At Corey D. McGaha PLLC, we are proud to have played a role in a significant legal ruling regarding debt collection practices. In Reygadas v. DNF Associates, LLC, the Eighth Circuit Court of Appeals examined key issues under the Fair Debt Collection Practices Act (FDCPA), providing crucial guidance for both consumers and businesses.

The Case Background

The case involved Stephanie Reygadas, who filed a lawsuit against DNF Associates, LLC, a company that purchased her defaulted debt. DNF had hired a third-party collection agency, Radius Global Solutions, LLC (RGS), to collect the debt. The issue arose when RGS sent a collection letter directly to Reygadas, even though she had legal representation—a violation of the FDCPA, which prohibits direct communication with debtors who have attorneys.

Reygadas sued DNF under the FDCPA and Arkansas Fair Debt Collection Practices Act (AFDCPA), claiming that DNF was liable for the actions of its third-party collector. The district court granted partial summary judgment in Reygadas’s favor, ruling that DNF was a “debt collector” and could be held responsible for the collection agency’s actions.

Key Legal Findings

The Eighth Circuit’s opinion in this case tackled two major legal questions:

Is DNF Associates a debt collector under the FDCPA? The court affirmed that DNF, as a debt buyer whose principal business involves collecting debts, qualifies as a “debt collector” under the FDCPA. DNF argued that it merely purchased debts and outsourced collection activities, but the court ruled that because DNF’s principal purpose is the collection of debts, it falls within the FDCPA’s scope.

Can DNF be held vicariously liable for the actions of its third-party collector? The court ruled that vicarious liability could not be imposed on DNF in this case because the third-party collector (RGS) did not have knowledge that Reygadas was represented by an attorney. While the FDCPA holds debt collectors accountable for violations like contacting a represented debtor, vicarious liability requires that the agent (in this case, RGS) know of the debtor’s legal representation. Since RGS did not know, DNF could not be held liable for RGS’s actions.

What This Means for Debt Buyers and Consumers

This ruling has important implications:

For debt buyers: Companies that purchase defaulted debt and hire third parties to collect on it should be aware that they may still be considered debt collectors under the FDCPA, even if they do not personally collect the debts. Businesses should ensure that their third-party collectors are fully informed and compliant with the FDCPA to avoid potential liability.

For consumers: The FDCPA provides robust protections against unfair debt collection practices. If you are represented by an attorney, debt collectors are legally prohibited from contacting you directly. Consumers should be aware of their rights and take action if those rights are violated.

Conclusion

The Reygadas v. DNF Associates, LLC decision reinforces the importance of compliance with the FDCPA in debt collection activities, particularly for debt buyers. If you have any concerns about debt collection practices or need assistance with a related legal issue, Corey D. McGaha PLLC is here to provide expert legal guidance and representation. Contact us to learn more about how we can help protect your rights.