In FTC v. Am. Future Sys., No. 20-2266, 2021 U.S. Dist. LEXIS 83401, at *3-4 (E.D. Pa. Apr. 30, 2021), Judge Slomsky allowed the FTC to proceed on unfair debt collection claims against a debt collection agency collecting on business related education and publication debts.
On May 13, 2020, the FTC initiated this action against American Future Systems, Inc. (“AFS”), Progressive Business Publications of New Jersey, Inc. (“PBPNJ”), and Edward M. Satell (collectively the “AFS Defendants”). (See Doc. No. 1.) Defendant Edward M. Satell is “the Chief Executive Officer and sole owner” of AFS, a Pennsylvania corporation, and PBPNJ, a New Jersey corporation. (Id. at 3; see also Doc. Nos. 1 at 2-3; 19 at 7.) Also sued were International Credit Recovery, Inc. (“ICR”), Richard Diorio, Jr., and Cynthia Powell (collectively the “ICR Defendants”). (See Doc. No. 1 at 3-4.) AFS Defendants market and publish “business-related newsletters and school or employment law books” under the trade names Progressive Business Publications (“PBP”) and Center for Education & Employment Law (“CEEL”). (Doc. No. 43 ¶ 19; see also Doc. No. 19 ¶ 16.) They sell annual subscriptions to these publications to “organizations nationwide, including businesses, schools, fire and police departments, and nonprofits.” (Ids.) “AFS Defendants typically charge several hundred dollars for a[n] . . . annual subscription” to their PBP newsletter. (Doc. No. 43 ¶ 19.) Defendant ICR is a collection agency hired by AFS to collect unpaid accounts for its PBP publications. (See id. ¶ 32.) AFS is “ICR’s largest client, accounting for more than 99% of its revenue.” (Id. ¶ 33.) In the 1990s, Defendants Richard Diorio, Jr. and Cynthia Powell began working at ICR as debt collectors. (See id. ¶¶ 50-51.) Today, Defendant Diorio is the Vice President of ICR, and Defendant Powell is the manager. (See id. ¶ 14-15.) . . . As to ICR Defendants, the FAC alleges that they have engaged in deceptive conduct, in violation of the FTCA and UTPCPL, by misrepresenting to businesses that: “(a) . . . AFS Defendants’ debts are valid; (b) consumers have a legal obligation to pay . . . [such] debts; and (c) failure to pay will result in a negative impact on a credit rating or will result in legal action.” (Id. ¶¶ 64, 84.) The FAC further alleges that “[w]hen ICR collectors represent that the organizations owe the purported AFS Defendants’ debt, the ICR Defendants know or have reason to know that many of [the consumers] had not agreed to any financial obligation for . . . [the] publications.” (Id. ¶ 38.) Additionally, ICR Defendants allegedly “do not report the nonpayment of PBP accounts to credit bureaus and do not initiate litigation against or ‘refer to collections’ consumers who do not pay.” (Id. ¶ 37.)
The FTC’s C0mplaint used language typical of FDCPA claims, so the debt collection agency argued that the FTC lacked jurisdiction to bring claims under the FDCPA arising out of collection on commercial debts. The District Court paid short shrift to the argument, noting that the FTC brought the claim under the FTC Act, not the FDCPA.
Regarding their first argument in support of dismissal of Count III, ICR Defendants rely on the FDCPA in arguing that the FTCA does not regulate debts that are not “contracted by consumers for personal, family or household purposes.” Conboy, 992 F.3d at 157 (quoting Staub v. Harris, 626 F.2d 275, 278 (3d Cir. 1980)). According to ICR Defendants, because ICR collects debts owed by commercial entities as opposed to “consumers,” they contend that the FTCA does not apply to their alleged deceptive practices. (See Doc. No. 48-2 at 7-9.) This argument is unavailing, as ICR Defendants are sued in Count III under the FTCA, not the FDCPA, and the FTCA clearly prohibits “unfair or deceptive acts or practices” in commercial activities involving small businesses and other organizations like those in the transactions at issue. See F.T.C. v. IFC Credit Corp., 543 F. Supp. 2d 925, 941 (N.D. Ill. 2008) (“Consistent with its Congressional mandate, the FTC has concluded that small businesses and religious and other not-for-profit organizations are consumers and are entitled to protection from deceptive and unfair acts and practices.”). Accordingly, the businesses to which ICR Defendants direct their alleged deceptive collection activities are “consumers” entitled to protection under the FTCA.