Courts have found the FDCPA may breach the traditional protections of a corporate barrier, holding individual officers and directors personally liable.

The majority of district courts have followed the 6th Circuit, finding the FDCPA's language referencing "any person" in "any business" breaks through corporate formalities.

Courts have ruled that an employee, officer, or director may be held personally liable under the FDCPA if that person: (1) materially participated in collecting the debt at issue; (2) exercised control over the affairs of the business, e.g., a chief compliance officer; or (3) regularly engaged directly or indirectly in the collection of debts.

In the 2008 Schwarm v. Craighead decision, a California court ruled the president and CEO of a collection business could be personally liable for collection letters.  Even though the CEO did not draft the letters, he faced personal FDCPA liability because he: (1) had final authority over the collection procedures, (2) was in charge of client relations, and (3) helped administer collection efforts. 

The details of how employees, directors, and officers of debt collection companies handle day-to-day collections will have a direct impact on personal liability. 

With CFPB mandates requiring board involvement and oversight obligations, liability exposure is expanding.

Take care to protect yourself by checking: (1) error and omissions policies to ensure officers are covered for FDCPA issues; (2) that all corporate formalities are maintained, so that traditional corporation protections are not lost; and (3) that all policies and procedures are FDCPA compliant. 

[This is the first of 4 articles addressing personal liability under consumer or employee protection laws. Other laws creating personal liability include the Telephone Consumer Protection Act (TCPA), Fair Credit Reporting Act (FCRA), and Fair Labor Standards Act (FLSA).]

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