Gray v. Suttell & Assocs. ( 2014 )

Fl LE.
IN CLERKS OFFICE This .opinion was filed for record
DA AUG 2 8 2014 t
IIUPMME COURT,IJDICI'I OI'M:II ..ul at- s:oodtk\ on ttY,9-2?'h20J4
. ·..
Ronald R. Carperri:er
~ Supreme Court Clark
IN THE SUPREME COURT OF THE STATE OF WASHINGTON
CERTIFICATION FROM UNITED STATES )
DISTRICT COURT FOR THE EASTERN )
DISTRICT OF WASHINGTON IN ) No. 88414-5
)
KELLI GRAY and all others similarly situated, ) En Bane
)
Plaintiffs, )
) Filed AUG 2 8 2014
v. )
)
SUTTELL & ASSOCIATES; MIDLAND )
FUNDING, LLC; MARK T. CASE and JANE )
DOE CASE, husband and wife; and KAREN )
HAMMER and JOHN DOE HAMMER, )
)
Defendants. )
)
------------------------- )
)
EVA LAUBER; DANE SCOTT; SCOTT )
BOOLEN; JOEL FINCH; and all others )
similarly situated, )
)
Petitioners, )
)
v. )
)
ENCORE CAPITAL GROUP, INC.; MIDLAND )
FUNDING, LLC; MIDLAND CREDIT )
MANAGEMENT, INC.; SUTTELL & HAMMER, )
PS; MARK T. CASE and JANE DOE CASE, )
husband and wife; MALl SAL. GURULE and )
No. 88414-5
JOHN DOE GURULE; KAREN HAMMER and )
ISAAC HAMMER, wife and husband; WILLIAM )
SUTTELL and JANE DOE SUTTELL, husband )
and wife, )
)
Responden~. )
)
WIGGINS, J.-ln response to questions certified to this court, we hold that debt
buyers fall within the definition of "collection agency" under the Washington Collection
Agency Act (WCAA), chapter 19.16 RCW, when they solicit claims for collection.
Accordingly, if the court finds that Midland Funding LLC solicited claims, then Midland
Funding is a collection agency and it cannot file collection lawsuits without a license.
ISSUES
The United States District Court for the Eastern District of Washington certified
the following questions to us:
1. Does the definition of "collection agency" in RCW 19.16.1 00(2) 1
include a person who 1) purchases claims that are owed or due or
asserted to be owed or due another, 2) undertakes no activity on said
delinquent consumer account but rather contracts with an affiliated
collection agency to collect the purchased claims, and 3) is the
1The definitions in this section were recently alphabetized pursuant to RCW 1.08.015(2)(k).
LAWS OF 2013, ch. 148, §§ 1, 3. Accordingly, the definition of "collection agency" is now under
RCW 19.16.1 00( 4 ). However, this opinion cites to prealphabetized RCW 19.16.100 to ensure
consistency with the briefs.
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No. 88414-5
named plaintiff in a subsequent collection lawsuit for said purchased
claims?
2. Can a company, such as Midland Funding, LLC, file lawsuits in the
[state of] Washington on delinquent consumer accounts without being
licensed as a collection agency as defined by RCW 19.16.1 00(2)?
Certification from United States District Court for the Eastern District of
Washington, No. CV-09-251-EFS consolidated with No. CV-1 0-5132-EFS (E.D.
Wash. 2013).
FACTS
This lawsuit involves two consolidated suits: Gray v. Sutte/1 & Assocs., No. CV-
09-251-EFS (E. D. Wash.), and Lauber v. Encore Capital Grp., No. CV-1 0-5132-EFS
(E.D. Wash.). 2 On April8, 2011, plaintiffs filed an amended complaint, alleging claims
under Washington's Consumer Protection Act (WCPA), chapter 19.86 RCW, and the
federal Fair Debt Collection Practices Act (FDCPA), 15 U.S.C. §§ 1692-1692p. These
claims are based in part on plaintiffs' assertion that Midland Funding's business
2 In the Gray lawsuit, Kelli Gray failed to pay for an item she ordered from Spiegel Brands Inc.
Electronic Case File (ECF) 428, at 1. Midland Funding purchased Gray's defaulted Spiegel
account and assigned the account to its servicer, Midland Credit Management Inc. (MCM),
which then turned the account over to Suttell & Associates, a law firm that filed a collection
lawsuit against Gray in Spokane County Superior Court. /d. at 1-2. On August 12, 2009,
Gray filed her lawsuit, alleging that the Midland defendants and Suttell violated the federal
Fair Debt Collection Practices Act (FDCPA), 15 U .S.C. §§ 1692-1692p; Washington's
Consumer Protection Act (WCPA), chapter 19.86 RCW; and the WCAA by serving and filing
time-barred lawsuits, requesting unreasonable attorney fees, and acting as a collection
agency without a license. ECF at 1-2. On November 10, 2010, plaintiffs Eva Lauber, Dane
Scott, Scott Boolen, and Joel Finch filed their putative class action on debt obligations that
they failed to pay. /d. The Lauber plaintiffs' complaint similarly alleges violations of the
FDCPA, WCPA, and WCAA based on the filing of affidavits in state court actions, and a
license claim. /d. On December 29, 2010, the court consolidated the Lauber and Gray cases.
/d.
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No. 88414-5
arrangements and debt collection processes violated the WCAA. See RCW
19.16.440; Evergreen Collectors v. Holt, 60 Wash. App. 151, 155, 803 P.2d 10 (1991)
(violation of WCAA is a per se violation of the CPA). The following chart illustrates the
relationships between Midland Funding and its parent companies.
Encore Capital Group Inc. (publicly held corporation)
l Owns
Midland Credit Management Inc. (licensed collection agency)
Midland Portfolio Services lnt~::ns 100% of Midland Funding)
l Owns
Midland Funding LLC (debt buying entity that owns the accounts?
Midland Funding purchases defaulted receivables, i.e., consumers' unpaid
financial commitments to credit originators such as banks, credit unions, consumer
finance companies, commercial retailers, auto finance companies, and
telecommunication companies. Midland Funding has no employees and is merely a
holding company for the delinquent accounts it purchases.
Midland Credit Management (MCM) services the defaulted accounts on behalf
of Midland Funding. Pursuant to the "Servicing Agreement," MCM decides how to
collect on the defaulted accounts purchased by Midland Funding. MCM's employees
manage the collection process and perform the collection acts for these defaulted
accounts. MCM is licensed by the State of Washington as a collection agency. To
fulfill its servicing duties, MCM contracts directly with Suttell & Associates, a law firm,
3 Note that MCM, the collection agency, owns the "owner" of the accounts it is collecting.
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No. 88414-5
to file collection lawsuits in Midland Funding's name. From 2005 to 2010, 1,082 cases
were filed in Washington superior courts naming Midland Funding LLC as plaintiff.
Defendants Midland Funding and Suttell argue that prior to recent amendments
to the WCAA, debt buyers did not fall within the definition of "collection agencies."
Thus, Midland Funding did not need not to obtain a collection agency license. In
February 2013, the federal district court certified the above questions to this court.
I. Overview of Washington's Collection Agency Act
Both state and federal law regulate collection agencies. The WCAA, chapter
19.16 RCW, enacted in 1971, requires collection agencies to obtain a license, follow
certain internal procedures, and adhere to a code of conduct. Prior to recent
amendments, the WCAA defined "collection agency" as:
(a) Any person directly or indirectly engaged in soliciting
claims for collection, or collecting or attempting to collect
claims owed or due or asserted to be owed or due another
person;
(b) Any person who directly or indirectly furnishes or attempts to
furnish, sells, or offers to sell forms represented to be a collection
system or scheme intended or calculated to be used to collect claims
even though the forms direct the debtor to make payment to the
creditor and even though the forms may be or are actually used by
the creditor himself or herself in his or her own name;
(c) Any person who in attempting to collect or in collecting his or
her own claim uses a fictitious name or any name other than his or
her own which would indicate to the debtor that a third person is
collecting or attempting to collect such claim.
Former RCW 19.16.100(2) (2003) (emphasis added). 4
4The drafters of the original 1971 bill included "factoring" agencies under the definition of
collection agencies. That language did not survive the Senate Judiciary Committee's review.
See Substitute S.B. 796, at 2, 42d Leg., 1st Ex. Sess. (Wash. Apr. 21, 1971) (on file with
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No. 88414-5
A recent amendment, effective October 1, 2013, adds subsection (d) to this
definition:
(d) Any person or entity that is engaged in the business of
purchasing delinquent or charged off claims for collection
purposes, whether it collects the claims itself or hires a third party for
collection or an attorney for litigation in order to collect such claims.
LAWS oF 2013, ch. 148, § 1 (emphasis added) (codified at RCW
19.16.1 00(2)( d)).
The federal FDCPA was enacted in 1977 to combat abusive debt collection
practices. 15 U.S.C. § 1692. Some provisions of the WCAA parallel provisions of
the FDCPA, but there are notable differences. For instance, the FDCPA regulates
'"debt collector[s]"' as opposed to "collection agencies." 15 U.S.C. § 1692a(6).
Because the FDCPA's definition of "debt collectors" differs from the WCAA's definition
of "collection agency," we do not find courts' interpretations of the FDCPA definition
instructive in this case.
II. Overview of Debt Purchasing
Since the enactment of the WCAA, the debt collection industry has grown and
changed to keep up with the increasing amount of consumer delinquent debt. 5 The
Wash. State Archives). Factoring consists of lending money to commercial clients, taking
accounts receivable as security, and collecting upon those accounts. While factoring is a
form of alternative financing to improve working capital, working with a collection agency is
an attempt to recover old debt.
5 As of November 2013, American consumers held over $800 billion of revolving, unsecured
debt. Consumer Credit- G. 19: Current Release: June 2014, BOARD OF GOVERNORS OF FED.
RES. SYs., http://www.federalreserve.gov/releases/g19/Current/#table1 (release date Aug. 7,
2014). According to a 2009 government accountability office report, "[a]pproximately 6.6
percent of credit cards were 30 or more days past due in the first quarter of 2009-the highest
[delinquency] rate in 18 years." U.S. Gov't Accountability Office, Credit Cards: Fair Debt
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No. 88414-5
Federal Trade Commission noted that '"[t]he most significant change in the debt
collection business in recent years has been the advent and growth of debt buying."'
FED. TRADE COMM'N, THE STRUCTURE AND PRACTICES OF THE DEBT BUYING INDUSTRY 1
(2013) (alteration in original) (quoting FED. TRADE COMM'N, COLLECTING CONSUMER
DEBTS: THE CHALLENGE OF CHANGE 13 n.1 (2009)). Although a relatively new industry,
by 2007, the debt collection industry employed over 200,000 people and reported
annual revenue of $58 billion from consumer collections. RICK JURGENS & ROBERT J.
HOBBS, NAT'L CONSUMER LAW CTR., THE DEBT MACHINE, HOW THE COLLECTION
INDUSTRY HOUNDS CONSUMERS AND OVERWHELMS COURTS 5 (201 0). A "debt buyer" is
an entity or individual that purchases delinquent or charged-off debts from a creditor,
usually for a fraction of the face value of the debt, and then takes some action to
collect on those claims. H.B. REP. on SUBSTITUTE H.B. 1822, at 2, 63d Leg., Reg.
Sess. (Wash. 2013).
There is growing concern that collection practices employed by debt buyers are
harmful to consumers. A legislative staff summary of public testimony in support of the
recent amendments reported:
Many of the worst abuses in the debt collection industry are by debt
buyers. Debt buyers purchase mass portfolios of charged off debt for
pennies on the dollar, with little evidentiary basis, and get massive
default judgments because the consumers have no notice of the lawsuit.
Consumers have had to go to great lengths to rectify judgments based
on fraudulent or paid-off claims that were sold to debt buyers who did not
know they were buying illegitimate claims.
/d. at 3.
Collection Practices Act Could Better Reflect the Evolving Debt Collection Marketplace and
Use of Technology 1 (2009), www.gao.gov/new.items/d09748.pdf.
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No. 88414-5
Indeed, up to one-half of all purchased debt is resold several times over, which
can make it difficult for the original debtor to recognize the debt because the collector
is no longer the original creditor. FED. TRADE COMM'N, REPAIRING A BROKEN SYSTEM:
PROTECTING CONSUMERS IN DEBT COLLECTION LiTIGATION AND ARBITRATION 5 (201 0).
Responding to these concerns, the Washington State Legislature amended the WCAA
in 2013 to explicitly reach debt buying entities. The issue here is whether the
preamended definitions also cover debt buyers.
ANALYSIS
Certified questions from federal court are questions of law that we review de
novo. Bradburn v. N. Cent. Reg'/ Library Dist., 168 Wash. 2d 789, 799, 231 P.3d 166
(201 0). We consider the legal issues not in the abstract but based on the certified
record provided by the federal court. /d. (citing RCW 2.60.030(2)). Once the court has
decided to rule on a certified question pursuant to RCW 2.60.020, the ruling is not
advisory but resolves actual issues pending in the federal proceeding and will be legal
precedent in all future controversies involving the same legal question. In re Elliott, 74
Wash. 2d 600, 446 P.2d 347 (1968).
Here, we hold that debt buyers are collection agencies under the WCAA when
they solicit claims for collection. Accordingly, if Midland Funding solicits claims for
collection, it is a collection agency and may not file collection lawsuits in Washington
without a license. RCW 19.16.110 (no person shall act as a collection agency without
first having applied for and obtained a license).
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No. 88414-5
I. Whether a Debt Purchaser Is a "Collection Agency" Subject to Licensing
Requirements under the WCAA
The first issue is whether debt buyers are "collection agencies" subject to
licensure under the WCAA. The relevant statutory provision defines a "collection
agency" as
[a]ny person directly or indirectly engaged in soliciting claims for
collection, or collecting or attempting to collect claims owed or due or
asserted to be owed or due another person.
RCW 19.16.1 00(2)(a). 6 We hold this definition is ambiguous, but the most reasonable
interpretation is that debt buyers fall within it when they solicit claims for collection. 7
Recent amendments additionally clarify that this interpretation is correct.
A. The statute is ambiguous
The purpose of statutory interpretation is "to determine and give effect to the
intent of the legislature." State v. Sweany, 174 Wash. 2d 909, 914, 281 P.3d 305 (2012);
6The statute also lists entities that are not collection agencies. RCW 19.16.1 00(3). However,
no provision specifically addresses debt buyers. Ch. 19.16 RCW.
7 "Solicit"
clearly requires some affirmative conduct, but the statute's ambiguity arises because
parties disputed whether the statute applied to debt buyers who were soliciting/collecting
claims they owned, as opposed to third party claims. Indeed, the Collection Agency Board
(Board)-the agency charged with administering the WCAA-struggled to determine whether
debt buyers fall under the statutory definition due to this ambiguity. See RCW 19.16.41 0. In
a July 2004 meeting, the Board adopted an interpretation that debt buyers that collect solely
on their own claims and in their own names are not covered by chapter 19.16 RCW. But in
a more recent October 2011 board meeting, the Board acknowledged its 2004 decision and
asked an assistant attorney general to reexamine whether debt buyers fall under the definition
of a "collection agency" in RCW 19.16.1 00(2). The assistant attorney general offered no
answer but suggested that debt buyers should fall under the department's regulatory
oversight responsibilities. Finally, during a September 2012 meeting, the Board unanimously
passed a resolution that the Board should "continue to review the issues" and "that the
Board's current and past minutes are not intended for use as persuasive authority on those
issues." Thus, the enforcing agency struggled to determine whether debt buyers fell within
the scope of the definition, ultimately deciding that further research was necessary. This
supports the conclusion that the statutory language is ambiguous.
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No. 88414-5
State v. J.P, 149 Wash. 2d 444, 450, 69 P.3d 318 (2003); In re Pers. Restraint of
Williams, 121 Wash. 2d 655, 663, 853 P.2d 444 (1993). When possible, the court derives
legislative intent solely from the plain language enacted by the legislature, considering
the text of the provision in question, the context of the statute in which the provision
is found, related provisions, and the statutory scheme as a whole. State v. Ervin, 169
Wash. 2d 815, 820, 239 P.3d 354 (201 0); Dep't of Ecology v. Campbell & Gwinn, LLC,
146 Wash. 2d 1, 9-10, 43 P.3d 4 (2002). We employ traditional rules of grammar to
discern plain meaning. State v. Jim, 173 Wash. 2d 672, 689, 273 P.3d 434 (2012) (citing
State v. Bunker, 169 Wash. 2d 571, 578, 238 P.3d 487 (201 0)). If the statute remains
susceptible to more than one reasonable meaning, it is ambiguous. City of Seattle v.
Fuller, 177 Wash. 2d 263, 269-70, 300 P.3d 340 (2013).
Here, the use of a comma and the disjunctive "or" to separate "soliciting claims
for collection" and "collecting or attempting to collect claims owed or due or asserted
to be owed or due another person" strongly suggests that there are two types of
collection agencies. See HJS Dev., Inc. v. Pierce County ex ref. Dep't of Planning &
Land Servs., 148 Wash. 2d 451, 473 n.94, 61 P.3d 1141 (2003); accord Riofta v. State,
134 Wash. App. 669, 682, 142 P.3d 193 (2006) ("or" is disjunctive unless there is clear
legislative intent to the contrary). In addition, the absence of a comma before the
qualifying phrase "owed or due or asserted to be owed or due another person"
indicates that the phrase refers only to the second type of collection agency. Bunker,
169 Wash. 2d at 578 (under the last antecedent rule, a qualifying phrase refers to the
last antecedent, but a comma before the qualifying phrase indicates that the phrase
applies to all antecedents).
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"Solicit" appears once more in another part of the statute listing prohibited
activities applicable to licensees; under RCW 19.16.250, licensees may not attempt
to enforce a claim by advertising or threatening to advertise sale of that claim and may
not solicit a claim by agreeing to advertise or threaten to advertise sale of that claim.
Thus, in both provisions, the two regulated actions are (1) enforcement/collection of a
claim and (2) solicitation of a claim.
Accordingly, a reasonable reading of the statute is that it defines two types of
"collection agencies": those that solicit claims for collection and those that collect
claims owed to another. Collection agencies that fall within the first category of
entities-entities that solicit claims for collection-need not collect claims owed to
another. Accordingly, we reject defendants' argument that debt buyers cannot be
collection agencies simply because they collect claims they purchase and own, and
we hold that debt buyers qualify as collection agencies under the WCAA as long as
they solicit claims for collection.
The statute does not define "solicit." See RCW 19.16.1 00. Webster's
dictionary defines "solicit" as "to endeavor to obtain by asking or pleading."
WEBSTER'S THIRD NEW INTERNATIONAL DICTIONARY 2169 (2002). In other words,
soliciting claims for collection involves conduct aimed at procuring a claim for
collection. A passive market participant does not "solicit" claims for collection. There
must be some affirmative act on the part of the solicitor. For example, the solicitor
could advertise that it is purchasing claims, target individual sellers, enter into
contracts with sellers to purchase claims, or perform market-based research to
generate lists used to purchase claims. See, e.g., RCW 19.182.01 0(7) ("direct
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No. 88414-5
solicitation" means "the process in which the consumer reporting agency compiles or
edits for a client a list of consumers who meet specific criteria and provides this list to
the client or third party on behalf of the client for use in soliciting those consumers for
an offer of a product or service"). By contrast, if a company is formed, sits idle, and
never actually solicits or acquires any claims for collection, that company has not
solicited claims for collection. Nor has a company solicited claims if it engages in no
marketing and merely passively accepts offers.
Here, it is possible that Midland Funding solicited claims for collection if it
affirmatively acted to acquire the claims it collected on. 8 But there are disputes
whether Midland Funding is, in fact, a passive debt buyer as opposed to one that
solicits claims for collection. It is not our task to make factual findings, only to explain
8 Midland Funding was formed to purchase claims for collection, has actually purchased
claims, and has subsequently filed 7,278 collection lawsuits in Washington between 2005 and
2010. It strains credulity to suggest that Midland Funding acquired 7,278 claims for collection
without ever undertaking any steps to solicit claims. In addition, defendant Encore Capital
files reports with the United States Securities and Exchange Commission (SEC). Defendants
Midland Funding and MCM's financial and operational information are not separately required
but, rather, are subsumed in the disclosures made by Encore Capital to the SEC. Indeed, in
its 201 0 10-Q filing with the SEC, Encore Capital explains:
Encore Capital Group, Inc. ("Encore"), through its subsidiaries (collectively, the
"Company"), is a systems-driven purchaser and manager of charged-off consumer
receivable portfolios .... The Company purchases receivables based on account-
level valuation methods, and employs a suite of proprietary statistical models
across the full extent of its operations .... Moreover, the Company has one of the
industry's largest distressed consumer databases, comprised of approximately 20
million consumer accounts.
ECF 128-1, at 5 (Encore Capital Grp. Inc. Quarterly Report (Form 10-Q), at 3 (Aug. 2, 201 0)).
Although the SEC filing does not conclusively establish that Midland Funding solicits claims
for collection, it has no employees and acts only through employees of other Encore Capital
subsidiaries.
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No. 88414-5
Washington law. Thus, we hold that Midland Funding, a debt buyer, is a "collection
agency" under RCW 19.16.1 00(2) if the district court finds that Midland Funding
solicited claims for collection-that is, if Midland Funding or its agents took any
affirmative steps to obtain claims for collection.
Regarding the remainder of the definition, there is no dispute that debt buyers
like Midland Funding are purchasing "claims" because Midland Funding purchases
portfolios of consumer debt, particularly credit card obligations, arising from
agreement or contract. See former RCW 19.16.1 00(5) ("claim" is "any obligation for
the payment of money or thing of value arising out of any agreement or contract,
express or implied"). In addition, Midland Funding solicits claims "for collection" even
if it outsources the collection as long as its purpose for soliciting the claim is collection.
None of the statutory exemptions applies to persons who outsource collection. See
former RCW 19.16.1 00(3)(a)-(f). In sum, debt buyers like Midland Funding fall within
the statutory definition of "collection agency" if they solicit claims for collection. This
interpretation gives effect to the overall purpose of the WCAA-to prohibit unfair or
deceptive debt collection practices.
B. The 2013 amendments to RCW 19.16.100 clarify that debt buyers are
"collection agencies"
Although we generally presume that a new legislative enactment is an
amendment that changes a law, the presumption may be rebutted by clear evidence
that the legislature intended an interpretive clarification. State v. Elmore, 154 Wash. App.
885, 905, 228 P.3d 760 (201 0) (citing Johnson v. Morris, 87 Wash. 2d 922, 926, 557 P.2d
1299 (1976)); see also Roe v. TeleTech Customer Care Mgmt. (Colo.) LLC, 171 Wash. 2d
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No. 88414-5
736, 751, 257 P.3d 586 (2011 ). The new amendment provides that a collection agency
includes:
(d) Any person or entity that is engaged in the business of
purchasing delinquent or charged off claims for collection purposes,
whether it collects the claims itself or hires a third party for collection or
an attorney for litigation in order to collect such claims.
LAWS OF 2013, ch. 148, § 1 (codified at RCW 19.16.100(2)(d)). There are two
indications that this amendment is a clarification and not a change in the law.
First, as discussed, former RCW 19.16.100(2)(a) was ambiguous with respect
to whether debt buyers who collect on claims they purchase and own are "collection
agencies." See Elmore, 154 Wash. App. at 905 (one indication a new enactment is a
clarification is that the original statute was ambiguous). There has been no judicial
guidance on the issue; no court has addressed whether debt buyers were included in
the statutory definition. Indeed, the reason the legislature amended the statute was
to make clear that debt buyers are covered. See FINAL B. REP. ON SUBSTITUTE H.B.
1822 at 1, 63d Leg., Reg. Sess., at 1 (Wash. 2013); H.B. REP. ON SUBSTITUTE H.B.
1822, at 2-3 (writing that debt buyers were not "specifically" or "technically" covered
by the WCAA, suggesting they were implicitly covered). The amended definition does
not conflict with the former statute. The legislature has merely clarified a definition
that, in application, connoted an ambiguous meaning.
Second, the legislature amended RCW 19.16.100 following uncertainty as to
whether the original enactment encompassed debt buyers. When an amendment is
adopted soon after a disagreement regarding the meaning of the law, courts have
concluded that the amendment is clarifying. See, e.g., Barstad v. Stewart Title Guar.
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No. 88414-5
Co., 145 Wash. 2d 528, 536-37, 39 P.3d 984 (2002) (legislature amended definition after
we declined to interpret definition in four consecutive decisions, holding that amended
statute resolved ambiguity); McGee Guest Home, Inc. v. Oep't of Soc. & Health Servs.,
142 Wash. 2d 316, 324, 12 P.3d 144 (2000) (amendments clarified legislature's view of
statute that a recent superior court decision had called into question). Here, for eight
years the Board struggled to determine whether debt buyers fell within former RCW
19.16.1 00(2)(a), ultimately deciding at a meeting in September 2012 that the issue
required yet further examination. Just a few months later, H. B. 1822 was introduced
in the House of Representatives. H.B. 1822, 63d Leg., Reg. Sess. (Wash. 2013) (first
reading on Feb. 11, 2013). Thus, the amendment's aim was to clarify uncertainties
that arose from the enforcement of the WCAA.
To conclude, we hold that the preamended definition of "collection agency"
includes debt buyers who solicit claims for collection. Midland Funding meets this
requirement if it sought to purchase delinquent debts for collection. The recent
amendment clarifies that debt buyers are collection agencies.
II. Whether Midland Funding May File Collection Lawsuits in Washington without
a License
The second certified question is whether a company, such as Midland Funding,
can file lawsuits in the state of Washington on delinquent consumer accounts without
being licensed as a collection agency. We hold that it cannot if it is found to be a
"collection agency" under former RCW 19.16.1 00(2) because RCW 19.16.110
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No. 88414-5
unambiguously requires persons acting as a collection agency to first obtain a
license. 9
RCW 19. 16.110 provides:
No person shall act, assume to act, or advertise as a collection agency
or out-of-state collection agency as defined in this chapter, except as
authorized by this chapter, without first having applied for and obtained
a license from the director.
All persons who act as a collection agency under the WCAA must obtain a license
under RCW 19. 16.110. 10 Here, if the district court finds that Midland Funding is a
"collection agency," then Midland Funding is in violation of RCW 19. 16.110. RCW
19. 16.110 unambiguously requires any person acting as a collection agency to obtain
a license. Midland Funding acts as a collection agency if it solicits claims for
collection. See former RCW 19. 16.1 00(2)(a). This section applies whether or not a
collection agency files collection lawsuits. 11
9 RCW 19. 16.260, regarding licensing prerequisites to collection lawsuits, was amended in
2013 to require collections agencies that file lawsuits to collect their own claims to allege and
prove that they are licensed. See LAws OF 2013, ch. 148, § 3 (adding "its own claim or" to the
provision). Because we can and do decide the case pursuant to RCW 19. 16.110, we need
not analyze the effect of this amendment. We also note that courts have analyzed claims
under RCW 19. 16.110 separately from claims under RCW 19. 16.260. See Moritz v. Daniel
N. Gordon, PC, 895 F. Supp. 2d 1097, 1112-113 (W.O. Wash. 2012) (finding plaintiff's RCW
19. 16.110 claim valid but the RCW 19.16.260 invalid because no evidence defendant violated
RCW 19.16.260 simply by violating RCW 19. 16.11 0); see Paris v. Steinberg & Steinberg, 828
F. Supp. 2d 1212 (W.O. Wash. 2011) (analyzing RCW 19. 16.110 claim first and then turning
to RCW 19.16.260 claim).
10We note that an entity that originates loans and then merely collects on its own claims
would not qualify as a "collection agency" under RCW 19. 16.100 and thus would not need to
be licensed.
11 Midland Funding may also need a license under the WCAA if it is found to be an alter ego
of its parent, MCM.
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No. 88414-5
CONCLUSION
To conclude, we answer the first certified question: Yes, the definition of a
"collection agency" in RCW 19.16.100 includes debt buyers if the debt buyer solicits
claims for collection. We answer the second certified question: No, Midland Funding
may not file lawsuits in Washington on delinquent consumer accounts without a
license if the district court finds that Midland Funding is a collection agency.
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No. 88414-5
v
WE CONCUR.
18