Eighth Circuit Rejects FDCPA Claims Based on Assignment of Collection Agreement

In  Klein v. Affiliated Grp., Inc., No. 19-3562, 2021 U.S. App. LEXIS 10602 (8th Cir. Apr. 14, 2021) the U.S. Court of Appeals for the Eighth Circuit affirmed summary judgment on behalf of debt collectors related to claims they violated the FDCPA in connection with the assignment of a collection agreement.

The plaintiff owed money to a hospital, North Memorial Health Care, and after the plaintiff applied for financial assistance and was denied, the hospital assigned the debt to a debt collector, The Affiliated Group (TAG). The debt collector sent the plaintiff a letter about the debt which did not mention the hospital’s financial assistance policy. Thereafter, the debt collector merged with another debt collector, Credit Management, LP (CMLP). Operating under the second debt collector’s name, a second letter similar letter was sent to the plaintiff.  The plaintiff alleged the letters violated the FDCPA:

At all relevant times, North Memorial had an agreement with the Minnesota Attorney General requiring North Memorial to enter into written contracts with any third-party debt collection agency. The agreement required North Memorial to include contract  language which would oblige debt collectors to comply with federal law and would require North Memorial to confirm that the patient was given a reasonable opportunity to apply for charitable care or other need-based relief.

After receiving the CMLP letter, Klein sued TAG and CMLP, arguing that they violated the FDCPA by failing to have a written contract as required by North Memorial’s agreement with the Minnesota Attorney General, making false statements in the March 2018 letter, and failing to include information about North Memorial’s financial assistance policy in the November 2017 and March 2018 letters. The district court analyzed each of Klein’s points, concluded that none of them carried the day, and entered summary judgment in favor of TAG and CMLP.

Although the plaintiff disputed that there was sufficient evidence of a merger between the two debt collectors, the Court of Appeals found that under Minnesota law there was an assignment of the collection agreement sufficient to put the second debt collector in privity with the hospital:

In line with Cascades, we conclude that the assignment of a contract is enough to put the assignee into privity with an original party to that contract under Minnesota law. So, the record before the district court established that there was a written agreement between North Memorial and CMLP due to TAG’s assignment. Despite the district court’s use of the term “merger” to describe this state of affairs, there is no dispute over a material fact and summary judgment on this issue was proper. See Beckley v. St. Luke’s Episcopal-Presbyterian Hosps., 923 F.3d 1157, 1160 (8th Cir. 2019) (“We may affirm on any basis supported by the record.”).

Therefore, the Court rejected plaintiff’s argument that the second letter was false, deceptive, or misleading:

We have already decided that CMLP was the valid assignee of the contract between North Memorial and TAG. So CMLP could legally take action to collect that debt on behalf of North Memorial, and CMLP did not violate § 1692e by saying as much. Also, the body of CMLP’s letter contained language identical to that in TAG’s letter and did not do anything different from TAG’s letter. In fact, both letters were signed by the same administrator, were labelled with the same physical addresses, listed the same contact telephone numbers, logged the same two charges Klein owed to North Memorial, and clearly spelled out that North Memorial was the debt owner. Compare App. 94 with App. 107. Even viewing all of this from the perspective of the unsophisticated consumer, no reasonable jury would  believe that any deception was caused by the phrase “the above-listed account[] has been turned over to us by our client,” nor was that statement false in light of our earlier canvass of Minnesota contract law. App. 107. We conclude the district court did not err when it granted summary judgment on this issue.

And the Court did not find the failure to disclose the hospital’s financial assistance policy was actionable because the debt collectors were not hospitals and the requirement did not apply to them:

We conclude they did not. TAG and CMLP are separate entities from North Memorial. North Memorial assigned only its ability to collect debt to TAG and CMLP, not its medical billing function—and the record shows that Klein received a medical bill and attempted to avail herself of North Memorial’s financial assistance policy without success before getting the debt collection letters. The FDCPA mandates that TAG and  CMLP comply with its terms in collecting debt, but that law does not impute North Memorial’s responsibility to comply with Treasury Department medical billing regulations to debt collectors working on its behalf. For that reason, we conclude that the letters TAG and CMLP sent are outside the Treasury Department regulations’ scope.