Court Opinion Offers Glimpse Into One Exclusion To The FDCPA's Definition Of 'Debt Collector'

In 1985, Sherman and Reva Ray obtained a credit card from Citibank. By July 1996, the balance owed on that card had climbed to around $10,000.

That $10,000 balance was a tall hill to climb for the Rays at that time. So, in lieu of trying to pay off that entire $10,000 balance, the Rays decided seek a settlement agreement with Citibank.

To that end, the Rays began contacting two different entities to discuss the settlement proposal. One was Citibank itself--formally known as Citibank (South Dakota), N.A.--and the other was the Citibank affiliate Citicorp Credit Services, Inc. (hereinafter referred to as "CCSI").

Within a few weeks of those initial contacts to Citibank, the Rays determined that Citibank might be willing to accept a $2,500 payment to satisfy the $10,000 balance. So, in August 1996, the Rays instructed their attorney to mail Citibank a check in the amount of $2,500. The Rays' attorney mailed the check as the Rays had instructed, but also added a written statement on the back of the check indicating that "endorsement or negotiation" of that $2,500 check would fully satisfy the $10,000 debt owed by the Rays to Citibank.

Upon receipt of that $2,500 check, Citibank deposited it, thereby accepting, the Rays believed, the Rays' settlement offer memorialized by, and on the back of, the check.

However, even after Citibank deposited the $2,500 check, Citibank and CCSI demanded additional payment from the Rays for the $7,500 balance that had not yet been paid on the Rays' account.

Lawsuit Against Citibank Filed For Fair Debt Collection Practices Act Violations

Eventually, the Rays filed suit against Citibank and CCSI in federal court, for, among other claims, violations of the Fair Debt Collection Practices Act ("FDCPA").

In response, both defendants filed a motion for summary judgment on the Rays' FDCPA claims, asserting that...

[...] as a matter of law, neither entity is covered by the Fair Debt Collection Practices Act ("FDCPA")[.]

What Citibank and CCSI specifically meant by this assertion was that neither Citibank and CCSI were considered "debt collectors" under the FDCPA. That was the conclusion to their argument, anyway.

In its ruling on the defendants' motion, the court began by agreeing that this issue--whether or not Citibank and CCSI were considered "debt collectors" under the FDCPA--was an appropriate place to begin the analysis:

[T]he liability of both Citibank and CCSI under the FDCPA ultimately hinges upon whether they may be considered "debt collectors" as that term is defined in 15 U.S.C. § 1692a (6). If either defendant is not a debt collector under the FDCPA, then summary judgment in favor of that defendant will be proper.

Key to this analysis was the relationship between the two defendants.

Citibank, of course, was the card issuer. (In common FDCPA parlance, we might also refer to Citibank as the "creditor," which, in this context, is a role distinct from the FDCPA's definition of a "debt collector.") CCSI, on the other hand, was a subsidiary of Citibank. So, importantly, the two entities shared a common ownership and were affiliated by corporate control. In addition, it was also important that CCSI's sole purpose was to provide "various customer services and administrative functions to Citibank."

How Does The FDCPA Define "Debt Collector" And What Are The Exceptions?

The FDCPA's definition of a "debt collector," at first, tends to strike many people as fairly straightforward. This is aided by the fact that, before the FDCPA begins to define "debt collector," the FDCPA defines the term "creditor," which helps narrow down what scope of meaning might then be left for subsequent terms like "debt collector."

How Does The FDCPA Define "Creditor?"

A "creditor" is typically understood to mean the original person "to whom a debt is owed[.]" See 15 U.S.C. § 1692a (4). (Note here that the term "person" can, and often does, refer to non-human entities such as corporations.) So, for example, if Citibank issued the card to the Rays, and Citibank is owed the $10,000 balance, then Citibank might be the most obvious candidate here for the role of creditor. Typically, this creditor designation would also operate to mean that, because Citibank is the creditor, Citibank would not also be the debt collector, even if Citibank attempts to collect a debt from the Rays.

A "debt collector," on the other hand, is typically understood to mean a person who attempts to collect debts owed to another person (e.g. debts owed to a creditor). See 15 U.S.C. § 1692a (6). This definition largely aims at people and companies who provide debt collections services to other people or companies.

Can A "Creditor" Also Be Considered A "Debt Collector?"

That said, the FDCPA's definition of "debt collector" also provides that a creditor can essentially lose whatever benefits arise from not being considered a debt collector if that creditor...