For those tracking Fair Debt Collection Practices Act (“FDCPA”) litigation for financial institutions and loan servicers, an opinion recently issued by the Eleventh Circuit Court of Appeals provides new insight on the definition of ‘debt collector’ under 15 U.S.C. §§ 1692a(6).  Following Davidson v. Capital One Bank (USA), N.A., No. 14-14200 (August 21, 2015), a bank collecting on a debt acquired while it was in default does not categorically qualify the bank as a debt collector under the FDCPA. 

Under the FDCPA, 15 U.S.C. § 1692a defines a ‘debt collector’ as follows:

(6) . . .  any person who uses any instrumentality of interstate commerce or the mails in any business the principal purpose of which is the collection of any debts, or who regularly collects or attempts to collect, directly or indirectly, debts owed or due or asserted to be owed or due another. . . .  The term does not include--

(F) any person collecting or attempting to collect any debt owed or due or asserted to be owed or due another to the extent such activity . . . (iii) concerns a debt which was not in default at the time it was obtained by such person; . . .

In Davidson, the Plaintiff filed a putative class action asserting that Capital One’s state court collection suit for defaulted credit card debt violated the FDCPA.  Davidson argued that the distinction between a creditor and debt collector turns on by the status of the debt when it was acquired.    

However, “looking no further than the statutory text” of 1692a(6), the Eleventh Circuit affirmed the lower court’s grant of Capital One’s motion to dismiss and held that Capital One was not a debt collector despite having purchased $1 billion of defaulted debt (including plaintiff’s loan) as part of a $28 billion purchase from HSBC because debt collection was only part of Capital One’s business, and not the principal purpose of its business.  Additionally, Capital One was not collecting debts due to another.  Thus, the Court held that the exclusions in 1692a(6)(F)(iii) do not obviate the substantive requirements of Section 1692a(6).

The Eleventh Circuit’s ruling in this area breaks from decisions by the Sixth and Seventh Circuit Courts of Appeal regarding the 1692a(6)(F)(iii) exclusion. See Bridge v. Ocwen Fed. Bank, FSB, 681 F.3d 355, 362 (6th Cir. 2012);Ruth v. Triumph P’ships, 577 F.3d 790 (7th Cir. 2009).  Significant to financial services providers facing FDCPA claims, Davidson provides additional insight in this area and highlights the requirement to plead “factual content that allows the court to draw the reasonable inference that” the defendant is a debt collector within the meaning of the FDCPA.