I defaulted on a credit card last year, and the bank authorized a collection agency to get their money. The agency made a few FDCPA and Rosenthal violations (California), so I threatened to counter-sue. Then the bank transferred it to another agency, and virtually the same thing happened. They are now on the third agency, who made another violation (disclosing my financial info to a third party). The bank did not sell the debt, they've always held it. Because I do owe this money, I want to make a settlement. For leverage, though, can I hold the bank accountable of the actions of the debt collectors who were working on their behalf? I want to use the option of counter-suing for harassment in addition to the collection violations, because this has happened three times.
Debt Collection Attorney
Generally speaking, no. FDCPA liability is not imputed to the original creditor unless both the original creditor and collection agency are debt collectors within the meaning of the statute. In re Cooper, 253 B.R. 286, 291 (Bankr. N.D. Fla. 2000).
However, because you live in California, you are entitled to additional protection from first-party creditors. Although the Fair Debt Collection Practices Act (FDCPA) applies to every state, not all states provide its residents additional protection from collectors like California provides its residents under the Rosenthal Fair Debt Collection Practices Act (Rosenthal Act). In other words, California residents are protected under two laws, both the federal law (FDCPA) and the state law (the Rosenthal Act). The most important distinction between the FDCPA and the Rosenthal Act is the fact that the Rosenthal Act allows protection from first-party creditors. That is, credit card companies cannot harass debtors while attempting to collect debts.
The legislative intent behind the Rosenthal Act is quite clear. Section 1788.1 of The Rosenthal Act states, “The Legislature makes the following findings: (1) The banking and credit system and grantors of credit to consumers are dependent upon the collection of just and owing debts. Unfair or deceptive collection practices undermine the public confidence which is essential to the continued functioning of the banking and credit system and sound extensions of credit to consumers. (2) There is need to ensure that debt collectors and debtors exercise their responsibilities to one another with fairness, honesty and due regard for the rights of the other.”
Although most of the cases I handle are debt collection harassment cases against third-party collection agencies, the Rosenthal Act is a valuable second layer of protection provided to California residents because first-party creditors can be some of the most aggressive collectors out there. This is most likely the case because very few states give its residents protection from first-party creditors. In other words, credit card companies’ collection departments may operate under the assumption that the FDCPA does not apply to them, so collection efforts may be a little more aggressive. Although this assumption is correct regarding the FDCPA, credit card companies should be careful when collecting debts from residents in California.
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Debt Collection Attorney
I am not sure how much leverage you would have by threatening to sue. If you have a viable case under the FDCPA or RFDCPA, you should have an attorney assist you and file the case. As to the liability of the original creditor (such as one of the "too big to fail" banks), you can allege agency and also violations under the RICO statutes. After the pleadings are filed, and the bank gets its first billing from some gigantic, expensive law firm, the case will be ripe for settlement.
Talking to a debt collector, and threatening a cross complaint or a lawsuit, is not likely to get you anywhere. They should try to settle, but I doubt that they will do more than give you a payment plan.