On July 28, in a decision favorable for the collection industry, the United States Court of Appeals for the Eleventh Circuit affirmed a district court’s dismissal of an action against defendant Seattle Service Bureau, Inc., a debt collector, for claims alleged under the Fair Debt Collection Practices Act (“FDCPA”) and the Florida Consumer Collection Practices Act (“FCCPA”).  The circuit court ruled that the plaintiff’s complaint failed to state a claim because the alleged debt Seattle Service sought to collect did not arise out of a consensual “consumer” transaction, but rather out of the negligent conduct of the plaintiff’s sister in an automobile accident.  The court held that neither the FDCPA nor the FCCPA apply to the alleged tort debt that Seattle Service sought to collect. 

The complaint alleged that in January 2013, the plaintiff’s sister was driving a car owned by the plaintiff when she was involved in a minor automobile accident with another driver.  Plaintiff reported the accident to his insurance company, which paid a claim for property damage to the other driver’s vehicle.  In November 2014, Plaintiff began receiving letters and calls from the collection agency attempting to collect on an alleged $50,000 debt owed to the other driver’s insurance company for damages arising out of the automobile accident.  Plaintiff claimed the debt did not exist and was fabricated by the collection agency. 

In ruling that the FDCPA and FCCPA did not govern the claims here, the Court provided that both statutes only regulate the collection of debts arising from “consumer transactions.”  According to the Court, the word “transaction” implies some type of business dealing between the parties and refers to consensual or contractual arrangements, not damage obligations resulting from negligence.  The Court cited a similar case in which it found that while the debt collector may have entered into a contract with the insurer for subrogation rights, no contract existed between Plaintiff and the damaged party, and that the debt arose from a tort rather than a consumer transaction.  Plaintiff argued that the debt Seattle Service sought to collect from him did not exist, and that a claim by a debt collector against an individual for a “debt not owed” qualifies as a consumer debt under the FDCPA and FCCPA.  However, the Eleventh Circuit found that whether the alleged debt was real or fabricated, it was connected to an automobile accident rather than a consensual transaction and therefore was not governed by either the FDCPA or FCCPA. 

This decision presents a significant win for the credit and collection industry.  The Eleventh Circuit’s interpretation of “consumer transactions” provides helpful guidance to defend against similar claims under the FDCPA. 

The case is Parham v. Seattle Service Bureau, Inc., No. 16-11164, in the Eleventh Circuit Court of Appeals.