The Fair Debt Collection Practices Act Does Not Apply to Fines

The Fair Debt Collection Practices Act Does Not Apply to Fines

Businesses taking extra steps to make sure they are not violating the Fair Debt Collection Practices Act (“FDCPA”) in debt collecting may have less to worry about if they are collecting “nonconsensual fines”. See Gulley v. Markhoff & Krasny, 664 F.3d 1073 (7th Cir.2011).

The FDCPA is a consumer protection amendment with the purpose of deterring abusive debt collection practices in the collection of consumer debt. The Act also imposes strict guidelines on how and when debt collectors may conduct business.  For example, if debt collectors call before 8:00am, call third parties to try and locate you, threaten to sue you when the collector has no intention to do so, or use deceptive methods in trying to collect a debt, there is likely a FDCPA violation.

The vague prohibition on using “deceptive methods” gives a lot of room for businesses and firms to violate the Act. Section 1692e of the FDCPA provides generally that “[a] debt collector may not use any false, deceptive, or misleading representation or means in connection with the collection of any debt.” 15 U.S.C. § 1692e. In addition, “[w]ithout limiting the general application of the foregoing,” section 1692e proscribes sixteen specific debt collection practices, including “[t]he false representation or implication that any individual is an attorney or that any communication is from an attorney.” Id. § 1692e(3).

However, in order for any section of the FDCPA to apply, it must be established that there was a “debt collector” seeking satisfaction of “debts” from “consumers”. Holt v. MRS BPO, LLC, No. 12 C 2571, 2013 WL 5737346, at *4 (N.D. Ill. Oct. 21, 2013)(citing  McKinney v. Cadleway Props., Inc., 548 F.3d 496, 500 (7th Cir.2008).

So what if you are not collecting “debts”? The FDCPA defines a “debt” as “any obligation or alleged obligation of a consumer to pay money arising out of a transaction in which the money, property, insurance, or services which are the subject of the transaction are primarily for personal, family, or household purposes, whether or not such obligation has been reduced to judgment.” 15 U.S.C. § 1692a(5). The FDCPA does not define “transaction”, but the Seventh Circuit has interpreted the term to mean “those obligations to pay arising from consensual transactions, where parties negotiate or contract for consumer-related goods or services.” Bass v. Stolper, Koritzinsky, Brewster & Neider, S.C., 111 F.3d 1322, 1326 (7th Cir.1997); see also Hawthorne v. Mac Adjustment, Inc., 140 F.3d 1367, 1371 (11th Cir.1998) (“[A]t a minimum, a ‘transaction’ under the FDCPA must involve some kind of business dealing or consensual obligation.”).

Based on this interpretation, courts have held that “fines”—penalties imposed for breaking the law or some other rule—are not the results of consensual transactions and thus cannot be “debts” under the FDCPA. See Gulley v. Markhoff & Krasny, 664 F.3d 1073, 1075 (7th Cir.2011). Therefore, the Act’s specific guidelines regarding collections do not apply to fines.


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