In Plummer v. Atlantic Credit & Finance, Inc.,[1] the court upheld three general rules:
- Debt buyers are debt collectors.
- Buying and selling debts is considered debt collection activity covered under the FDCPA.
- Communications made to third-party collectors may also be actionable.
Basic facts:
- A consumer defaults on an HSBC card.
- Atlantic Credit & Finance, Inc. buys that debt and attempts collection.
- The consumer's attorney notifies Atlantic Credit of the disputed nature of debt.
- Atlantic Credit sells the debt to Velocity Investments, LLC notifying Velocity of the consumer's attorney's dispute.
- Velocity places debt with Capital Management Services, which sends letter to consumer.
Velocity moved to dismiss the class action using the following arguments:
- Its placement of the debt with Capital Management was not a "communication" under the FDCPA.
- It was not a "debt collector" because it did not directly attempt collection.
The court found plausible the plaintiffs' theories against Velocity:
- Velocity's failure to disclose disputed nature of debt to Capital Management is a material misrepresentation covered under the FDCPA. Whether negligent or intentional, debt buyers may not immunize themselves from liability by hiring another collector to do its dirty work.
- Velocity may be vicariously liable for the acts of Capital Management.