Hawthorne v. NCO Fin. Sys., Inc., No. 13-2266 (7th Cir. 2015)
Annotate this CaseFrom 2006-2011, NCO purchased consumers’ defaulted debt and referred collections to its sister corporation Financial, an Illinois-licensed debt collector, and to outside attorneys, who are exempt from the Illinois Collection Agency Act (ICAA), 225 ILCS 425/2.03(5). NCO avoided direct collection activities; did not communicate with debtors or credit-reporting agencies; and did not consider itself a ”collection agency” subject to the ICAA. Financial attempted to collect the debts and outside lawyers filed 2,749 lawsuits on NCO’s behalf. Illinois consumers whose debts NCO bought and referred to Financial or outside counsel, filed a class action, alleging that NCO engaged in unlicensed debt collection and that Financial violated the ICAA because it knew or should have known that NCO was an unlicensed debt collector. The district judge agreed that NCO was not a collection agency, relying in part on testimony from a lawyer in the Illinois Department of Financial and Professional Regulation, charged with enforcing the ICAA, that the Act did not apply to NCO until 2013, when it was amended to add a definition of “debt buyer.” The court entered judgment for the defendants. The Seventh Circuit reversed, noting a 2015 Illinois Supreme Court holding that a passive debt buyer “clearly qualifies as a ‘collection agency’ as defined in section 3 of the Act.”
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