Ditty v. CheckRite, Ltd., Inc.

United States District Court for the District of Utah · 1997 · Corporations

973 F. Supp. 1320 (1997)

Updated August 22, 2026

CorporationsFDCPAFCRAvicarious liabilityagencyjoint venturelimited liabilitydishonored checks

Facts

Plaintiffs wrote dishonored checks for personal retail purchases, and the checks were referred by merchants to CheckRite for collection. CheckRite sent collection letters seeking the face amount of the check plus a $15 service charge, then referred the accounts to DeLoney & Associates, which sent letters stating the matter had been referred for litigation and offering settlement for the face amount, a $15 service charge, and an additional $73 to $83 as 'Legal Consideration for Covenant not to Sue.' CheckRite and DeLoney & Associates shared the settlement proceeds under an oral agreement, and CheckRite also maintained a nationwide check verification system through which information about bad checks was disseminated to subscribing merchants. Richard DeLoney was the firm's sole attorney, authored the letters, trained collection agents, and supervised the collection practices.

Issue

Whether obligations arising from dishonored consumer checks are 'debts' under the FDCPA, and if so, whether defendants' collection practices violated the FDCPA and FCRA. The court also had to decide whether CheckRite could be held vicariously liable for its attorney's conduct and whether Richard DeLoney could be personally liable.

Rule

Under the FDCPA, a 'debt' includes any obligation to pay money arising out of a transaction primarily for personal, family, or household purposes, and a dishonored consumer check falls within that definition. Section 1692f(1) prohibits collecting amounts not expressly authorized by the agreement creating the debt or permitted by law; § 1692g does not require all collection activity to stop during the thirty-day validation period unless the debt is disputed; and a principal may be vicariously liable for its attorney-agent's FDCPA violations when the attorney acts with implied actual authority or apparent authority. An attorney who regularly and personally engages, directly or indirectly, in debt collection qualifies as a 'debt collector' under the Act.

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One of 10 multiple-choice questions for this case. Pick an answer to see why.

In Portland, Oregon, Lena Ortiz bought groceries for her family and paid with a check. The check bounced, and Pine Harbor Recovery later sent her a collection letter arguing that the federal debt-collection statute does not apply because the transaction involved no extension of credit.

Under the majority rule of this case, is the bounced-check obligation most likely covered by the FDCPA?

Explanation. The court held that the FDCPA definition of debt is unambiguous and does not require an offer or extension of credit. A dishonored check creates an obligation to pay arising out of a transaction primarily for personal, family, or household purposes, so it qualifies as a debt under the Act.