Although a victory for debt buyers, two recent decisions of the Missouri Court of Appeals demonstrate the zealousness of state regulators in pursuing debt buyers for their collection practices.

In State of Missouri v. Professional Debt Management, LLC, and State of Missouri v. Portfolio Recovery Associates, LLC, both issued on April 5, 2011, the Court rejected the attempt by the State Attorney General to impose liability on two debt buyers for engaging in debt collection activity alleged to have violated the Missouri Merchandising Practices Act (MPA). According to the Court, because the MPA provides a remedy only for unfair or deceptive practices that are connected "with the sale or advertisement of any merchandise," the MPA does not apply to debt collection activities.

The AG's actions were brought under the MPA because Missouri does not have a debt collection statute or a more generally applicable unfair and deceptive acts and practices statute. Among the debt buyers' allegedly unfair and deceptive collection practices were (1) misrepresenting actions that can be taken against debtors, (2) attempting to collect debts that were not owed or time-barred, and (3) assessing fees and interest above the usury limit without a written agreement to pay the higher interest or fees.

The MPA prohibits the use of unfair or deceptive practices "in connection with the sale or advertisement of any merchandise in trade or commerce ... whether committed before, during or after the sale, advertisement or solicitation." Affirming the circuit court's dismissal of the AG's actions, the Court of Appeals held that the debt buyers' activities were not taken "in connection with" the underlying sales transactions because they did not relate to any claims or representations made before or at the time of those transactions and were taken by a person who was not a party to those transactions.

The increased scrutiny being given to debt buyers highlights the need for them to consult with experienced counsel who can not only review their internal rules to make sure they are compliant with the Fair Debt Collection Practices Act (FDCPA) and state debt collection laws, but can also provide guidance in conducting periodic audits to ensure the rules are being followed.

Ballard Spahr's Consumer Financial Services Group is nationally recognized for its guidance in structuring and documenting new consumer financial services products, its experience with the full range of federal and state consumer credit laws throughout the country, and its skill in litigation defense and avoidance (including pioneering work in pre-dispute arbitration programs). In addition to having extensive experience in defending all manner of debt collection lawsuits, Ballard Spahr lawyers regularly counsel their clients engaged in consumer debt collection on compliance with the FDCPA and state debt collection laws. For more information, please contact Group Chair Alan S. Kaplinsky, 215.864.8544 or; Vice Chair Jeremy T. Rosenblum, 215.864.8505 or; John L. Culhane, Jr., 215.864.8535 or; Martin C. Bryce, Jr., 215.864.8238 or; Keith R. Fisher, 202.661.2284 or; Barbara S. Mishkin, 215.864.8528 or; or Mark J. Furletti, 215.864.8138 or



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