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

Editor's Note: This article, authored by Virginia Bell Flynn & Jovanni Villa previously appeared in Troutman Pepper’s Consumer Financial Services Law Monitor and is re-published here with permission. 
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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.”

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