You May Be Personally Liable Under the FDCPA

The Fair Debt Collection Practices Act was enacted to deter abusive practices by third-party debt collectors. Violation can result in civil liability or enforcement action by the Federal Trade Commission. Damages can amount to hundreds of thousands of dollars.

In order to prevail on an FDCPA claim, a plaintiff must establish that the defendant is a debt collector and has engaged in one of the practices prohibited by the statute. Lack of clarification about who fits within the definition of a “debt collector” is a lingering issue. The FDCPA defines a debt collector as any person who uses “interstate commerce or the mails in any business, the principal purpose of which is the collection of any debts” that are owed to another.

However, the law excludes various individuals and entities, including officers or employees of a creditor seeking to collect debts on behalf of the creditor.

The Seventh Circuit has a narrow definition of a debt collector and has rejected attempts to hold owners, officers and employees of debt collectors personally liable.

However, most courts have reached contrary conclusions. The Sixth Circuit and district courts in the First, Second, Third, Ninth, and Tenth Circuits have held that owners, officers and employees of a debt collector can be personally liable for the FDCPA violations of their companies.

The author opines that ambiguities in the FDCPA’s language have resulted in unforeseen consequences, and that it’s important that the courts provide some clarification.