I. Identifying Your Client as a "Debt Collector"

Once litigation has been initiated against your client the first thing you must do is to verify that your client's activities with respect to the allegations contained in the complaint constitute "debt collection" as defined under '803(6) of the FDCPA. That Section states that A any person who uses any instrumentality of interstate commerce or the mails in any business the principal purpose of which is the collection of the debts, or who regularly collects or attempts to collect "debts owed or due to be owed or asserted to be owed or due another.@ is a debt collector. The Act also includes creditors who use a different title or name for their collection practices. The Act excludes (1) employees of the creditor while in the name of the creditor are collecting or attempting to collect debts of that creditor; (2) any person while serving or attempting to serve legal process in connection with judicial enforcement of any debt; and (3) non-profit organizations who perform credit counseling.

It is important initially to determine the relationship of your client to the creditor and whether, in fact. the named party is an employee of the creditor as opposed to a separate and independent entity.

Additionally, various non-profit organizations. such as organizations created for the purpose of collecting non-dischargeable student loan debts may not be subject to provisions of the FDCPA. See Pelfrey v. Educational Credit Management Corporation. 71 F. Supp. 2d. 1161 (N.D. Alabama 1999) (aff~d, 208 F.3d 945 (11th Cir. 2000). Loan servicing companies which do not participate in loan collections may be excluded from the FDCPA.

II. Identify the Relationship Between the Creditor and Your Debt Collector Client and Verify Exactly What Actions Were Taken on Behalf of the Creditor by Your Client

Often independent debt collectors will enter into a contract with a creditor client in which they agree to provide debt collection services. One contractual term which is extremely important in defense of allegations of violations of the FDCPA is an indemnity agreement between the creditor and the debt collector. Generally, some type of reciprocal agreement exists whereby the creditor will indemnify the debt collector for any violation of the FDCPA which is caused or occasioned by misinformation or the negligence of the creditor in providing information to the debt collector. More commonly, however, the debt collector will assume for purposes of indemnity any liability for actions or inactions taken by the debt collector on behalf of the creditor in the collection of debt. From a practical standpoint, the allegations which we are repeatedly seeing in these cases involve allegations of fraud, misrepresentation and negligence against the creditor, as well as some type of violation of the Fair Debt Collection Practices Act on the part of the debt collector along with allegations of invasion of privacy, outrage, harassment, and negligent training and supervision.

III. Does the Complaint Set Out Allegations Which Involve a "Debt" Under the FDCPA?

The Eleventh Circuit Court of Appeals in Hawthorn v. Mac Adjustment, 140 F.3d 1367 (11th Cir. 1998) discussed the plain terms of the FDCPA concerning obligations which are considered to be "debts" subject to the FDCPA. In Hawthorn, the plaintiff was involved in an accident allegedly resulting from negligence. Liberty Mutual Insurance Company insured the other party to the accident who was damaged in the amount of $2,020.18. Liberty Mutual then sought to enforce its subrogation rights as to the amount paid to its insured through Mac Adjustment. Mac Adjustment wrote a letter to the plaintiff requesting payment. The plaintiff's lawsuit alleged that Mac Adjustments' letter was sent to her in violation of the FDCPA. Mac Adjustment moved for judgment on the pleadings, contending that the obligation was not a "debt" under the FDCPA because it did not "arise out of a consumer transaction which the plaintiff was offered or extended the right to acquire money, property, insurance or services which are `primarily for household purposes' and to defer payment." The Eleventh Circuit held that district court was correct in dismissing the plaintiff's complaint because the obligation at issue in the case did not constitute a debt on the plain language of the FDCPA. This case also is a good review of various other types of obligations which are not considered debts under the FDCA.

Unfortunately, plaintiffs do not always allege violations of the FDCPA, opting instead to make sweeping claims sounding in tort such as intentional infliction of emotional distress, or outrage, harassment and/or invasion of privacy.