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Debt Buyer Beware

April 20, 2020 Posted in Case Law Review Share

The Ninth Circuit held that a business that was engaged in and profited from buying consumer debt, but outsourced direct collection activities to another company, qualified as a “debt collector” under the Fair Debt Collection Practices Act (“FDCPA”). Jillian McAdory filed a lawsuit against M.N.S. Associates and DNF Associates alleging, among other things, violations of the FDCPA.  DNF responded to the lawsuit arguing that it was not subject to the FDCPA requirements because its principle business was not debt collecting but buying debt for investment purposes. DNF hired M.N.S. Associates to collect the debt. In other words, DNF argued that it cannot be considered a debt collector because it took no action towards consumers to collect the debt. The Ninth Circuit rejected this argument and ruled that companies that buy debt for investment purposes cannot circumvent the FDCPA’s restrictions by hiring a third party to collect the debt.  The Ninth Circuit did remand the case to the district court to determine whether DNF was vicariously liable for the actions of M.N.S. Associates. McAdory v. M.N.S. & Associates, LLC, 2020 WL 1128813 (9th Cir. 2020)