Passive Debt Buyer May Delegate Dispute Communications to Third Party

A New York District Court recently addressed the issue of whether the FDCPA requires passive debt buyers to personally register disputes or whether they can delegate that obligation to their third party debt collector/servicer. Passive debt buyers purchase debt but retain third parties to service and collect the debt. 

In Nunez v. Pinnacle Credit Services, the consumer retained a debt settlement company to assist her in connection with her credit. Nunez v. Pinnacle Credit Services, 2016 U.S. Dist. LEXIS 178600 (S.D.N.Y. Dec, 27, 2016).  One of Ms. Nunez’s accounts had been acquired by a passive debt buyer, Pinnacle Credit Services (“Pinnacle”).  The account appeared on Nunez’s credit report in Pinnacle’s name. When the debt settlement company contacted Pinnacle on Nunez’s behalf and asked if they could dispute the debt, Pinnacle advised that they did not handle accounts, but instead had “outside agencies that handled the accounts” and that the outside agency should instead be contacted.  Pinnacle then provided the outside agency’s contact information and transferred the call.  Ms. Nunez filed suit alleging that Pinnacle’s communication with the debt settlement company violated sections 1692e and f.

On summary judgment, the consumer contended that “Defendant providing its own name and contact information to the credit reporting agency ‘misleads consumers, leading them to reasonably believe that their accounts may be discussed with Defendant,’ and therefore Defendant was obliged to record Plaintiff’s dispute of her debt rather than transferring her to its servicing agency for that purpose.” Nunez at *6-7. In reviewing the communication to determine whether or not it was unfair or deceptive, the court quickly pointed out that Nunez did not allege that the information reported to the credit reporting agency was inaccurate or that there was anything deceptive or inaccurate in the conversation with the debt buyer.  Instead, “Plaintiff’s claim appears to be not that Defendant said or did anything misleading, but rather that the FDCPA obliges owners of debt to personally register disputes from consumers rather than delegating that task to an agent.”  Id. at 7-8.

The court ruled in favor of the debt buyer, noting that the plaintiff provided no authority and instead appeared to be “trying to fit a square peg of any obligation not found anywhere in the FDCPA into the round hold of the statute’s prohibition against deceptive or misleading means to collect a debt.”  Id. at 8-9.  The court went on to note that it is not uncommon for debt buyers to delegate collection activity to agents and that the debt buyer did nothing to impede the consumer’s ability to dispute the debt.