Late last week, the Federal Trade Commission filed an amicus brief in Davidson v. Capital One Bank (USA), N.A.,a case brought by a consumer complaining of Capital One’s efforts to collect on a defaulted credit card. If adopted, FTC’s reading of the statute would apply Fair Debt Collection Practices prohibitions to banks that acquire consumer debt asset portfolios.
In Davidson, Capital One had acquired the consumer’s defaulted account in 2012 as part of its $28 billion acquisition of HSBC’s domestic credit card accounts. The consumer brought the suit—styled as a class action—alleging that Capital One’s collection activities violated the Fair Debt Collection Practices Act. The consumer argued that Capital One qualified as a “debt collector” under the FDCPA because his account was already in default at the time of acquisition.
The district court dismissed the claims, finding that Capital One is not a “debt collector” for FDCPA purposes. The decision turned on FDCPA’s definition of “debt collector”—to qualify for coverage under the statute, an entity must “regularly” attempt to collect debts “owed or due another” or the principal purpose of the entity’s business must be “the collection of any debts.” The district court found that Capital One did not qualify. The Eleventh Circuit, in a decision issued in late August, agreed—affirming the district court’s dismissal.
FTC’s recent amicus brief asks the Eleventh Circuit to review the decision en banc and reverse the decision. In FTC’s view, banks that acquire defaulted consumer accounts are collecting debts “due another”—similar to traditional debt collectors that acquire debt for pennies on the dollar and that may resort to unscrupulous practices to monetize the paper. Capital One disagrees, arguing that once it acquired the portfolio, it sought to collect its own debt—therefore qualifying as a “creditor” excluded from the FDCPA. So far, the Eleventh Circuit has sided with the bank—but FTC’s brief seeks to change that.
The brief is consistent with FTC’s mission—to protect consumers from dishonest trade practices. But its arguments overlook the already crowded regulatory environment in which banks like Capital One operate. Banks’ primary regulators, in addition to the CFPB, already monitor and sanction deceptive and unfair practices. Adding FDCPA to the mix would arguably duplicate those measures and add to banks’ rising compliance costs.
Banks that acquire consumer debt asset portfolios should monitor the Davidson case, as it may affect future regulations or spur new lawsuits from consumers.