District Court (Tex.) Says Repossession Referral Agency is Subject to the FDCPA as Engaged in Debt Collection

In Melcher v. Titlemax of Tex., Inc., No. 3:21-cv-46, 2022 U.S. Dist. LEXIS 95414, at *11-13 (S.D. Tex. May 27, 2022), Judge Brown denied a motion to dismiss under the FDCPA filed by a repossession referral agency.

MVTrac argues that despite the plaintiffs’ allegations, it is neither a debt collector nor a skip-tracing company. Dkt. 29 at 7. Though there is no statutory definition of “skip tracer,” the Seventh Circuit has defined “skip tracing” as “the process of locating a debtor and his property’s whereabouts.” United States v. Cummings, 395 F.3d 392, 394 (7th Cir. 2005). And though MVTrac argues that it is not a skip tracer, it admits that it “attempt[s] to locate vehicles subject to liens and forward the location for recovery.” Dkt. 29 at 7 n.1.  There is considerable dispute throughout the federal judiciary on whether skip tracers qualify as debt collectors under the FDCPA. The Fifth Circuit has spoken on neither that issue nor on whether a repossession middleman can be a debt collector under the FDCPA. Nevertheless, the court is confident the Fifth Circuit would likely find, on this record, that MVTrac is a debt collector. Its actions surpass what can be classified as merely “skip tracing.” More than just a data collector or information provider, MVTrac is a middleman that directly profits from the successful repossession of property. It advertises itself as a “[f]ull service recovery operation connecting lenders and repossession agents to facilitate quicker and more compliant recoveries.” Dkt. 31 at 4.5  MVTrac also has a subscription service that financially incentivizes the repossessing of vehicles by its subscribers—repossession companies like NJC Asset Repo. See Dkt. 31 at 4; MVConnect, LLC v. Recovery Database Network, Inc., No. 3:10-cv-1948, 2011 U.S. Dist. LEXIS 161409, 2011 WL 13128799, at *2 (N.D. Tex. May 27, 2011) (“When a subscriber to the MVTRAC ALPR system locates a vehicle that is to be repossessed, the subscriber, acting as an independent contractor, is authorized to repossess that vehicle on behalf of MVRecovery. The subscriber earns a repossession fee for repossessing the vehicle.”).  MVTrac’s model uses the internet, an “instrumentality of interstate commerce,” to connect subscriber-creditors, such as TitleMax, with a repossession agent, such as NJC Asset Repo, to “collect, directly or indirectly, debts owed or due or asserted to be owed or due another.” § 1692a(6). The relationship between MVTrac and NJC Asset Repo incentivizes repossessors to take property. Taken as true, these facts support a reasonable inference that MVTrac is a debt collector under the FDCPA.