Maguire, a credit card holder at retail store chain fell behind on her payments. This retailer's accounts were operated by Citicorp, which sent Maguire various dunning notices. When Maguire failed to pay, she received a letter from "Debtor Assistance," which stated that "your account has recently [been] charged off" and which offered her a manageable repayment schedule.

At the time of this case, Debtor Assistance was actually a unit of Citicorp that handles accounts that have been written off but not yet assigned to collection agencies. Maguire never paid and ended up filing for bankruptcy protection. She eventually sued Citicorp for violation of the Fair Debt Collection Practices Act (FDCPA), based on the letter from Debtor Assistance.

Did she have a case?

Make your decision and then click on "next" below for the answer and our analysis!

Maguire won.

Initially the trial court dismissed the complaint, holding that since Debtor Assistance is a unit of Citicorp, this was an in-house collection and therefore exempt from the Act.

Maguire appealed, and the court of appeals held that for purposes of the FDCPA, Citicorp was using an alias when it sent a letter from Debtor Assistance. Under the Act, bill collectors are supposed to reveal their true identities.

Indeed, although a creditor need not use its full business name or its name of incorporation to avoid FDCPA coverage, it should use the "name under which it usually transacts business, or a commonly-used acronym" when collecting debts.

Since a "least sophisticated consumer" would have the impression that a third party, and not Citicorp, was seeking to collect the debt, the FDCPA was triggered. Thus, the case was remanded to the trial court for a determination of damages.

Unless a defendant can prove its violation of the FDCPA was the unintentional result of an error (here the use of the Debtor Assistance name and letterhead was an established business practice, and therefore not in error), the defendant will be liable for actual damages suffered by the debtor as well as up to $1000 per suit in statutory damages.

The debtor, in a successful suit under the FDCPA, will also be entitled to an award of reasonable attorneys' fees and costs associated with the litigation.

The moral of the story is this: Creditors collecting their own debts are exempt from the FDCPA. However, if a creditor uses letterhead with another name - or any other form of alias - it will be subject to the provisions of the FDCPA, which rigorously restrict the manner in which debts can be collected from consumers.

Citation: 147 F.3d 232 and 932 F. Supp. 1153

Editor's Note: This article originally appeared in the Credit & Collection Manager's Letter.