Appeals Court Rules Law Firm Not a ‘Debt Collector’ in FDCPA Suit

The Court of Appeals for the Fifth Circuit has affirmed a lower court’s ruling that a law firm is not a “debt collector” as defined by the Fair Debt Collection Practices Act because it was not “regularly” engaged in debt collection.

A copy of the ruling in Reyes v. Steeg Law and Margaret Glass can be accessed by clicking here.

The plaintiff filed a class-action lawsuit against the defendants, arguing violations of the FDCPA when the defendants sent letters demanding payment in seven days, instead of the 30 prescribed by the FDCPA, and for continuing to communicate with the plaintiff even after learning she was represented by an attorney.

The defendant argued it did not meet the statutory definition of a debt collector under the FDCPA.

A judge initially certified a class of plaintiffs, condominium owners who received collection letters from the defendant, but following the successful dismissal of some members of the class and some defendants reaching a settlement with Reyes, the class was subsequently decertified and a summary judgment was entered in favor of the defendant. The plaintiff appealed the decision.

While admitting that the Fifth Circuit had not yet developed a “bright-line rule” for determining how much work qualifies a law firm as a debt collector under the FDCPA, the Appeals Court looked at the amount of work conducted by the defendant to determine whether the District Court erred in granting the summary judgment.

The defendant sent 36 letters related to 34 liens in the year prior to the plaintiff filing her complaint. About 1.3% of the firm’s overall revenue was “attributable to fees accrued through the representation of condominium associations in perfecting and enforcing liens and recovering delinquent balances,” and representing condominium association clients accounted for 1.5% of the firm’s total billable hours.

“Neither this court’s precedent nor common sense compel a determination that these circumstances constitute regularly engaging in debt collection activity,” the Appeals Court wrote in its ruling. “The district court did not err in holding that Steeg Law is not a debt collector as defined by the” FDCPA.

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