Opinion ID: 1389648
Heading Depth: 3
Heading Rank: 2

Heading: Collection Activities Incidental to Fiduciary Obligation

Text: The second requirement is that an entity's collection activities be incidental to its fiduciary obligation. 15 U.S.C. § 1692a(6)(F)(i). The incidental to requirement means that the collection activity must not be central to the fiduciary relationship. See Wilson v. Draper & Goldberg, 443 F.3d 373, 377 (4th Cir.2006). The function of this requirement is to exclude fiduciaries whose sole or primary function is to collect a debt on behalf of the entity to whom the fiduciary obligation is owed. Thus, the requirement excludes lawyers or trustees acting solely or primarily to collect debts owed to their clients or beneficiaries. For example, in Wilson, the Fourth Circuit held that a law firm that was hired solely for the purpose of foreclosure was not acting pursuant to a responsibility that was incidental to its fiduciary obligation to its client. Id. Rather, the foreclosure was central to its obligation. Therefore, the incidental to a bona fide fiduciary obligation exception to the definition of debt collector did not apply. Id. Generally speaking, the collection of defaulted debts by a guaranty agency is incidental to its primary function. A central part of a guaranty agency's administrative function isas the name suggestsguaranteeing student loans made by other entities. See Skerry v. Mass. Higher Educ. Assistance Corp., 73 F.Supp.2d 47, 55 (D.Mass.1999) (describing guaranteeing loans as the primary function of a guaranty agency). The primary business purpose of [a guaranty agency] is administration of the Guaranteed Student Loan Program. While [a guaranty agency] regularly sends these [collection] notices, such activity is incidental to its primary function of administering the federal GSL Program. Games, 737 F.Supp. at 1389. If this were a case in which ECMC had guaranteed the loan to Rowe, and had then undertaken to collect on the loan after default, its collection activities would have been incidental to its fiduciary duties to the DOE within the meaning of the FDCPA. However, this does not appear to be such a case. Rowe's complaint alleges that OSSC rather than ECMC was the guarantor of his loan. According to the complaint, ECMC's sole function was to take assignment of the loan from OSSC and to act as a collection agent. Such collection activity is not incidental to ECMC's fiduciary duty to the DOE. In a 1990 Notice of Interpretation, the Secretary of Education was careful to distinguish between the activities of guaranty agencies and third parties collecting on defaulted loans on behalf of guaranty agencies. The Notice stated: A great deal of the collection activities on GSL [guaranteed student loan] programs is performed for guarantee agencies by third party collection contractors. . . . [T]he secretary took particular note of the existence of Federal law that regulated the conduct of these third party collectors of defaulted student loans. These debt collectors were subject to the Fair Debt Collection Practices Act (FDCPA) . . . prior to the promulgation of these GSL regulations, and . . . they remain subject to the FDCPA.  Stafford Loan, 55 Fed.Reg. 40,121, 40,121 (Oct. 1, 1990) (emphasis added). [2] Though the Notice dealt specifically with third parties collecting debts on behalf of guaranty agencies, we cannot distinguish such activity from that of a guaranty agency collecting a debt as a third party on behalf of a loan guarantor such as OSSC. It is, of course, possible that ECMC may turn out to have had a broader role in this case than merely acting as a collector of the debt guaranteed by OSSC. But for purposes of a motion to dismiss under Rule 12(b)(6), we take at face value the allegation in the complaint. Assuming for present purposes that ECMC's only role in this case was to collect the loan assigned to it by OSSC after Rowe's default, we hold that ECMC's collection activity was not incidental to a bona fide fiduciary activity within the meaning of the FDCPA. 15 U.S.C. § 1692a(6)(F)(i).