In the recent case of Duncan v. Asset Recovery Specialists, Inc., the U.S. Court of Appeals for the Seventh Circuit, which includes Indiana, looked at whether the Fair Debt Collection Practices Act applied when a vehicle repossession company attempted to charge a $100 fee for returning personal property from a repossessed car to the debtor-owner.
The Act, known as the FDCPA, is a broad, complex federal law that regulates the behavior of third parties. Third parties can include collection agencies when they collect debts for lenders and other creditors. The FDCPA imposes specific restrictions on how, where and when collectors may contact and interact with debtors. It inherently requires third-party collectors to behave reasonably and truthfully throughout the collection process.
Did repossession firm violate the FDCPA?
In the Duncan case, Asset Recovery Services repossessed Danelle Duncan's car for Wells Fargo after she defaulted on her auto loan with the bank. She alleged that when she tried to pick up her personal property from the vehicle, Asset Recovery demanded she pay the handling fee. Her position was that this violated the FDCPA's prohibition on "impermissible debt collection."
Repossessor not a third-party collector
The Seventh Circuit disagreed, holding that Asset Recovery was not acting as a third-party collector for Wells Fargo's loan. Instead, the repossessor was imposing its own administrative fee. In addition, there was evidence that the bank had even agreed to pay the fee.
The court said that Duncan had also failed to show that the $100 administrative fee was an attempt to get her to make a payment on the Wells Fargo vehicle loan. Due to this determination, the FDCPA did not apply as Asset Recovery's actions because it was not acting as a third-party collector.
As the court wrote, "There is no way on this record to view the handling fee as some sort of masked demand for a principal payment to Wells Fargo." Citing previous case law, the court noted that a "repossessor does not ... play the role of a debt collector by charging an administrative fee for its own services."
We will continue to discuss in this space how courts and agencies interpret and apply the FDCPA.