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Thursday, February 2, 2017

Institutions not covered by the FDCPA

QUESTION
Our policy for debt collection is being updated. We know that certain institutions are not debt collectors per the FDCPA. What debt collector institutions are not covered by the FDCPA?

ANSWER
The Fair Debt Collection Practices Act (FDCPA) applies only to the collection of debt incurred by a consumer primarily for personal, family, or household purposes. It does not apply to the collection of corporate debt or debt owed for business or agricultural purposes.

The FDCPA defines a debt collector as any person who regularly collects, or attempts to collect, consumer debts for another person or institution or uses some name other than its own when collecting its own consumer debts.

An institution is not considered a debt collector under the FDCPA when it collects:
  • Another institution’s debts in isolated instances;
  • Its own debts under its own name;
  • Debts it originated and then sold but continues to service (for example, mortgage and student loans);
  • Debts that were not in default when they were obtained;
  • Debts that were obtained as security for a commercial credit transaction (for example, accounts receivable financing);
  • Debts incidental to a bona fide fiduciary relation­ ship or escrow arrangement (for example, a debt held in the institution’s trust department or mortgage loan escrow for taxes and insurance);
  • Debts, regularly, for other institutions to which it is related by common ownership or corporate control.

Other debt collectors that are not covered by the FDCPA include:
  • Officers or employees of an institution who collect debts owed to the institution in the institution’s name;
  • Legal-process servers. 

Jonathan Foxx
Managing Director 
Lenders Compliance Group