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ARTICLE · 12 MARCH 2019

Third Circuit Holds That Debt Purchasers Can Qualify As Debt Collectors

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On February 22, the Third Circuit sidestepped the Supreme Court's 2017 holding in Henson v. Santander Consumer USA Inc. and found that a purchaser of defaulted debt ...

United StatesFinance and Banking
Melanie Brody
Melanie Brody
Francis L. Doorley
Francis L. Doorley
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On February 22, the Third Circuit sidestepped the Supreme Court's 2017 holding in Henson v. Santander Consumer USA Inc. and found that a purchaser of defaulted debt qualified as a debt collector under the Fair Debt Collection Practices Act.

In Barbato v. Greystone Alliance, the Third Circuit considered whether an entity that purchased charged off receivables and outsourced the actual collection activity was subject to the FDCPA. In analyzing the issue, the court explained that the FDCPA's definition of the term debt collector has two prongs, and if an entity satisfies either of them, it is a debt collector subject to the Act. Under the "principal purpose" prong, a debt collector includes any person who "uses any instrumentality of interstate commerce or the mails in any business the principal purpose of is the collection of any debts." Under the "regularly collects" prong, a debt collector includes any person who "regularly collects or attempts to collect, directly

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