Debt Purchasers Need Collection License

Gray v Suttell & Associates (Supreme Court WA, Aug 28, 2014)


Copy of the Opinion: 140828 WSC Gray v Suttell

Over a thousand collection lawsuits were filed in the name of the purchaser of the debt. The Supreme Court held that was unlawful if the buyer did not have a debt collection license from Washington State. The court included the following industry analysis in its opinion.

Since the enactment of the WCAA, the debt collection industry has grown and changed to keep up with the increasing amount of consumer delinquent debt. TheFederal Trade Commission noted that ‘”[t]he most significant change in the debt collection business in recent years has been the advent and growth of debt buying.”‘FED. TRADE COMM’N, THE STRUCTURE AND PRACTICES OF THE DEBT BUYING INDUSTRY (2013) (alteration in original) (quoting FED. TRADE COMM’N, COLLECTING CONSUMER DEBTS: THE CHALLENGE OF CHANGE 13 n.1 (2009)). Although a relatively new industry, by 2007, the debt collection industry employed over 200,000 people and reported annual revenue of $58 billion from consumer collections. RICK JURGENS & ROBERT J. HOBBS, NAT’L CONSUMER LAW CTR., THE DEBT MACHINE, HOW THE COLLECTION INDUSTRY HOUNDS CONSUMERS AND OVERWHELMS COURTS 5 (201 0). A “debt buyer” is an entity or individual that purchases delinquent or charged-off debts from a creditor, usually for a fraction of the face value of the debt, and then takes some action to collect on those claims. H.B. REP. on SUBSTITUTE H.B. 1822, at 2, 63d Leg., Reg. Sess. (Wash. 2013).
There is growing concern that collection practices employed by debt buyers are harmful to consumers. A legislative staff summary of public testimony in support of the recent amendments reported: Many of the worst abuses in the debt collection industry are by debt buyers. Debt buyers purchase mass portfolios of charged off debt for pennies on the dollar, with little evidentiary basis, and get massive default judgments because the consumers have no notice of the lawsuit. Consumers have had to go to great lengths to rectify judgments based on fraudulent or paid-off claims that were sold to debt buyers who did not know they were buying illegitimate claims.

Indeed, up to one-half of all purchased debt is resold several times over, which can make it difficult for the original debtor to recognize the debt because the collector  is no longer the original creditor. FED. TRADE COMM’N, REPAIRING A BROKEN SYSTEM:  PROTECTING CONSUMERS IN DEBT COLLECTION LITIGATION AND ARBITRATION 5 (2010).  Responding to these concerns, the Washington State Legislature amended the WCAA  in 2013 to explicitly reach debt buying entities. The issue here is whether the  preamended definitions also cover debt buyers.

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