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Friday, July 02, 2004

Are you a debt collector? That question was raised in Goldstein v. Hutton, Ingram, Yuzek, Gainen, Carrol & Bertolotti. There, a law firm was sued under the Fair Debt Collection Practices Act. The firm moved for summary judgment asserting that its actions -- sending out a three-day notice pursuant to the New York State Real Property Actions and Proceedings Law -- did not violate the Act and that it was not a debt collector within the meaning of the Act. The district court granted the motion on the second ground. The plaintiff appealed.

The district court's decision was grounded in the fact that the law firm had not derived significant revenue from debt collection over the past year, did not devote significant resources to that area of practice, did not market itself as a debt collector and had no regular client relationship with a debt collecting business. The Second Circuit, however, held that the determination of whether a law firm regularly engages in debt collection activity such as to make it a debt collector under the Act must be assessed on a case by case basis. In assessing "regularity," a court should consider a number of factors, including (1) the number of debt collection communications issued and/or debt collection litigations commenced over the relevant period, (2) the frequency of such communications or litigations, (3) whether the firm has personnel specifically assigned to work on debt collection matters, (4) whether the firm has systems or contractors in place to facilitate such activity and (5) whether the activity is undertaken in connection with ongoing client relationships with entites that have retained the frim to assist in the collection of outstanding debt collection activity.

Finding that, based on the facts before the district court, a rational fact finder could find that the law firm was a debt collector under the Act, the Second Circuit vacated the summary judgment and remanded the case for further proceedings.

The decision can be found here.

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