A limited liability company is a “person” that can file a lawsuit under the Fair Debt Collection Practices Act (FDCPA), the U.S. Court of Appeals for the Sixth Circuit has ruled.

In Anarion Investments LLC v. Carrington Mortgage Services, LLC et al., the plaintiff, a Delaware limited liability company, alleged that the defendants violated the FDCPA by making false representations in foreclosure notices. The notices were published in newspapers in connection with the foreclosure sale of a home secured by a mortgage that appears to have been assigned to one of the defendants. The plaintiff held an option to buy the property.

The district court dismissed the complaint, holding that the plaintiff was not a “person” under the FDCPA, and therefore could not recover under the statute’s civil liability provision. This provision states that a debt collector who fails to comply with the FDCPA “with respect to any person is liable to such person.” Reversing the district court, the Sixth Circuit held that the term “person,” as used in the provision, includes both artificial entities and natural persons.

According to the Sixth Circuit, this reading was dictated by the federal Dictionary Act, which provides that in determining the meaning of a federal statute, the word “person” includes artificial entities unless the context indicates otherwise. The Court cited FDCPA provisions in which the term “person” includes artificial entities, such as the provision authorizing the Federal Trade Commission to enforce compliance “by any person,” and the definition of “debt collector” as “any person” who collects debts. It also observed that the FDCPA’s definition of “consumer,” which is limited to a “natural person,” “strongly suggests that, when Congress meant to refer only to natural persons, it did so expressly.”

In response to the defendants’ argument that extending FDCPA protections to artificial entities would not be consistent with the statute’s purpose, the Sixth Circuit stated that “two aspects of the FDCPA alleviate that concern.” First, the Court observed that the FDCPA definition of “debt,” which limits the term to obligations incurred primarily for “personal, family or household purposes,” would prevent “any person–natural or artificial–from filing a lawsuit over an attempt to collect a debt owed by a business.” (The Sixth Circuit noted that this case was unusual because the plaintiff brought suit based on an attempt to collect an individual’s personal debt.)

Second, the Court commented that “nothing in our decision today means that [the plaintiff] can bring suit under the FDCPA.” According to the Court, its opinion “answered only” the question of whether the plaintiff was a “person” under the FDCPA and “[l]eft unanswered, among other questions,” whether any of the defendants’ alleged misrepresentations were made “with respect to” the plaintiff as required for relief under the FDCPA’s civil liability provision.

In a strong dissent, Judge Bernice Bouie Donald stated that the majority should not have relied on the Dictionary Act presumption that the term “person” includes artificial entities unless “the context indicates otherwise” because, based on the FDCPA’s legislative history and purpose to protect natural persons from abusive debt collection practices, Congress did “indicate otherwise.” Thus, she deemed it a “more context-appropriate interpretation” for artificial entities not to be considered “persons” with standing to sue under the FDCPA. She also labeled the majority’s attempt to alleviate concerns about the potentially expansive effect of its decision “a cavalier response to a very real concern.” According to Judge Donald, the majority’s holding “potentially opens the door to a new class of plaintiffs under the FDCPA and effectively provides a new cause of action in foreclosure appeals.”

Attorneys in Ballard Spahr’s Consumer Financial Services Group regularly advise clients on compliance with the FDCPA and state debt collection laws and defend clients in FDCPA lawsuits and enforcement matters. To assist clients in responding proactively to the documentation-related challenges being faced by the debt collection industry and creditors attempting to collect their own debts, the Group has formed a Collection Documentation Task Force. Attorneys in the Group also prepare clients for Consumer Financial Protection Bureau examinations.


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