a case that was first reported by Buckley Sandler, a federal judge in Pennsylvania has ruled that a debt buyer that purchased a portfolio which included accounts where the statute of limitations had expired does qualify as a “debt collector” under the Fair Debt Collection Practices Act and denied a motion from the buyer to dismiss the case.

The plaintiff received a collection letter from an agency that was hired by the debt buyer to collect on an unpaid account. The plaintiff alleged that the language in the letters violated the FDCPA because it conveyed that the debt was legally enforceable when, in fact, the statute of limitations had expired.

A copy of the ruling in the case of Darla Norman v. Allied Interstate and LVNV Funding can be accessed by clicking here.

The plaintiff received two letters from Allied Interstate attempting to collect a debt on behalf of LVNV. The debts were more than seven years old and had been purchased by LVNV from the original creditor or another debt buyer. The relevant portion of the collection letters included the following statements:

Our client [LVNV] is interested in resolving this Account and is willing to consider payment for less than the Amount Owed to satisfy your obligation. Although we are not obligated to accept any payment proposal, please telephone us to discuss potential settlement options.

To make a payment, please telephone us at 866-466-3142 or mail your payment . . . . [Y]our account will be debited on the day we receive your payment. Your check will not be returned.

Unless you notify us within 30 days after receiving this letter that you dispute the validity of this debt . . . we will assume that this debt is valid. If you notify us in writing within 30 days after receiving this letter that you dispute the validity of this debt, . . . we will obtain and mail to you a verification of the debt or a copy of a judgment. If you request of us in writing within 30 days after receiving this letter, we will provide you with the name and address of the original creditor, if different from the current creditor.

We look forward to receiving your payment.

LVNV attempted to argue that it did not meet the definition of debt collector under the FDCPA and therefore can not be accused of violating the act. Judge Gerald McHugh of the District Court for the Eastern District of Pennsylvania ultimately disagreed. While acknowledging that the Supreme Court in Henson v. Santander ruled that debt buyers do not meet the definition of debt collectors under the FDCPA in certain circumstances, this case was not one of those circumstances. The argument made by the plaintiff in this case was that the LVNV’s principal purpose is to collect debts, which the Supreme Court did not rule on in Henson.

In reviewing LVNV’s website and the text of the collection letter — which said that Allied Interstate was collecting “on behalf of LVNV” — Judge McHugh ruled that LVNV met the “primary purpose” definition of debt collector and denied the motion to dismiss.

Next, Judge McHugh ruled that the language in the letter would make it seem to the least sophisticated debtor that the debt was legally enforceable.

In fact, that the letters here did not include a payoff amount, but instead stated that Allied was “not obligated to accept any payment proposal,” arguably increasing the likelihood that a consumer could be misled as to the legal status of the debt. After all, Allied’s statement that it is “not obligated” to accept any proposal necessarily implies that Allied has some legal recourse if it and the consumer cannot agree on a “settlement.”

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