Creditors Face Liability for Misrepresentations from Their Third-Party Debt Collectors  By Melissa Guseynov The U.S. Court of Appeals for the Second Circuit recently held that creditors may be liable under the false name exception to the Fair Debt Collection Practices Act (“FDCPA”) if they falsely represent to debtors they retained a third-party collection agent, when in fact the agent made no “bona fide” effort to collect.

It has long been the rule that creditors are generally not considered debt collectors subject to the FDCPA. However, the false name exception, codified in section 1692a(6), provides an exception in cases where creditors, “in the process of collecting [their] own debts, uses any name other than [their] own which would indicate that a third person is collecting or attempting to collect such debts.” 15 U.S. C. § 1692a(6).

In Vincent v. The Money Store, 2013 WL 5989446 (November 13, 2013), plaintiff homeowners claimed that The Money Store (“Money Store”) should bear liability under the FDCPA’s false name exception for sending allegedly deceptive debt collection letters in which it misrepresented that the law firm of Moss, Codilis, Stawiarski, Morris, Schneider & Prior, LLP (“Moss Codilis”) had been retained to collect on The Money Store’s behalf. In actuality, The Money Store only hired Moss Codilis to send 30-day “breach” letters and did not authorize them to take further action to collect. Moss Codilis sent some 88,937 letters on behalf of The Money Store, and earned between $3 million and $4.5 million in fees from 1997 through 2002. Id. at * 4.

On April 24, 2003, the plaintiffs commenced suit in the District Court for the Southern District of New York. The plaintiffs claimed The Money Store violated FDCPA by, among other things, creating the false impression that Moss Codilis had been retained and authorized to both collect on behalf of The Money Store, and commence legal action against borrowers. On December 7, 2005, Judge Sprizzo granted summary judgment to The Money Store, relying on a prior decision in a separate but related case, Mazzei v. Money Store, 349 F. Supp.2d 651, 661 (S.D.N.Y. 2004). In Mazzei, the District Court determined the plaintiffs could not rely on the false name exception because: (i) Moss Codilis, not The Money Store, sent the breach letters, (ii) Money Store did not pretend to be Moss Codilis, and (iii) The Money Store did not so systematically control Moss Codilis as to render them its alter ego. Id. at * 5-6. Consequently, Judge Sprizzo found The Money Store was exempt from FDCPA liability.  Id. at * 6.

After Judge Sprizzo’s death, the case was reassigned to Judge Koeltl, who denied the plaintiffs’ motion for reconsideration. The plaintiffs appealed, among other issues, the dismissal of their FDCPA claims to the Second Circuit.  Id.

In reversing the district court’s grant of summary judgment on the issue of the FDCPA false name exception, Chief Judge Katzmann, writing for the majority, explained that issues of fact existed as to whether Moss Codilis made “bona fide attempts” to collect The Money Store’s debts or whether it was simply performing as a “conduit” for a debt collection process controlled entirely by The Money Store. Id. at * 12. The majority concluded that a jury could determine the breach letters here “falsely implied that Moss Codilis was attempting to collect The Money Store’s debts and would institute legal action against debtors on behalf of The Money Store if the debtors did not resolve the delinquency.” Id. at * 12-13. Judge Katzmann vacated the dismissal of the FDCPA claims and remanded the case for further proceedings.

Judge Livingston dissented, stating that the majority’s “questionable” interpretation of the false name exception “will prove vexing,” as the parameters of the false name exception will now become unpredictable. Id. at * 26.

Vincent teaches that creditors and third-party collection agents must clearly communicate the parameters of the agent’s retention and the scope of its authority to act on behalf of the creditor. Moreover, once these parameters are determined, the agent must communicate this with delinquent debtors. Vincent makes it clear that creditors cannot simply ignore the messages delivered to borrowers by their outside collection agents. Lenders are encouraged to contact Richard Weltman, Michael Moskowitz or other members of the Weltman & Moskowitz team to better understand how the implications of Vincent can be put into practice to avoid future liability.

Melissa A. Guseynov, an associate of the firm, contributed research and reporting for this article.  

About Weltman & Moskowitz, LLP, A New York and New Jersey Bankruptcy, Business and Creditors’ Rights Law Firm:

Richard Weltman & Michael Moskowitz |

Richard E. Weltman and Michael L. Moskowitz founded Weltman & Moskowitz, LLP in 1987. Weltman & Moskowitz, LLP is a business, creditor’s rights and bankruptcy law firm serving clients in New York, Long Island, New Jersey and beyond. The firm concentrates on lender’s rights, corporate insolvency, resolution of commercial disputes, foreclosures, loan workouts and modifications, shareholder and partnership contests, business divorce, dissolution, and business and bankruptcy litigation, arbitration, and mediation of all types. Michael and Richard may be reached at 212.684.7800, 201.794.7500, or via email at or