Under the Fair Debt Collections Practices Act, a debt collector is liable to a consumer for contacting third parties in pursuit of that consumer’s debt unless the communication falls under a statutory exception. One of those exceptions covers communication with a third party for acquiring location information about the consumer.  Even then, the Act prohibits more than one such contact unless the debt collector reasonably believes that the earlier response of the third party was erroneous or incomplete and that such person now has correct or complete location information.

The first federal court of appeals to address the issue has just ruled that if sued in a case alleging illegal third-party contact, the debt collector has the duty to plead and prove the exception. To take shelter in the exception, a debt collector must expressly state in its answer to the complaint (facts permitting) that it pursued repeat contacts with the third-party because it reasonably believed that her earlier response was erroneous or incomplete and that she now has correct or complete location information. To prevail on the defense, the debt collector will also have to produce evidence in discovery and provide testimony at trial that proves those facts. The debt collector will need someone to testify at trial to those facts that made it reasonable to believe that the third party’s earlier response was erroneous or incomplete and that the third party now has correct or complete location information.

This latter point may be very difficult to prove. How would the debt collector come into possession of facts that would lead it to believe that a third party now has correct or complete location information without a further call? It is probably a very rare occurrence.

Some federal district trial courts have placed the burden on the plaintiff/consumer to allege facts to support an inference that the debt collector had no reason to believe that the third party knew the debtor’s whereabouts or provided an incomplete or erroneous response initially. Do not count on this being the procedure any more. The court of appeals’ opinion was so thorough and logical that it will most likely guide other federal courts across the country to put the burden of proof to establish the exception on the debt collector.

Ordinarily, creditors are not considered debt collectors under the Fair Debt Collections Practices Act. However, an assignee of a loan may be deemed a debt collector if the loan is already in default when the loan is assigned.

Before a repeat contact with a third party for information about the location of a debtor, the debt collector should document in the file those facts that support a reasonable belief that the third party’s earlier response was erroneous or incomplete and that the third party now has correct or complete location information.  Absent that documentation, the debt collector may be hard pressed to carry its burdens of producing exculpatory evidence in discovery and of proving at trial that its belief was reasonable.

The opinion discussed is Evankavitch v. Green Tree Servicing, LLC, — Fed. 3d— (2015 WL 4174441) (3rd Cir. 2015).  In addition to settling the specific issue addressed, the opinion also presents a good roadmap for lawyers generally to use in analyzing who has the burden of proof on a defense.