An emerging body of case law is expanding the way the courts treat illegal or unethical actions by a debt collector on behalf of a creditor. Landlords who enlist the services of debt collectors or debt collection services need to be aware of these changes in order to avoid potential litigation down the line.
In the past, creditors like landlords would never be held liable in lawsuits against the debt collector as they were not, themselves, considered to be debt collectors under the Fair Debt Collection Practices Act (FDCPA). Instead, the debt collector would be held solely responsible for any actions that violate the FDCPA.
Two recent cases have altered these definitions and are exposing creditors to future liability by considering creditors to be vicariously liable for the actions of a third-party debt collector’s actions simply because of the existence of an agreement between the two parties. These agreements can include a servicing agreement, a collection agreement, or even an engagement agreement that enlists the debt collector to carry out the debt collection on behalf of the creditor.
In the case of McAdory v. M.N.S. & Associates, LLC, No. 18-35923 (9th Cir. 2020), the Plaintiff claimed the debt collector violated multiple aspects of the FDCPA in collecting a debt. To summarize the details of the case, a debt collector (DNF) purchased an original debt from Kay Jewelers. DNF then outsourced the debt by selling it to a separate collector, M.N.S.
The court found the M.N.S. subsequently violated the FDCPA, but, in doing so, the panel upheld the allegation that DNF was responsible for the actions of M.N.S. as DNF did not need to directly interact with the debtor in order to qualify as a debt collector under U.S. Code § 1692a. This is because the collection of the debt is the “principal purpose” of the business.
While DNF claimed they did not have traditional legal “control” over M.N.F. in this case, the court ruled that the existence of an agreement between the two parties implied the presence of control.
This is a significant shift in the application of the FDCPA and multiple subsequent cases have followed this precedent in order to litigate cases against creditors who outsource debt collection. If you are a landlord who uses third-party debt collection services or sells debt to debt collection agencies, you must be aware of their practices in order to protect yourself. Work with debt collectors you trust and don’t simply rely on them to follow FDCPA. Additionally, you should analyze your agreement with the debt collector to ensure that the debt collector will indemnify and defend you for liability associated with the debt collector’s actions. You may also want to consider whether a modification of your insurance policy is necessary to protect you from these types of lawsuits.
Being direct and transparent about your desire to follow the law properly could prevent you from being held vicariously liable for the improper actions of the third-party debt collector. If you find yourself in the middle of litigation regarding debt collection practices, the team at Atlas Law is here to help. Contact your Florida landlord’s advocate today.