District Court (Minn.) Says Repossession Company and Repossession Company Assignor Were Subject to FDCPA; “Breach of the Peace” Suspended Current Right to Possession under FDCPA

In Altanie Hansen, Plaintiff, v. Santander Bank, N.A.; UAR Direct, LLC, d/b/a United Auto Recovery; 11th Hour Recovery, LLC, Defendants, No. 22-CV-3048 (SRN/TNL), 2023 WL 5533536, at *2–3 (D. Minn. Aug. 28, 2023), Judge Nelson found that a repossession company and the assignor were both subject to the FDCPA/1692a(6).

To be bound by the provisions of the FDCPA, Defendants must be found to be “debt collectors.” Debt collector is defined by FDCPA § 1692a(6):
The term “debt collector” means any person who uses any instrumentality of interstate commerce or the mails in any business the principal purpose of which is the collection of any debts, or who regularly collects or attempts to collect, directly or indirectly, debts owed or due or asserted to be owed or due another…. For the purpose of section 1692f(6) of this title, such term also includes any person who uses any instrumentality of interstate commerce or the mails in any business the principal purpose of which is the enforcement of security interests. 15 U.S.C.A. § 1692a(6).  § 1692a(6) provides both a general-purpose and limited-purpose definition of debt collector for purposes of the FDCPA. Companies that enforce security interests are not “debt collectors” under the general FDCPA definition, but they do meet the “limited-purpose definition” for liability under FDCPA § 1692f(6). See Obduskey v. McCarthy & Holthus LLP, 139 S. Ct. 1029, 1036 (2019). Repossession companies like 11th Hour are primarily in the business of the enforcement of security interests, so they are subject to § 1692f(6). “Courts in this district have plainly held that § 1692f(6) of the FDCPA does apply to repossession companies.” Buzzell v. Citizens Auto. Fin., Inc., 802 F. Supp. 2d 1014, 1020 (D. Minn. 2011) (internal citations omitted); see also Revering v. Norwest Bank Minn., N.A., Civ. No. 99–480/RHK/JMM, 1999 WL 33911360, at *5 (D. Minn. Nov. 30, 1999).
UAR, as the “middle man” between the creditor and repossession company, also operates to enforce security interests and is similarly subject to FDCPA § 1692f(6). See Buzzell, 802 F. Supp. 2d at 1021 (holding that FDCPA § 1692f(6) applies to a “middle man” just as it does a repossession company). Defendants argue that the lack of a FDCPA claim against Santander is an effective concession that Santander had a present right of possession that must apply to UAR and 11th Hour as well. (Defs.’ Mem. at 13.) However, “creditors” are defined separately under FDCPA § 1692a(4), and are not considered “debt collectors” for purposes of the FDCPA. “Debt collectors” are “third party collection agents working for a debt owner[, not a] debt owner seeking to collect debts for itself.” Henson v. Santander Consumer USA Inc., 582 U.S. 79, 83 (2017). Plaintiff could not have pleaded that Santander was a “debt collector” for purposes of § 1692f(6) because Santander is alleged to own the security interest at issue. (Am. Compl. ¶ 9.) Accordingly, Plaintiff has sufficiently pled that 11th Hour and UAR are “debt collectors” for purposes of FDCPA § 1692f(6).

The District Court also conduct an exhaustive analysis of the effect of a breach of the peace on the “present right to possession” under 15. U.S.C. § 1692f(6), concluding that a breach of the peace suspends the right to possession.

Defendants argue that a breach of the peace does not necessarily suspend a repossession company’s right to possession. (Defs.’ Reply Mem. in Supp. of their Mot. to Dismiss [Doc. No. 22] (“Reply”), at 8-10.) They cite Akerlund, where the plaintiffs argued that the defendants were liable under § 1692f(6) when they violated a Postal Service regulation prohibiting collecting private debts on postal property. Akerlund, 2001 WL 1631440, at *6. There, the Court “decline[d] to apply the breach of peace doctrine so broadly,” instead holding that the defendants “did not lose the present right to possession because they violated a Postal Service regulation” and so, did not violate the FDCPA despite the breach of the peace. Id.; see also Osborne v. Minnesota Recovery Bureau, Inc., No. 04-1167 (JRT/FLN), 2006 WL 1314420, at *1 (D. Minn. May 12, 2006) (holding that the defendants had the present right to possession despite a breach of the peace and dismissing the FDCPA claim.)   Despite these lower court decisions, the Eighth Circuit in Clarin was clear that a breach of the peace does suspend a repossession company’s present right to possession. Clarin, 198 F.3d at 665. The Minnesota District Court has followed Clarin’s lead. See Allen v. Fidelity Fin. Servs., No. Civ.98–1725 (ADM/AJB), 1999 WL 33911359 (D. Minn. Dec. 16, 1999); see also Moore v. Cap. One N.A., No. CV 14-4745, 2016 WL 1627604, at *2 (D. Minn. Apr. 22, 2016) (holding that because “there was no breach of the peace, [plaintiff]’s claims that [defendant] violated the FDCPA and Minnesota’s repossession statute, and committed conversion fail.”) Clarin and the Minnesota cases that follow are consistent with the interpretation of UCC Article 9 self-help repossession statutes in other jurisdictions. Breaches of the peace by repossession companies are considered “the type of abusive practice Congress sought to prevent in enacting FDCPA and specifically § 1692f(6).” Alexander v. Blackhawk Recovery & Investigation, L.L.C., 731 F. Supp. 2d 674, 680–81 (E.D. Mich. 2010) (holding that the plaintiff sufficiently alleged a breach of the peace and “thereby lost its right to possession of the vehicle” for purposes of FDCPA § 1692f(6)). An analysis of breach of the peace to determine present right to possession under FDCPA § 1692f(6) is the “majority approach” taken by federal courts. Westbrook v. NASA Fed. Credit Union, No. 3:17-CV-00534-AKK, 2019 WL 1056356, at *3 n.3 (N.D. Ala. Mar. 6, 2019), aff’d on other grounds, 799 F. App’x 722 (11th Cir. 2020) (collecting cases); see also Clark v. PAR, Inc., No. CV-15-02322, 2015 WL 13781846, at *3-5. (C.D. Cal. July 22, 2015) (rejecting the reasoning in Oehrlein, Akerlund, and Osborne and holding that the defendant was liable under the FDCPA because it did not have the present right to the collateral where it breached the peace during the attempted repossession). Consistent with Clarin, under Minnesota law, a breach of the peace can void Defendants’ present right to possession for purposes of FDCPA § 1692f(6).