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The California Court of Appeal upheld a Riverside District Attorney subpoena challenged by an Irvine company in an April 5 published opinion.

The opinion established that the Rosenthal Fair Debt Collection Practices Act applies to customer-management company Alorica Inc., even though debt collection is only a minor part of the company’s services.

The ruling also established that the National Bank Act does not apply to Alorica, even though it conducted business for national banks.

The combined district attorney’s offices of Riverside, Los Angeles, San Diego and Santa Clara began investigating the customer management company Alorica Inc., for its debt collection practices in January, 2019, according to the opinion.

The offices served an investigative subpoena under the authority of Rosenthal in November 2019, which contained 11 separate document requests.

Rosenthal allows investigations of debt collectors, and defines debt collector as any person who, in the ordinary course of business, regularly on behalf of themselves or others engages in debt collection. 

The offices called for an order compelling full compliance with the subpoena in November. 2020.

Alorica objected, claiming that Rosenthal did not apply to them because they are a customer-experience company, not a debt collector or debt buyer, and don’t regularly engage in debt collection.

Only 1% of its business consists of making outbound account-related calls, and those calls are on behalf of only four clients, they claimed.

Alorica also argued that some of the requested documents, from Alorica’s business with the bank Credit One, were protected from the subpoena under the National Bank Act.

After Riverside Superior Temporary Judge Eric Isaac granted the office’s petition, Alorica appealed.

Both of Alorica’s arguments lacked merit, the appellate opinion ruled.

The district attorney’s offices have the power to investigate the company merely on suspicion that the law is being violated, and part of that power includes determining if Rosenthal does cover Alorica, the ruling said.

“(T)he People have the authority to subpoena records from Alorica in order to determine whether Alorica—which concedes that it makes ‘outbound calls on behalf of and in the name of its clients to consumers who are late paying active accounts’—is a debt collector under the Rosenthal Act,” the ruling said.

Alorica also claimed that the National Bank Act protects them from releasing documents related to their client Credit One.

The NBA gives national bank inspection powers only to federal powers. Alorica claimed the NBA’s phrasing of “records of national banks” included all records regarding Credit One which Alorica held.

The appellate ruling called Alorica’s interpretation implausible.

Their interpretation would mean that state officials would not be able to investigate third parties providing services to the bank.

“Thus, if Alorica’s interpretation were correct, the National Bank Act and associated regulations would arbitrarily curtail state law enforcement authority without creating an equivalent federal law enforcement authority to fill the gap. It is not reasonable to infer that such a result was intended,” the opinion ruled.

Parties

Fourth District Court of Appeal, Division Two Associate Justice Frank Menetrez wrote the opinion, which Presiding Justice Manuel Ramirez and Associate Justice Richard Fields joined.

David Callaway, Laura A. Stoll and Tierney Smith of Goodwin Procter represented Alorica.

Riverside District Attorney Michael Hestrin and Deputy District Attorney Emily Hanks argued for the People.

Superior Court number CVMV2000170

Appellate number E076786.

Read the ruling here.

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