Unveiling Debt Collectors: Does the FDCPA Limit “Debt Collector” Liability to Corporate Entities?
Volume 82, No. 5, Spring-Summer 2010
By Sean M. O'Neill

Congress passed the Fair Debt Collection Practices Act (“FDCPA”) to deter debt collectors from abusing debtors while attempting debt collection. Congress recognized that the debt collection industry’s growth would likely result in more contact between debt collectors and consumers, and that the likelihood of abuse would increase absent regulation and consistent state action against abusive practices. While the FDCPA provides greater anti-abuse safeguards than the previous regime, the FDCPA’s arguably ambiguous definition of “debt collector” hinders the FDCPA’s prospect of promoting consistent state action.

The issue of whether shareholders, employees, directors, and officers can be held personally liable under the FDCPA has become a hotly contested topic, resulting in a split among federal circuit courts. The issue’s ultimate resolution will impact attorneys, consumers, agents of debt collection companies, the debt collection industry itself, and the confines of state corporate law when it conflicts with the broad reading of a federal statute. Debt collectors, some of whom are attorneys, may incorporate their business and reasonably expect immunity from personal liability under state law for acts taken on behalf of the corporation. While a few courts have ruled that debt collectors, working in their corporate capacity, cannot be held personally liable for violations of the FDCPA without piercing the corporate veil, the clear majority of courts will impose personal liability on a corporate actor if he or she is personally involved with the FDCPA violation at issue, notwithstanding state corporate law that may effect a different result.

This Comment will examine the circuit split among federal courts on this issue and will argue for the adoption of the personal involvement approach, which provides a standard more in tune with the FDCPA’s legislative history, purpose, and plain meaning. Part II of this Comment will review the current state of the circuit split existing among the federal courts on this issue. Part II.A will focus on the legislative history of the FDCPA and the provisions of the FDCPA pertaining to debt collectors. Part II.B.1 will provide a brief overview of the veil piercing doctrine and limited liability. Part II.B.2 will examine the reasoning of the Seventh Circuit in White v. Goodman and Pettit v. Retrieval Masters Creditors Bureau, Inc., as well as a supporting federal district court decision. This line of authorities holds that in order for an employee, shareholder, officer, or director to be held personally liable for a violation of the FDCPA, the plaintiff must first show a basis for piercing the corporate veil. Finally, Part II.B.3 will examine the arguments of the opposing authorities, which hold employees, shareholders, directors, and officers personally liable for violations of the FDCPA in which they were personally involved, without resorting to a veil piercing analysis.

Part III.A will address the fundamental flaws of Pettit’s and White’s reasoning that justified the interjection of the veil piercing analysis for purposes of determining whether a debt collector can be held personally liable. Specifically, Part III.A.1 will examine the flaws of the Seventh Circuit’s narrow reading of the statute while Part III.A.2 will analyze the problems with the Title VII analogy relied upon by the Seventh Circuit in making its decision. Part III.B will highlight the strengths of the premises underlying the personal involvement approach and contend that the approach furthers the purposes and policies of the FDCPA. Part III.B.1 proposes that the clear jurisprudential trend favors disregarding the corporate veil analysis. Part III.B.2 argues that applying veil piercing theory in these cases frustrates, rather than furthers, the FDCPA’s purpose. Lastly, Part III.B.3 asserts that analogizing the FDCPA to the Comprehensive Environmental Response, Compensation, and Liability Act of 1980 (“CERCLA”) is more persuasive than the Seventh Circuit’s Title VII analogy.

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