Judge Holds Debt Buyer Liable for Actions of Collector in Partially Granting Plaintiff’s MSJ in FDCPA Case

On remand from the Ninth Circuit Court of Appeals, a District Court judge in Oregon has partially granted a plaintiff’s motion for summary judgment, ruling that a debt buyer who places accounts with a debt collector can be held vicariously liable for the actions of the debt collector, because the debt buyer “bear[s] the burden” of monitoring the activities of the debt collector when collecting debts on the debt buyer’s behalf.

A copy of the ruling in the case of McAdory v. M.N.S. & Associates and DNF Associates can be accessed by clicking here.

The case is back at the District Court level after the Ninth Circuit Court of Appeals ruled last year that a company that purchases and profits from consumer debts meets the definition of “debt collector” under the Fair Debt Collection Practices Act, even if it does not directly interact with individuals and outsources the actual debt collection work to another company.

The plaintiff obtained a retail credit card and stopped making payments on the account. The debt was purchased by DNF Associates, which placed the account with a collection agency. The collection agency sent a letter to the plaintiff, which she did not respond to because she did not recognize DNF’s name. Four months later, the plaintiff received a voicemail from the collection agency and returned that call. During the call, the plaintiff spoke with a representative of M.N.S., who allegedly implied he was a lawyer and that the plaintiff was going to be sued if she did not make a payment on the debt. The plaintiff agreed to pay the debt during a subsequent phone call, but M.N.S. allegedly withdrew funds from the plaintiff’s account before the authorized payment date.

Even though the two defendants had a signed agreement that stipulated M.N.S. was an independent contractor, DNF “had a right to control MNS’s debt collection activities to a significant degree, the Court finds that DNF and MNS were in a principal-agent relationship,” ruled Judge Marco Hernandez of the District Court for the District of Oregon. The agreement between the two companies allowed DNF to audit the accounts it placed with M.N.S. at any time, and during one such audit, DNF noted that M.N.S.’s “collection efforts needed much improvement with regard to consumer compliance” and that guidelines were not being followed. The audit also revealed that DNF knew about the phone scripts that were being used by M.N.S. when collecting on its accounts. “By its acquiescence, DNF ‘impliedly authorized’ MNS’s use of the script ‘and thus is liable for any violations of law caused by the firm’s use of those practices,’ ” Judge Hernandez ruled.