Businesses Can Collect On Their Own Debts Without Being Subject To FDCPA

                              Photo: http://www.nationaldebtrelief.com/fairdebtcollectionpractices/

Bob Gaumont co-authored this post.
When litigating cases under the Fair Debt Collections Practices Act (“FDCPA”) one of the more difficult issues is defining exactly what a “debt collector” is (and what it is not).   Ramsay v. Sawyer Property Management of Maryland, LLC and Jeffrey Tapper, 2013 WL 2405309 (D. Md. 2013) is another case from the United Stated District Court of Maryland which analyzes the definition of a “debt collector.”  In Ramsay the Court applied the now well-settled rule that businesses can collect on their own debts without being subject to the FDCPA.

Plaintiff Kharyn Ramsay (“Plaintiff”), a tenant at one of Sawyer Property’s (“Sawyer”) rental properties, defaulted on her rent payments.  Sawyer hired attorney and licensed collection agent Jeffrey Tapper (“Tapper”), to collect the delinquent rent from Plaintiff and other tenants in default.  Plaintiff brought this class action lawsuit against Sawyer and Tapper (collectively, the “Defendants”) for their actions taken to collect these debts.

Plaintiff Ramsay’s claims under the FDCPA were dismissed with prejudice where Tapper, acting on behalf of his client, Sawyer, stamped plaintiff’s DC/CV 32 (Order of Court Directing Defendant to Appear for Examination in Aid of Enforcement of Judgment) and DC/CV 33 (Show Cause Order for Contempt) court orders with the following:

THIS COMMUNICATION IS FROM A DEBT COLLECTOR.  IT IS AN ATTEMPT TO COLLECT A DEBT AND ANY INFORMATION OBTAINED WILL BE USED FOR THAT PURPOSE. (hereafter the “Disclosure Stamp”)

The Court found that Plaintiff’s FDCPA claim against Sawyer failed because Plaintiff lacked a plausible claim that Sawyer is a debt collector under the FDCPA where Sawyer is a rental and property management company for Maryland landlords, collecting on a debt in its own name.  The Court affirmed the holding in Kennedy v. Lendmark Fin. Servs., RDB-10-02667, 2011 WL 4351534, at *3 (D. Md. Sept. 15, 2011) that “creditors whose primary business is not debt collection may not be held liable under the FDCPA.”  Such creditors are also not required to be licensed as a collection agency.  See Fontell v. Haslett, 870 F. Supp. 2d 395, 409 (D. Md. 2012) (holding that a homeowner association was not required to have a collection agency license where “there [was] no question that the homeowner association was not acting as a collection agency when it took action to collect fees on its own behalf and under it own name”).

Moreover, the Court applied the rationale from Fontell to prevent the Plaintiff from holding a non-debt collector, Sawyer, vicariously liable for the acts of the debt collector it hired.  Fontell, 870 F. Supp. at 412.  Although a debt collector cannot hire an attorney to engage in illegal debt collection practices on its behalf to avoid liability under the FDCPA, this does not apply where the hiring party is not a debt collector itself.  In the latter circumstances, a debt collector is hired to perform collection services, not evade the FDCPA.

Tapper, the attorney and licensed collection agent hired by Sawyer, did meet the FDCPA’s definition of a debt collector.  However, analyzing the Disclosure Stamp under the “least sophisticated consumer” standard set forth by the Fourth Circuit for a claim of a FDCPA violation under 15 U.S.C. § 1692(e), which prohibits a debt collector from using “any false, deceptive, or misleading representation or means in connection with the collection of any debt,” the Court concluded that Plaintiff failed to assert a plausible claim that the Disclosure Stamp was false or misleading.  Nor did Defendants violate section 1692(f)’s prohibition on the use of “unfair or unconscionable means to collect or attempt to collect any debt.”

Finally, given that the Court dismissed the Plaintiff’s federal claim, it no longer had original jurisdiction over the case, and the Court declined to exercise its discretionary supplemental jurisdiction over Plaintiff’s state law claims under the Maryland Consumer Debt Collection Act and the Maryland Consumer Protection Act.

Read full opinion here:

 http://www.mdd.uscourts.gov/Opinions/Opinions/Ramsay%20v.%20Sawyer%20MEMO%20AND%20ORDER.pdf