BRIDGES v. OCWEN | 6th Circuit Court of Appeals “as to a specific debt, one cannot be both a ‘creditor’ and a ‘debt collector,’ as defined in the FDCPA"

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BRIDGES v. OCWEN | 6th Circuit Court of Appeals “as to a specific debt, one cannot be both a ‘creditor’ and a ‘debt collector,’ as defined in the FDCPA”

BRIDGES v. OCWEN | 6th Circuit Court of Appeals “as to a specific debt, one cannot be both a ‘creditor’ and a ‘debt collector,’ as defined in the FDCPA”

RECOMMENDED FOR FULL-TEXT PUBLICATION
Pursuant to Sixth Circuit Rule 206
File Name: 12a0112p.06

UNITED STATES COURT OF APPEALS
FOR THE SIXTH CIRCUIT
_________________
LISA BRIDGE;WILLIAM W. BRIDGE, III,
Plaintiffs-Appellants,

v.

OCWEN FEDERAL BANK, FSB; OCWEN
FINANCIAL CORPORATION; OCWEN LOAN
SERVICING, LLC; AAMES CAPITAL
CORPORATION; FIRSTAR BANK, nka US
BANCORP; OCWEN FEDERAL LOAN
SERVICING COMPANY; DEUTSCHE BANK
NATIONAL TRUST CO., fka BANKERS TRUST
COMPANY OF CALIFORNIA,
Defendants-Appellees.

No. 09-4220

Appeal from the United States District Court
for the Northern District of Ohio at Cleveland.
No. 07-02739—David D. Dowd, Jr., District Judge.

Decided and Filed: April 30, 2012

Before: CLAY and STRANCH, Circuit Judges; BARRETT, District Judge.*
_________________

EXCERPT:

III. ANALYSIS
A. Coverage Under the Fair Debt Collection Practices Act
“If [the Fair Debt Collection Practices Act] is not enacted, Congress will then be
classifying as ‘deadbeats’ those individuals who through no fault or action of their own
are being harassed, hounded, threatened and intimidated by debt collectors.” H.R. Rep.
No. 131, 95th Cong. 1st Sess. 9 (1977). Congress did enact the FDCPA, however,
effectuating its intention to prohibit precisely this kind of misclassification and
harassment. We conclude that the district court’s judgment must be vacated because the
Bridges have sufficiently alleged that the Defendants are debt collectors within the
coverage of the FDCPA.

Under the FDCPA, a “debt collector” is defined as:
any person who uses any instrumentality of interstate commerce or the
mails in any business the principal purpose of which is the collection of
any debts, or who regularly collects or attempts to collect, directly or
indirectly, debts owed or due or asserted to be owed or due another.
Notwithstanding the exclusion provided by clause (F) of the last sentence
of this paragraph, the term includes any creditor who, in the process of
collecting his own debts, uses any name other than his own which would
indicate that a third person is collecting or attempting to collect such
debts. . . . The term does not include —
. . .
(F) any person collecting or attempting to collect any debt owed or due
or asserted to be owed or due another to the extent such activity (i) is
incidental to a bona fide fiduciary obligation or a bona fide escrow
arrangement; . . . [or] (iii) concerns a debt which was not in default at the
time it was obtained by such person . . . .

15 U.S.C. § 1692a(6).

We note, as other circuits have, that “as to a specific debt, one cannot be both a
‘creditor’ and a ‘debt collector,’ as defined in the FDCPA, because those terms are
mutually exclusive.” FTC v. Check Investors, Inc., 502 F.3d 159, 173 (3d Cir. 2007)
(citing Schlosser v. Fairbanks Capital Corp., 323 F.3d 534, 536 (7th Cir. 2003)); cf.
Montgomery v. Huntington Bank, 346 F.3d 693, 698 (6th Cir. 2003) (holding the
definition of debt collector “does not include the consumer’s creditors”). If an entity
which acquires a debt and seeks to collect it cannot be both a creditor and a debt
collector, can it be neither? We answer no. To allow such an entity to define itself out
of either category would mean that the intended protection of the FDCPA is unavailable.
Both the statutory language and legislative history of the FDCPA establish that such an
entity is either a creditor or a debt collector and its collection activities are covered under
the FDCPA accordingly.

The distinction between a creditor and a debt collector lies precisely in the
language of § 1692a(6)(F)(iii). For an entity that did not originate the debt in question
but acquired it and attempts to collect on it, that entity is either a creditor or a debt
collector depending on the default status of the debt at the time it was acquired.3 The
same is true of a loan servicer, which can either stand in the shoes of a creditor or
become a debt collector, depending on whether the debt was assigned for servicing
before the default or alleged default occurred. Wadlington v. Credit Acceptance Corp.,
76 F.3d 103, 106-8 (6th Cir. 1996); see also Perry v. Stewart Title Co., 756 F.2d 1197,
1208 (5th Cir. 1985). This interpretation of the Act is supported by Congress’s intent
in passing it.

This bill also protects people who do not owe money at all. In the
collector’s zeal, collection efforts are often aimed at the wrong person
either because of mistaken identity or mistaken facts. This bill will make
collectors behave responsibly towards people with whom they deal.

H.R. Rep. No. 131, at 8 (emphasis added); see also S. Rep. 95-382, 95th Cong. 1st
Session 4, reprinted in 1977 U.S.C.C.A.N. 1695, 1698 (1977) (“[T]he committee does
not intend the definition [of debt collector] to cover . . . mortgage service companies and
others who service outstanding debts for others, so long as the debts were not in default
when taken for servicing[.]”).

Thus, we do not accept Defendants’ argument that, even if they are not creditors
under the Act, neither are they debt collectors. It would thwart the purpose of the Act
to find that a non-originating debt holder is neither a creditor nor a debt collector based
on that defendant’s adoption of contradictory factual positions. Defendants may not so
easily define themselves out of FDCPA coverage. Echoing the Third Circuit’s
sentiment, “[a]lthough the argument is rather clever, it is wrong. It would elevate form
over substance and weave a technical loophole into the fabric of the FDCPA big enough
to devour all of the protections Congress intended in enacting the legislation.” Check
Investors, 502 F.3d at 172-73.4

The same is true of a creditor who uses any name other than his own which
would indicate that a third person is attempting to collect the debt. See 15 U.S.C.
§ 1692a(6) (“Notwithstanding the exclusion provided in clause (F) of the last sentence
of this paragraph, the term [debt collector] includes any creditor who, in the process of
collecting his own debts, uses any name other than his own which would indicate that
a third person is collecting or attempting to collect such debts.”). No such creditor may
escape liability by alleging that it is neither a creditor nor a debt collector and thus not
subject to the FDCPA.

[…]

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