Money Owed as a Result of Theft is not a Debt for FDCPA Purposes

The Second Circuit recently joined other circuits in holding that money owed as result of theft does not constitute a debt within the meaning of the FDCPA.  In Beauvoir v. Israel, C.A. 14-3794 (2d Cir. July 21, 2015) the consumers filed a putative class action against an attorney who was retained by a natural gas company to collect for the consumption of unmetered gas to the consumers’ residence.  The underlying obligation arose from allegations that the consumers “diverted and consumed unmetered natural gas…by means of unlawfully tampering with… [the] gas meter to impede, impair, obstruct and prevent the…meter from performing its recording function.”  The demand letter sent by the attorney did not contain the debt validation language required by 15 U.S.C. §1692g.  The attorney moved to dismiss the claim because the collection action he initiated concerned the theft of natural gas and thus, was not a debt as the term is defined by the FDCPA. 

In affirming the district court’s dismissal of the FDCPA suit, the court focused on the asserted basis for the obligation to pay.  Under the FDCPA, a “debt” is defined as an “obligation or alleged obligation of a consumer to pay money arising out of a transaction in which the money, property, insurance, or services which are the subject of the transaction are primarily for personal, family, or household purposes, whether or not such obligation has been reduced to judgment.”  15 U.S.C. §1692a.  Because the money owed in this case arose as a result of theft and not out of a transaction or as a result of the rendition of a voluntary service or transaction, the court determined that it was not a debt covered by the FDCPA.  At a minimum, the court concluded that the FDCPA contemplates that the debt arise as a result of the rendition of a service or purchase of property or other item of value.  For those keeping count, a majority of the circuits have held that liability derived from theft or torts does not constitute a debt under the FDCPA.  See Fleming v. Pickard, 581 F.3d 922, 926 (2009); Hawthorne v. Mac Adjustment, Inc., 140 F. 3d 1367 (11^th Cir. 1998); Bass v. Stolper, Koritzinsky, Brewster & Neider, S.C., 111 F.3d 1322 (7^th Cir. 1997); Zimmerman v. HBO Affiliate Grp., 834 F.2d 1163 (3d Cir. 1987).