OPINION AND ORDER
WILLIAM S. DUFFEY, JR., District Judge.
This matter is before the Court on Magistrate Judge E. Clayton Scofield's Report and Recommendation [32] ("R & R") recommending that Defendant Capital One Bank (USA), N.A.'s ("Defendant") Motion to Dismiss [16] be denied and that Plaintiff Keith Davidson ("Plaintiff") be given twenty days after the date of the Court's order to renew his motion for class certification. The Court will also consider Defendant's Motion for Hearing [36] ("Hearing Motion") regarding its Objection [35] to the R & R and its Motion for Leave to File Reply in Support of Objection [38] ("Motion for Leave"), and Plaintiff's Motion to Certify Class [41].
I. BACKGROUND
This case involves a matter of first impression in the circuit, and is decided against the following factual, procedural, and statutory backdrop.
On September 26, 2013, Defendant filed its Motion to Dismiss, asserting that it was not a "debt collector" subject to the provisions of the FDCPA, because it was undertaking to collect debt that was owed to it, and not debt "owed or due another."
On December 11, 2014, the Magistrate Judge issued his R & R, finding that Plaintiff had asserted sufficient facts to raise a plausible inference that Defendant was a "debt collector" as defined under the FDCPA. (R & R at 7).
On January 6, 2014, Defendant filed its Objection to the R & R and the Hearing Motion. On January 20, 2014, Plaintiff filed his Response [37] to Plaintiff's Objection to the R & R. On January 28, 2014, Defendant filed its Motion for Leave, and on January 31, 2014, Plaintiff filed his Response
II. DISCUSSION
A. Standard of Review
After conducting a careful and complete review of the findings and recommendations, a district judge may accept, reject, or modify a magistrate judge's report and recommendation. 28 U.S.C. § 636(b)(1)(C); Williams v. Wainwright, 681 F.2d 732, 732 (11th Cir.1982) (per curiam). A district judge "shall make a de novo determination of those portions of the report or specified proposed findings or recommendations to which objection is made." 28 U.S.C. § 636(b)(1)(C). In the absence of objections, a district judge reviews the magistrate judge's findings and recommendations for plain error. United States v. Slay, 714 F.2d 1093, 1095 (11th Cir.1983) (per curiam).
B. Analysis
The Magistrate Judge noted that the sole issue before him was whether Plaintiff had sufficiently alleged that Defendant was a "debt collector" under the FDCPA. (R & R at 7). Because Defendant objects to the Magistrate Judge's conclusion in the R & R that Defendant is a "debt collector," the Court reviews the Magistrate Judge's findings and recommendations de novo. See 28 U.S.C. § 636(b)(1)(C).
1. Debt Collector Defined By FDCPA
The FDCPA protects consumers from unfair, harassing, or deceptive debt collection practices by debt collectors. 15 U.S.C. § 1692e; Acosta v. Campbell, 309 Fed.Appx. 315, 320 (11th Cir.2009). The FDCPA defines the term "debt collector" as:
15 U.S.C. § 1692a(6) (emphasis added).
To qualify as a "debt collector" under the FDCPA, a person must fall within one of the two definitions of § 1692a(6). They must either be "a person who uses an instrumentality of interstate commerce or the mails in a business which has the principal purpose of collecting debts, or who regularly collects debts owed to another." Warren v. Countrywide Home Loans, Inc., 342 Fed.Appx. 458, 460 (11th Cir.2009) (emphasis added).
The second definition — the regular collection or attempt at collection of "debts owed or due or asserted to be owed or due another" — has an exception to it. Section 1692a(6)(F) specifically states: "[t]he term [`debt collector'] does not include — 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 ... concerns a debt which was not in default at the time it was obtained by such person...." 15 U.S.C. § 1692a(6)(F). Thus § 1692a(6)(F) excludes from debts "owed or due or asserted to be owed or due another" a debt that was "not in default at the time it was obtained by [a] person [who regularly collects debts.]" See id.
That is, the second prong, when read consistent with the exception, provides that a person who regularly collects debts, owed or due or asserted to be owed or due another person, is a "debt collector," if the debts being collected were in default when acquired.
The FDCPA also defines a "creditor" as:
15 U.S.C. § 1692a(4) (emphasis added).
2. Interpretation of Section 1692(a)(6)
Defendant's objection is to the Magistrate Judge's interpretation and application of the second prong of § 1692a(6). Plaintiff and the Magistrate Judge appear to interpret the § 1692a(6)(F) exception or the definition of creditor in § 1692a(4), or both, as creating a loophole that allows Defendant to avoid application of the FDCPA. Plaintiff and the Magistrate Judge believe this "loophole" violates the intent of the statute by excluding a party they contend is intended to be covered. They argue that reading the FDCPA definitions as a whole requires the statute to be applied to Defendant here. They rely on cases, including those from two other circuits, to support their FDCPA interpretation. A careful reading of the statute and these other cases shows the argument upon which Plaintiff and the Magistrate Judge relies does not support the interpretation or application of the FDCPA that they urge. The only issue here is whether Defendant "regularly collects or attempts to collect, directly or indirectly, debts owed or due or asserted to be owed or due another." See 15 U.S.C. § 1692a(6).
The process for reviewing the requirements of a statute are summarized by our Circuit in United States v. DBB, Inc., 180 F.3d 1277 (11th Cir.1999):
DBB, 180 F.3d at 1281 (internal citations omitted); see also Burlison v. McDonald's Corp., 455 F.3d 1242, 1245-47 (11th Cir. 2006).
The statutory language in § 1692a(6) is unambiguous. Neither party claims otherwise. A "debt collector," defined in the disjunctive, is any person (1) "in any business the principal purpose of which is the collection of any debts" or (2) "who regularly collects or attempts to collect, directly or indirectly, debts owed or due or asserted to be owed or due another." See 15 U.S.C. § 1692a(6) (emphasis added). It is undisputed that the principal purpose of Defendant's business is not debt collection, see R & R at 7; Res. to Mot. to Dismiss at 5, and that the first prong of the disjunctive definition does not apply. The only issue is whether the second prong of § 1692a(6) includes Defendant as a "debt collector." The Court finds it does not. Defendant does not regularly attempt to collect debts owed or due another.
To interpret § 1692a(6) to require that the debt in question be owed or due another to satisfy the second prong of § 1692a(6) does not preclude a person or entity who is owed a debt from being a "debt collector" under the first prong of § 1692a(6), and thus does not erode the protections the FDCPA grants to consumers. Although the Court does not rely on legislative history to interpret the plain language of the FDCPA, it notes that its interpretation comports with congressional intent and Congress's concern about independent debt collectors, which Defendant is not.
3. The Magistrate Judge's Decision
In considering the Magistrate Judge's R & R and the contentions of the parties, the Court considers the Magistrate Judge's different conclusion that the only requirement to successfully allege that a defendant is a "debt collector" pursuant to the second prong of § 1692a(6) is to allege that the defendant acquired debt that was in default when acquired. (R & R at 10-11). The Court specifically reviews the authorities upon which the Magistrate Judge relied to reach the conclusion he reached.
The Magistrate Judge correctly found that liability under the FDCPA attaches only to debt collectors. See Hasbun v. Recontrust Co., N.A., 508 Fed.Appx. 941, 942 (11th Cir.2013); Goia v. CitiFinancial Auto, 1:10-cv-2405, 2012 WL 113647, at *11 (N.D.Ga. Jan. 13, 2012) ("However, the FDCPA, by its terms, only applies to `debt collectors' and defines them as those who regularly enforce the debts of another or whose principal business purpose is the enforcement of security interests.").
The Magistrate Judge then noted that creditors generally are not liable under the FDCPA when collecting amounts owed to them in their capacity as creditors. The Magistrate Judge noted further that it is possible to be both a "creditor" and a "debt collector" subject to the FDCPA. R & R at 7; see also Bates v. Novastar/Nationstar Mortgage LLC, 1:08-cv-1443, 2008 WL 2622810, at *6 (N.D.Ga. June 24, 2008) ("FDCPA definitions for creditor and debt collector are separate but overlap, allowing for the possibility that a creditor could also be a `debt collector' subject to the statute, if the debt was already in default at the time the creditor acquired it."); Kuria v. Palisades Acquisition XVI, LLC, 752 F.Supp.2d 1293, 1301 (N.D.Ga.2010) ("a third party who buys debt already in default may be liable for FDCPA violations as a `debt collector' despite having `creditor' status.") (citing Bates); but see Frazer v. IPM Corp. of Brevard, Inc., 767 F.Supp.2d 1369, 1379-80 (N.D.Ga.2011) ("Thus, [t]he FDCPA applies only to `debt collectors' seeking satisfaction of `debts' from `consumers'; it does not apply to `creditors.'") (citing McKinney
A determination that a person is a "creditor" for FDCPA purposes does not itself foreclose that the creditor can also meet the definition of "debt collector" for the purpose of coverage under § 1692a(6) of the FDCPA. "A plaintiff's ability to properly classify a defendant as a debt collector is critical because the `FDCPA applies only to `debt collectors' whose conduct involves the collection [of] a debt'" Underhill v. Bank of Am., N.A., 1:13-c.v-2614, 2014 WL 587868, at *11 (N.D.Ga. Feb. 14, 2014) (citations omitted). The question in a case like this is always whether the activities alleged of the person engaging in them qualifies the person as a "debt collector" for FDCPA purposes. That the person was at another time and in another way acting as a creditor does not preclude the requirement to evaluate if the person is a "debt collector" in other activities.
The Magistrate Judge interpreted § 1692a(6)'s second prong as including any person who acquired debt that was in default when acquired. The Magistrate Judge determined that collection activity on the debt in this case-because it appears to have been in default when acquired-was covered by the FDCPA. (R & R at 10-11).
Although the parties do not dispute that the debt at issue was in default when acquired, this fact does not necessarily lead to the conclusion that Defendant is a debt collector. It only supports that the exemption for those who seek to collect a debt that was not in default when acquired does not apply.
The Magistrate Judge, to support the interpretation offered, relies on several categories of cases that do not apply here. The first category includes cases under which the defendant's principal business purpose was the collection of debts and, accordingly, the defendant qualified as a "debt collector" under the first prong of § 1692a(6). Kuria v. Palisades Acquisition XVI, LLC falls into the first category of cases the Magistrate Judge cited to support his conclusions. Kuria, and cases like it, do not apply here. In Kuria, the Court determined that the defendant, which was "engaged in the business of buying and collecting debts that are in default," qualified as a debt collector despite attempting to collect debts owed to it and thus also qualifying as a creditor. See Kuria, 752 F.Supp.2d at 1296, 1301. The Kuria Court noted that an entity, even if it meets the definition of a "creditor," may be treated as a "debt collector" under the FDCPA provided the entity is in the business of collecting debts. That is, an entity that purchases a debt already in default at the time of purchase for the purpose of collecting it is a debt collector so long as the entity's business is debt collection. Id. at 1301.
Kuria does not, however, stand for the proposition that an entity is automatically a "debt collector" based solely upon the debt being in default when acquired. The Kuria decision begins with a factual finding that the defendant "is engaged in the business of buying and collecting debts that are in default." Id. at 1296. This fact was undisputed by the plaintiff. Id. at 1301. While not explicitly stated in the opinion, likely because it was self-evident, the defendant in Kuria thus qualified as a "debt collector" under the first prong of § 1692a(6), because it was an entity whose principal purpose is the collection of debts. Kuria stands for the unremarkable proposition that an entity that qualifies as a
The second category of cases focus on whether debt was or was not in default when acquired. When debts are not in default when acquired, § 1692a(6)(F) plainly excludes the acquirer from the definition of "debt collector." It thus is not necessary to evaluate whether the entity qualifies as a debt collector under the second prong of § 1692a(6). See De Dios v. Int'l Realty & Investments, 641 F.3d 1071, 1074 (9th Cir.2011) (Concluding that the debt was not in default when acquired and noting that "[r]ather than deciding whether a debt servicer falls under the primary definition of a debt collector, we follow the simpler path."); cf. Bradford v. HSBC Mortgage Corp., 829 F.Supp.2d 340, 350 n. 21 (E.D.Va.2011) ("As a matter of logic and statutory structure, acquiring a debt that was in default at the time simply makes a defendant ineligible for this particular exclusion from the definition of `debt collector;' it does not follow from this ineligibility that the defendant satisfies the definition of `debt collector' that § 1692a(6) puts forth or cannot be considered a `creditor' pursuant to § 1692a(4)").
The Magistrate Judge's reliance on the Court's prior decision in Bates falls into this second category of cases. In Bates, the plaintiff failed to prove that the debt was in default when it was acquired by the defendant from the original lender. Bates, 2008 WL 2622810, at *6. The Bates Court set out the definition of "debt collector" under § 1692a(6), but then referenced the exclusion in § 1692a(6)(F), excluding from the term "debt collector" those seeking to collect debts that are not in default when acquired. Id. The Court in Bates was entitled to conclude that the defendant was not a debt collector by determining that it was not primarily in the business of collecting defaulted debts (first prong of § 1692a(6)) and that it did not regularly attempt to collect debts owed to another (second prong of § 1692a(6)). The Bates Court chose instead to apply the § 1692a(6)(F) exception, avoiding the need to interpret or apply the § 1692a(6) prongs. In the case here, Defendant concedes that the debt was in default when it was acquired and the § 1692a(6)(F) exception, by its terms, does not apply. Unlike in Bates, the Court here is required to interpret § 1692a(6)'s prongs to determine if Defendant is a debt collector. Bates does not assist in that evaluation.
Schlosser, 323 F.3d at 536.
In Check Investors, the Third Circuit relied upon the reasoning in Schlosser. The court in Check Investors, like the court in Schlosser, rejected an argument that the defendant owned the debt and thus was a "creditor," and thus not a "debt collector". Check Investors, 502 F.3d at 173-74.
The court in Check Investors noted:
Id. at 172-73.
Schlosser and Check Investors do not apply here. A careful reading of Schlosser and Check Investors shows that both of these cases involved entities whose principal business was the acquisition of defaulted debt for collection purposes. See Schlosser, 323 F.3d at 535 ("[Defendant] acquired 12,800 allegedly delinquent high-interest mortgages from ContiMortgage, including one owed by the plaintiffs");
The Seventh Circuit and the Third Circuit both have held that one cannot be both a "creditor" and a "debt collector" under the FDCPA. Constrained by this precedent, the plain language of the FDCPA would only apply to those who do not own the debts in question, as those who own the debts are "creditors," and, thus, cannot be "debt collectors."
Our Court has held that one can be both a "creditor" and a "debt collector," and is not so constrained. See Kuria, 752 F.Supp.2d at 1301; Bates, 2008 WL 2622810, at *6. An obvious example of an entity being both a creditor and a debt collector is where an entity's principal business is acquiring defaulted debt for collection purposes. The ownership of the defaulted debt would technically render the entity a "creditor"-an entity "to whom a debt is owed." See 15 U.S.C. § 1692a(4). The entity simultaneously would be a "debt collector" under the first prong of § 1629a(6), because it is in a "business the principal purpose of which is the collection of any debts." See 15 U.S.C. § 1692a(6).
The conclusion that one can be both a creditor and a debt collector — if one is a debt collector under the first prong of § 1692a(6) — addresses the Check Investors concern with the possibility of creating a FDCPA loophole. Those entities whose principal purpose is the collection of defaulted debts would be debt collectors regardless of their ownership of the defaulted debt. Those entities whose primary business is not the collection of debts would only be debt collectors when they regularly collected or attempted to collect debts "owed or due another." See 15 U.S.C. § 1692a(6). The reasoning in the Schlosser or Check Investors cases is not controlling and is not persuasive.
Defendant urges the Court to follow the Ninth Circuit's reasoning in the only circuit to address the acquisition of debt by an acquirer not in the business of collecting debt and who is not collecting debt for another — Schlegel v. Wells Fargo Bank, NA, 720 F.3d 1204 (9th Cir.2013). In Schlegel, the Ninth Circuit concluded that Wells Fargo, which acquired plaintiff's loan after it was in default, was not a "debt collector" under the FDCPA. Schlegel, 720 F.3d at 1209-10. The Schlegel Court, after noting that the complaint failed to allege that Wells Fargo's principal purpose was debt collection, rejected plaintiff's argument that Wells Fargo satisfied the second prong of § 1692a(6), finding that Wells Fargo was attempting to collect a debt owed to it, and not due or owed to another. Id. at 1208-10. The Schlegel Court relied upon the clear statutory language in the second prong of § 1692a(6) that an entity that was seeking to collect a debt it owned was not a "debt collector." Id. at 1209-10. The reasoning in Schlegel is sound, including because it is tethered to the express language of § 1692a(6). The Court reaches the same conclusion as the Schlegel Court, whose reasoning is persuasive,
There does not appear to be any controlling authority in the Eleventh Circuit on the statutory constructing issue presented in this case. There is, however, a well established framework for interpreting statutes. See Burlison, 455 F.3d at 1245-47; United States v. DBB, Inc., 180 F.3d 1277 (11th Cir.1999). The Eleventh Circuit's decision in Hixson v. French, 517 Fed.Appx. 767, 768-69 (11th Cir.2013) also is instructive. Hixson involved a loan serviced by Citimortgage that was owned by the original refinancing lender. Hixson, 517 Fed.Appx. at 768. The question was whether Citimortgage was a debt collector under the FDCPA. Id. at 769. The Hixson Court noted: "[t]o be subject to the [FDCPA], an entity must be a `debt collector' that collects the `debts ... due another,' [15 U.S.C.] § 1692a(6), but Citimortgage sought to collect debt it was owed." Id. The Hixson decision, of course, does not address Plaintiff's argument and the Magistrate Judge's conclusion that an entity that acquires defaulted debts originally owed to others is a "debt collector" under § 1692a(6), as the debt in Hixson was held by the original lender. Hixson does, however, support that determinations under § 1692a(6) must rely upon the language of the statute and that the statutory language must be plainly read and its terms plainly applied. See also Humphrey v. Washington Mut. Bank, F.A., 06-cv-1367, 2007 WL 1630639, at *2 (N.D.Ga. June 1, 2007) (finding that defendant "not a debt collector because it was attempting to collect its own debt from Plaintiffs.").
The Court has also noted that even where a plaintiff alleges that the debt was in default when assigned, the plaintiff's complaint must still contain sufficient factual allegations that a defendant is a "debt collector" under one of the prongs of § 1692a(6). See Anderson v. Deutsche Bank Nat. Trust Co., 1:11-cv-4091, 2012 WL 3756512, at *4 (N.D.Ga. Aug. 6, 2012) report and recommendation adopted, 1:11-cv-4091, 2012 WL 3756435 (N.D.Ga. Aug. 27, 2012) (dismissing complaint because it did not allege that defendants' principal purpose was the collection of debts or that it regularly sought to collect debts owed or due another) (citing Reese v. Ellis, Painter, Ratterree & Adams, LLP, 678 F.3d 1211, 1218 (11th Cir.2012)). While the Anderson Court makes it clear that a determination that the debt is in default is not the end of the inquiry, the decision did not address the second prong of § 1692a(6), and is, thus, not helpful in interpreting its language and determining whether Defendant is a "debt collector" under the FDCPA.
After a careful review of § 1692a(6) and the cases relied upon by the Magistrate Judge, as well as arguments raised by
III. CONCLUSION
For the foregoing reasons,
FootNotes
Defendant is not a third-party debt collector. As Plaintiff alleges in the Amended Complaint, Defendant acquired twenty-eight (28) billion dollars of credit card accounts originally held by HSBC. (Am. Com. at ¶¶ 7-8, 11). The Amended Complaint alleges a transfer of ownership and the risk associated with the debt acquired. Plaintiff does not allege the debt was acquired by Defendant to collect it for anyone other than for Defendant. Plaintiff alleges that "over $1 billion of the acquired accounts were ... delinquent or in default at the time of acquisition." (Id. at ¶ 12). Plaintiff, thus, alleges that Defendant acquired credit card accounts of which approximately 3.57% were delinquent or in default at the time of acquisition, which Plaintiff noted is average for the time period. (See id. at ¶ 13) (noting that, according to S & P/Experian Consumer Credit Default Indices, the default rate on credit cards in December 2012 was 3.53%).
Defendant, who Plaintiff alleges acquired a substantial number of non-defaulted credit card accounts, acts here like a creditor that would generally be restrained in its desire to protect its goodwill when collecting on delinquent accounts, as opposed to a third-party debt collector that will have no future contact with the consumer. The Court interpretation of "debt collector" thus comports with legislative history.
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