Barbato v. Greystone Alliance, LLC
916 F.3d 260
3rd Cir.2019Background
- Crown Asset Management purchases charged-off consumer receivables and refers those accounts to third-party servicers or law firms to pursue collection; Crown itself did not directly contact the consumer at issue (Barbato).
- Turning Point (later Greystone) sent collection letters and left voicemails for Barbato after Crown placed her charged-off account with Turning Point under a service agreement; Crown could recall accounts and set settlement guidelines.
- Barbato sued Turning Point/Greystone and later added Crown, alleging violations of the FDCPA; Turning Point/Greystone were dismissed, leaving Crown as the lone defendant.
- The District Court granted summary judgment that Crown is a "debt collector" under the FDCPA’s "principal purpose" definition because Crown’s business is acquiring defaulted accounts to collect on them, even though it outsources collection.
- Crown sought reconsideration based on the Supreme Court’s Henson decision; the District Court denied reconsideration and certified the question for interlocutory appeal.
- The Third Circuit affirmed: Henson clarified the "regularly collects" prong but did not displace the distinct "principal purpose" prong; an entity whose primary business aim is collecting acquired debts qualifies as a debt collector even if it outsources collection.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether a debt-buyer that outsources collection is a "debt collector" under the FDCPA's "principal purpose" definition | Barbato: Crown purchases defaulted accounts and its principal purpose is collection, so it is a debt collector despite outsourcing | Crown: Its principal purpose is acquiring debt, not performing collection acts; Henson shows debt buyers collecting for themselves are not debt collectors under §1692a(6) | Court held Crown is a debt collector under the "principal purpose" prong because its business aim is collecting acquired debts, regardless of who performs collection acts |
| Whether Henson abrogates prior Third Circuit precedent making default-status dispositive | Barbato: Henson does not affect the principal-purpose analysis from Pollice | Crown: Henson rejects the default test and shows debt-buyer status means creditor not debt collector | Court held Henson only clarified the "regularly collects" prong and did not disturb the "principal purpose" analysis; default test’s mutual-exclusivity rationale is no longer valid but does not eliminate the principal-purpose pathway |
| Whether the statutory text requires active, direct collection (verb) to trigger the principal-purpose prong | Barbato: "Collection" can mean the object (collected debts); principal-purpose focuses on business aim, not who acts | Crown: "Collection" is an act; absence of "directly or indirectly" in this prong means it should exclude outsourced collection | Court held the noun "collection" can encompass indirect collection; the principal-purpose text sweeps broadly and need not include "indirectly" because the noun already covers that concept |
| Whether legislative history limits the FDCPA to "repo-man" style collectors and excludes passive debt owners | Barbato: Even if Congress targeted repo-men, debt buyers that exist solely to monetize acquired debt function like traditional debt collectors | Crown: Legislative history shows Congress aimed at active harassing collectors, not passive owners | Court held statutory text -- broad and clear -- controls; market incentives make debt buyers like Crown align with collectors, so legislative-history argument fails |
Key Cases Cited
- Henson v. Santander Consumer USA Inc., 137 S. Ct. 1718 (2017) (clarified that debt buyers collecting for their own account do not fall under the "regularly collects" prong)
- Tepper v. Amos Fin., LLC, 898 F.3d 364 (3d Cir. 2018) (explained that an entity can satisfy both creditor and debt-collector definitions; default rule is not dispositive)
- Pollice v. Nat'l Tax Funding, L.P., 225 F.3d 379 (3d Cir. 2000) (held debt buyer whose principal purpose is collection is a debt collector even when collection is outsourced)
- Check Investors, Inc. v. FTC, 502 F.3d 159 (3d Cir. 2007) (discussed prior Third Circuit treatment of creditor vs. debt collector as mutually exclusive)
- Meyer v. Holley, 537 U.S. 280 (2003) (explains that statutory torts are construed against a background of ordinary vicarious liability principles)