Indiana Appeals Court Rules That a Passive Debt Buyer Is a Debt Collector under the FDCPA and State Law

The Court of Appeals of Indiana recently upheld a lower court’s decision that a debt buyer who purchased a portfolio of defaulted student loans and placed an account with a collection agency qualifies as a “debt collector” under both Indiana state law and the Fair Debt Collection Practices Act (FDCPA).

In Rock Creek Capital LLC (Rock Creek) v. Tibbett, Rock Creek filed a collection lawsuit against an individual to recover an unpaid student loan. The individual then filed a counterclaim alleging that Rock Creek was not licensed to collect consumer debt in Indiana and was thus engaging in illegal conduct in violation of the FDCPA and the Indiana Deceptive Consumer Sales Act.

In response to the counterclaim, Rock Creek both admitted and denied it was a debt collector as defined by the FDCPA and that it retained the services of licensed agencies and attorneys to collect only on accounts that are valid, due, and owing. It further contended that it “invests in debt, but leaves the ‘collection’ to actual debt collectors retained for that purpose.” Rock Creek then filed a motion for partial summary judgment, attaching a letter from a compliance officer for the Indiana Secretary of State stating that if a company is collecting debt owed to the company on its own behalf it would not qualify as a collection agency. “Collection agencies collect debts owed to others.”

After reviewing the definition of debt collector under the FDCPA and supplier under the Indiana Deceptive Consumer Sales Act, the lower court concluded Red Rock satisfied both. Ultimately, after looking at the evidence and reviewing the testimony of Rock Creek’s chief executive, including the statement that “Rock Creek’s business is buying defaulted receivables at a discount and trying to get those accounts to pay what is — what they owe,” the Appeals Court ruled that the company constitutes a “person who uses any instrumentality of interstate commerce or the mails in any business the principal purpose of which is the collection of any debts,” under § 1692a(6) of the FDCPA. The court further concluded that Rock Creek constituted a debt collector under the Indiana statute.