A three-judge panel on Wednesday vacated a decision to dismiss Fair Debt Collection Practices Act claims against a mortgage company and three servicing and debt collection agencies.

Vincent v. The Money Store was remanded by the U.S. Second Circuit Court of Appeals in New York for additional proceedings in an effort to define what actions by a creditor would expose it to liability under the FDCPA.

The case dates back to original mortgage transactions taking place in the late 1990s. It could ultimately impact liability under first-party or flat-rate collection relationships. The first lawsuit in the case was filed in April 2003.

The accounts were assigned for servicing to The Money Store, a mortgage lender, after the plaintiffs executed their mortgages. The plaintiffs ultimately defaulted on their loans and letters were sent from law firm Moss, Codilis, Stawiarski, Morris, Schneider & Prior LLP informing the borrowers of default.

The core issue is just how involved Moss Codilis was in collecting the debt.

Plaintiffs contend that The Money Store used the name of the law firm by hiring it to send collection letters that falsely indicated that Moss Codilis had been retained to collect the debts. The district court rejected that argument, and found that The Money Store had not used a name other than its own, and thus could not be found liable for violating the FDCPA through the so-called false name exception.

The court disagreed and remanded the FDCPA claims for further proceedings because it found that Moss Codilis did nothing more than send out the letters. The Money Store carried out all additional collection activity.  

“Where a creditor, in the process of collecting its own debts, hires a third party for the express purpose of representing to its debtors that the third party is collecting the creditor’s debts, and the third party engages in no bona fideefforts to collect those debts, the false name exception exposes the creditor to FDCPA liability,” the court wrote.

One dissenting judge wrote that the majority was not defining what collection activities counted as “bona fide” collection efforts. She wrote “under this ‘bona fide’ standard, an actual debt collector like Moss Codilis can escape civil liability under the FDCPA by becoming more involved in deceptive collection practices. Surely this was not Congress’s intent.”

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