ACA International’s Industry Advancement Fund provided amicus support to member agency’s Petition for Writ of Certiorari imploring the Supreme Court to review the Third Circuit’s decision in Barbato v. Greystone Alliance, LLC, et al. Editor’s note: This content is available to members only.
8/19/2019 15:00
If profiting from your business is your “principal purpose,” you may be a debt collector. Crystal clear, right? The U.S. Third Circuit thinks so. Earlier this year, the Third Circuit decided that even though an entity that refers its debt to a third party for collection, it is nevertheless a debt collector because it profits from the collection of the debts it purchased, thereby satisfying the “principal purpose” prong of the Fair Debt Collection Practices Act’s definition for a debt collector. The court reasoned, “an entity that otherwise meets the ‘principal purpose’ definition cannot avoid the dictates of the FDCPA merely by hiring a third party to do its collecting.”
The Third Circuit’s decision in Barbato v. Greystone Alliance, LLC, et al. comes only a couple years after the U.S. Supreme Court’s decision in Henson wherein it overruled earlier Third Circuit precedent with respect to the “regularly collects” portion of the “debt collector” definition. The Supreme Court held that an entity that holds debts for its own account does not qualify as a “debt collector” under the “regularly collects” prong of the statutory definition. The Supreme Court, however, declined to consider whether a passive debt buyer can qualify as a debt collector pursuant to the FDCPA’s “principal purpose” definition.
The Supreme Court’s decision in Henson left a loophole for consumer attorneys to litigate whether the statutory definition encompasses a debt buyer because it is engaged in a business for which the “principal purpose” is the collection of debt. Thus, opportunistic consumer attorneys could take a second bite of the apple and swoop back in the very same entities that the Supreme Court previously excluded from the FDCPA’s debt collector definition. The Third Circuit acknowledged that Henson had abrogated its earlier precedent with respect to the “regularly collects” portion of the “debt collector” definition. But it held that an entity that purchases debts and refers them to a third party for collection satisfies the “principal purpose” portion of the definition simply because it profits from the collection of debts.
On Aug. 19, 2019, serving as amicus curiae (“friend of the court”), ACA International filed a brief supporting its member agency, Crown Asset Management, LLC, in seeking a reversal of the Third Circuit’s decision. In its brief, ACA urges the Supreme Court to review the Third Circuit’s decision because it will have far-reaching effects on the expensive and onerous statute, as well as potential liability to which passive debt purchasers will be exposed. Moreover, the Third Circuit’s decision in Barbato effectively takes the teeth out of the Supreme Court’s decision in Henson—a unanimous decision. Thus, ACA requested that the Supreme Court clarify that neither the “regularly collects” nor “principal purpose” prongs of the FDCPA’s definition of “debt collector” include passive debt purchasers—who neither collect debt nor interact with consumers.
ACA will continue to update its members on this case given its industry-wide significance.
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