Important FDCPA Analysis

EDITORIAL

Fellow Members of the Repossesion Industry,

I am reaching out today to ensure that you are all aware of the recent Supreme Court Decision ruling that Repossesors are NOT debt collectors under the law, and its positive implications for your business.

Over the last 10 years, and in particular the last 5 years, the recovery industry has come under attack with an onset of nuisance Fair Debt Collection Practices (FDCPA) lawsuits.

In Obduskey v. McCarthy & Holthus, the Supreme Court ruled that businesses whose sole purpose is to enforce security interests that secure underlying debt, like automobile repossession agents and nonjudicial foreclosure firms (in states that maintain nonjudicial foreclosure procedures, unlike Florida), are not always “debt collectors” under the Fair Debt Collection Practices Act, 15 U.S.C. Section 1692 et seq. (FDCPA). The FDCPA imposes many requirements and restrictions on consumer debt collectors. After Obduskey, a security-enforcement firm is a debt collector only when it meets what the Supreme Court dubbed the “limited-purpose definition” of a debt collector. A limited-purpose debt collector is subject to far fewer FDCPA requirements and restrictions.

With this ruling, automobile repossessors are now only bound one section of the Rule [ §808(6) of FDCPA]. The Court determined that firms whose business is limited to the ENFORCEMENT of security-interests, such as automobile repossesors, will NOT be subject to ALL of the restrictions under the FDCPA.

The Court’s ruling allows our agents to be exempt from majority of the FDCPA’s restrictions. Repossessors are only subject to one section of the Act, which forbids actions prohibited by the Act (such as threatening violence or repeated phone calls) only in situations where the (1) repossession is not valid, (2) there is no intention to repossess at the present time, or (3) the repossession collateral is exempted.

This, ladies and gentlemen, is great news for the industry.

The American Recovery Association is committed to bringing timely news to our members and the collateral recovery Industry. For more on this case, visit Law.com. Please sure to send it to your legal counsel and your insurance companies.

David A. Kennedy