Conversion versus Debt Collection

By Anton Kaminsky | February 19, 2022
what is the difference between conversion and debt collection

When someone takes and keeps property that belongs to you, and you try to get it back, are you acting as a debt collector?

What is the difference between a lawsuit for conversion and an attempt to collect debt under the FDCPA debt collection act?

This very question recently came up when Kaminsky Law was recently sued for allegedly acting as a debt collector when filing a lawsuit on behalf a client to recover the client’s property–a luxury watch. According to the lawsuit Kaminsky Law filed, an individual purchased an item from a watch retailer, obtained a refund for the item from his bank, but did not return the item to the retailer.

Kaminsky Law sued on behalf of the retailer claiming that the individual converted the property. Conversion is defined in the law as an intentional tort that occurs when someone takes property belonging to another without authority or permission or deprives another of possession or use of the property.

However, the other side filed a lawsuit in the Eastern District of Pennsylvania against Kaminsky Law and Anton Kaminsky personally claiming that Kaminsky Law was acting as a debt collector under the Fair Debt Collection Practices Act (FDCPA) 15 U.S.C. § 1692, et seq.

Kaminsky Law moved to dismiss the lawsuit on the basis that suing for conversion is different than acting as a debt collector and trying to collect on a debt, especially because the retailer was not extending any credit to the individual who purchased the item, and therefore there was no debt to collect.

The Court agreed with Kaminsky Law, and cited case law from all over the country which says that Kaminsky Law was:

“not acting as a creditor that was attempting to collect on a debt as defined by the FDCPA” because “conversion does not fall within the purview of the FDCPA.” Scher v. Sherman, No. 19-16077, 2020 U.S. Dist. LEXIS 238904, *14 (N.J.D. December 18, 2020) (attempts to collect on tort settlements based on allegations of fraud to convert online video game currency by an alleged tortfeasor are not attempts to collect a debt within the meaning of the FDCPA); Beauvoir v. Israel, 794 F.3d 244, 247-48 (2d Cir. 2015) (holding that money owed as a result of theft is not “an obligation or alleged obligation of a consumer to pay money arising out of a transaction” and, therefore, does not constitute a debt for purposes of the FDCPA); Shorts v. Palmer, 155 F.R.D. 172, 176 (S.D. Ohio 1994) (finding no debt under the FDCPA where the alleged theft of cigars was the basis of the collection action); Fleming v. Pickard, 581 F.3d 922, 926 (9th Cir. 2009) (“[W]e have little difficulty concluding that Defendants’ cause of action against Plaintiffs for wrongful conversion does not, as a matter of law, constitute a debt for purposes of the FDCPA.”); Hadnot v. Ackerman, No. 19-cv-1949, 2020 U.S. Dist. LEXIS 112028 (N.D. Tex. June 25, 2020) (“Consistently, courts have determined liability arising from tort and theft does not constitute a “debt” under the FDCPA.”).

Read the Court’s full January 31, 2022 Memorandum dismissing the FDCPA lawsuit against Kaminsky Law.

The Court’s decision in favor of Kaminsky Law was also featured on Law.com which reiterated that:

Court held [Kaminsky Law] did not violate the FDCPA when they filed the underlying state court action on behalf of watch seller. The action was not filed in an attempt to collect on a debt, as defined by the FDCPA, but was filed based on conversion. Seller’s claims did not arise from a purported agreement or contract to sell the watch. Under the sale agreement, payment was due prior to the watch being sent to plaintiff. There was no allegation that, either at the time of the transaction or later, defendant extended to plaintiff the opportunity to defer payment until after receipt of the watch.

Legal Intelligencer via Law.com

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