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Is Debt Collection a "Merchandising Practice"? Missouri Supreme Court Says Yes

May 14, 2018 | Allen James

In Jackson v. Barton, the Missouri Supreme Court was asked to decide whether unfair debt collection practices were sufficient to sustain a claim under the Missouri Merchandising Practices Act. To the surprise of many, the Court answered this question in the affirmative.

Specifically, the plaintiff received dental work and a series of oral contracts ensued in which the plaintiff was assured the amount he owed would be relatively small. Subsequently, collection efforts began for a much larger sum that had been agreed to orally. An attorney spearheaded the collection efforts, leaving a wake of collection “no-nos” in his trail. Among his many mistakes, the attorney failed to appear at trial in a collection suit he filed and later sent a demand letter for a much larger sum than was actually owed. Unsurprisingly, the Court was not impressed.

Clearly, these actions were sufficient to state a claim under the Fair Debt Collections Practices Act. There was, however, a question of whether a FDCPA claim was barred by the statute of limitations. Whether plaintiff possessed an actionable claim under the Missouri Merchandising Practices Act (MMPA) was significantly murkier. In essence, the question came down to whether the collection efforts qualified as an act “in connection with the sale” of merchandise as required under the MMPA.

The Court first compared the situation to Conway v. CitiMortgage, Inc., 438 S.W.3d 410, 414 (Mo. Banc 2014), a case in which the Court held that subsequent foreclosure proceedings are actions “in connection with the sale of merchandise” as contemplated by the MMPA. Moreover, the Court found that how a party enforces the terms of sale is in fact a continuation of the sale. With this precedent in mind, the Court turned its attention to how collections efforts should be viewed.

Collection efforts were ultimately held to be a part of or a continuation of the underlying sale of goods and services, in this case dental services. The Court found that because the dentist performed dental services while extending credit to the plaintiff, the sale of such dental services was not actually completed until final payment was received. As such, any collections efforts were made in connection with the sale of dental services in an effort to enforce the terms of the sale.

In sum, even actions that take place long after the bulk of a transaction is completed can still land a party on the wrong side of the MMPA. From a policy standpoint, the MMPA seems to be growing in scope, with Missouri courts willing to apply the Act to a wide array of situations and actions by defendants. In a world where debt collections can be a tricky area for businesses, and other statutes clearly regulate debt collection activities, the threat of running afoul of the MMPA only raises the stakes. 

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The BSCR Missouri Law Blog examines significant developments, trends and changes in Missouri law on a broad range of topics of interest to Missouri practitioners and attorneys and businesses with disputes subject to Missouri law. Learn more about the editor, David Eisenberg.

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