When Is an Attorney a Debt Collector? 10th Cir. Adopts New Test
Abby Shadakofsky, d/b/a Personal Collection Services ("Shadakofsky"), hired Cheryl Wadas to represent her in a debt collection action against George James. After many procedural mishaps, the parties ended up in federal court with James claiming that Wadas, as Shadakofsky's agent, violated the Fair Debt Collection Practices Act ("FDCPA").
The question before the court was whether Wadas regularly engaged in the practice of debt collection, to be considered a "debt collector" for purposes of the FDCPA. The Tenth Circuit found that she was not.
New Test for Determining 'Regularity' in Debt Collection
The court noted that the language, as well as the precedent, was not clear. Amidst this conflict, the Tenth Circuit turned to another circuit -- the Second Circuit -- for clarity.
The Second Circuit declared that though these types of cases must be looked at on a case-by-case basis, there were several factors relevant to determining whether someone regularly engaged in debt collecting, namely:
- The number of debt collecting communications,
- The frequency of communications, and
- Whether there was special department or personnel devoted to debt collection.
Here, Wadas showed that there were no debt collection communications, her debt collection case load was very small (19 cases in all -- 11 of which she represented the debtor), she had only one debt-collector client (Shadakofsky), and her income from representing Shadakofsky was very small. For these reasons, the court found that Wadas was not "regularly engaged in debt collection."
This decision has practical implications for attorneys practicing in the Tenth Circuit. Though still heavily based on the facts of each case, the Tenth Circuit now has adopted a clear test to determine whether an attorney can be considered a debt collector for purposes of the FDCPA.
If you engage in any sort of debt collection activity, it would be wise to review your actions against the new standard to see if you may be potentially called a debt collector. If there is any chance you can be considered a debt collector, be sure to act within the boundaries of the FDCPA.
- FDCPA No Written Requirement for Debt Validity Dispute (FindLaw's U.S. Second Circuit Blog)
- Fifth Circuit Rules for Debt Collector in FDCPA Appeal (FindLaw's U.S. Fifth Circuit Blog)
- 3rd Circuit Says Debt Collection Attorney Violated FDCPA (FindLaw's U.S. Third Circuit Blog)
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