9th Cir. Says Guaranty Agency Collecting Student Loans Was Exempt from FDCPA

In Lima v. United States Dep’t of Educ., No. 17-16299, 2019 U.S. App. LEXIS 37472, at *9 (9th Cir. Dec. 18, 2019), the Court of Appeals explained:

The FDCPA exempts from the definition of debt collector “any person collecting or attempting to collect any debt . . . owed or due another to the extent such activity . . . is incidental to a bona fide fiduciary obligation.” 15 U.S.C. § 1692a(6)(F) (emphasis added). For the fiduciary exception to apply, Defendant must have a “fiduciary obligation” and Defendant’s collection activity must be “incidental to” that fiduciary obligation. Rowe, 559 F.3d at 1032. Plaintiff concedes, and we agree, that Defendant owes a fiduciary obligation to the DOE.  The “incidental to” requirement prevents fiduciaries “whose sole or primary function is to collect a debt on behalf of the entity to whom the fiduciary obligation is owed” from escaping FDCPA coverage. Id. at 1034. Accordingly, to qualify for the fiduciary exception, Defendant’s collection activity “must not be ‘central to’ [its] fiduciary relationship.” Id. In Rowe, we reversed the dismissal of a complaint for failure to state a claim under the FDCPA. The plaintiff claimed that the defendant [*10]  guaranty agency’s “sole function was to take assignment of the loan from [another agency] and to act as a collection agent.” Id. at 1035 (emphasis added). We held that, because the only role alleged to have been played by the guaranty agency was to collect the debt, the fiduciary exception did not apply.  We distinguished between that alleged collection-only activity and cases in which an agency guarantees a loan and then attempts to collect on the loan, holding that the former type of collection activity “is not ‘incidental to’ [the defendant]’s fiduciary duty to the DOE.” Id. This case differs from Rowe because Defendant had a broader role than merely collecting a debt. When Defendant took the assignment of Plaintiff’s judgment account, Defendant took on all outstanding guaranty obligations. For example, Defendant is obligated to release its judgment against Plaintiff if Plaintiff’s debt is consolidated, rehabilitated, or repaid. Defendant also is obligated to maintain records, report to the National Student Loan Database System, and properly administer its operating fund. Those obligations are not illusory, even if Defendant has not had to perform some of them.  A fiduciary relationship is not  characterized only by what activity has happened to date. Fiduciary relationships naturally include reasonably foreseeable responsibilities that may arise in the future. DOE’s regulations place Defendant on standby should such fiduciary activities become necessary. Accordingly, we conclude that Defendant had a broader fiduciary role with respect to Plaintiff’s debt than merely collecting the debt. Therefore, Defendant’s collection activity was “incidental to” its fiduciary obligation to the DOE.