"A law firm that sent delinquency notices to tenants for multiple landlords was engaged in debt collection regulated by the Fair Debt Collection Practices Act, or FDCPA, the Western District of Virginia has ruled."
Why this is important: In Lord, et al., v. Senex Law PC, the law firm claimed its clients were the only “debt collectors” regulated by the FDCPA because each landlord reviewed and electronically signed the notices sent to tenants. The plaintiffs each rented apartments from landlords who retained Senex. In early 2020, each tenant received monthly notices demanding payment of various amounts of overdue rent, late fees and attorneys’ fees. Individually and as a class, the tenants sued Senex for violations of the FDCPA in September 2020. Senex moved to dismiss on grounds that it was not a debt collector subject to the FDCPA. The Court rejected the argument that, as a matter of law, Senex was not a debt collector.
The notices
Senex Law is a Virginia law firm that provides services to landlords, including those associated with tenant rent delinquency. Either using Senex’s email, fax or online portal, landlords submitted delinquent rent reports. The reports included the tenant’s name and address and charges due, as well as the landlord’s name and contact information. Senex receives these reports each month and uses them to fill out their notice templates. Unsigned copies of each notice are sent to the landlords, who review and electronically sign them before Senex conducts its “attorney review.” Senex charges for each attorney review, which the landlords passed along to the tenants as “attorney’s fees.” The notices were dated according to when Senex attorneys finished their review. Each notice was printed on the landlord’s letterhead with their contact information and instructions to make payments to the landlord.
Signatures
The FDCPA defines “debt collector” as “any person who uses an 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.” The Court agreed with some courts in the 2nd U.S. Circuit Court of Appeals that the landlord’s electronic signature did not immunize Senex from FDCPA liability.
‘Regularly collects’
Under the FDCPA, a debt collector is defined by using one of two tests: the principal purpose test and the regularly collects test. The Court used the “regularly collects” test and noted that the U.S. Supreme Court has “understood that to mean that ‘Congress intended that lawyers be subject to the Act whenever they meet the general “debt collector” definition.”’ Given Senex’s pattern of sending out frequent notices, its patterns indicating an ongoing relationship with the landlords and its online systems to facilitate debt collection, the Court found that “it is clear that Senex regularly engages in debt collection activity.”
‘Ministerial’ and UETA
The Court rejected that Senex was only acting in a ministerial capacity finding, among other things, that Senex’s retention of delinquent tenant information for subsequent debt collection could not be deemed ministerial. The Court also rejected Senex’s argument that under the Uniform Electronic Transactions Act (UETA) the electronic signatures of the landlords be given legal effect such that the landlords’ signatures established the notices to be their own acts.
The Court ultimately concluded that the FDCPA applied stating that “Instead of merely serving as a mailing service, [Senex] provides a turn-key delinquent rent processing system for its landlord clients. Importantly, [Senex] retains the delinquent tenant’s information for follow-up collection and eviction proceedings. In no sense can the integrated … delinquent rent collection system be deemed ministerial.” ---
Bryce J. Hunter
