Charles Tatlebaum, left, and Brittany Hynes, right.
On March 9, the U.S. Court of Appeals for the Ninth Circuit issued a split decision that considered whether a business that purchased and profited from consumer debts but outsourced direct collection activities is characterized as a “debt collector” subject to the Fair Debt Collection Practices Act (FDCPA). Joining the Third Circuit, the court held in McAdory v. M.N.S. & Associaties, that an entity that otherwise satisfies the “principal purpose” definition of debt collector pursuant to 15 U.S.C. Section 1692(a)(6) may not escape responsibility under the FDCPA simply by retaining a third party to carry out its debt collection activities.
This ruling is significant for not only debt purchasers, but also for secured lenders that take over accounts receivable from a defaulting borrower and then outsource the collection efforts.
