Michaela A. Albon, Esquire
Associate General Counsel
The Prudential Home Mortgage Company, Inc.
5325 Spectrum Drive
Frederick, MD 21701

Dear Ms. Albon:

This is in response to your recent letter regarding when mortgage loan servicers are considered "debt collectors" under Section 803 (6) of the Fair Debt Collection Practices Act, 15 U.S.C. § 1692 et seq. ("the Act").

In your letter, you ask us to answer four questions involving whether mortgage loan servicers are considered debt collectors under the Act. As you noted in your letter, Section 803 (6) of the Act defines a "debt collector" as:

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.

You also note in your letter that Section 803 (6) (F) of the Act excludes from the definition of "debt collector":

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 . . . (ii) concerns a debt which was originated by such person; [or] (iii) concerns a debt which was not in default at the time it was obtained by such person.

With this in mind, we respond to your questions as follows:

1. Question: Presume that a mortgage loan servicer purchases a loan in the secondary market and then resells the loan servicing-retained. Would the mortgage loan servicer be a debt collector as to those loans or does the exemption for loans that were not in default at the time the loans were purchased survive the resale?

Answer: The mortgage loan servicer would not be a debt collector as to the loans purchased and resold under this scenario because it would fall under the exception provided in Section 803 (6) (F) (iii). Therefore, as long as the debts were not in default when the mortgage loan servicer obtained them, the mortgage loan servicer's collection activities with respect to these debts are exempt from the Act.

2. Question: Would a mortgage loan servicer be a debt collector as to those loans to which it holds servicing rights but as to which it does not (and never did) hold title?

Answer: Yes, but only as to those loans which were not in default when the mortgage loan servicer obtained the servicing rights to them. For the exemption of Section 803 (6) (F) (iii) to apply, the mortgage loan servicer does not have to hold or have held title to the loans which it services.

3. Question: Does a mortgage loan servicer who is otherwise exempt from the coverage of the Act (e.g., as owner of the loans) lose the exemption if it services loans under a fictitious name? Please presume that the fictitious name has been registered as required under applicable law.

Answer: Yes, if the fictitious name or name other than the mortgage loan servicer's would falsely indicate that a third person is collecting or attempting to collect the debts. Normally, if a mortgage loan servicer uses its own name in collecting debts it originated, Section 803 (6) (F) (ii) applies to exclude it from the Act. However, when the mortgage loan servicer uses a name other than its own -- legitimately registered or otherwise -- Section 803 (6) specifically states, "Notwithstanding the exclusion provided by clause (F) of the last sentence of this paragraph, the term [debt collector] includes any creditor who, in the process of collecting his own debts, uses any name other than his own which would indicate that a third person is collecting or attempting to collect such debts."

4. Question: If a mortgage loan servicer is a debt collector under any of these scenarios, does it become a debt collector as to any other loans it services?

Answer: No. The mortgage loan servicer must comply with the requirements of the Act only with respect to those debts which are not exempt from the Act.

This response reflects an informal staff opinion that is not binding on the Commission. It does, however, represent our current enforcement position. Thank you for your inquiry, and I hope that this letter is responsive to your concerns.

Yours truly,

Nadine Samter
Attorney
Division of Credit Practices