UNITED STATES OF AMERICA
November 9, 1992
Patricia A. Torkildson, Esq.
Dear Ms. Torkildson:
This responds to your letter to David Medine dated September 11, 1992, in which you described a program provided by CUNA Service Group, Inc. ("CSG"), an affiliate of Credit Union National Association ("CUNA"), on behalf of CUNA's credit union members. You ask if CSG is exempt from the application of the Fair Debt Collection Practices Act ("FDCPA") in operating the program, which is described in the following paragraph (using your description verbatim).
While acting as a loan servicer under the program, CSG is exempt from the FDCPA under Section 803(6)(F)(iii) of the FDCPA, which states that the term "debt collector" (the type of party covered by the FDCPA) does not include "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 . . . concerns a debt which was not in default at the time it was obtained by such person." Because CSG's collection efforts on the account commence prior to default in every case (in fact, CSG solicits and creates the account in the first place), the clear language of the exemption clearly removes CSG from the FDCPA's definition of "debt collector" in its capacity as a loan servicer under the program you described. The legislative history of the FDCPA, which states that the exemption was intended to apply to any parties "who service outstanding debts for others, so long as the debts were not in default when taken for servicing" (Senate Report No. 95-382, page 4), similarly indicates that CSG's program of servicing these loans for credit unions is the type of activity that the exemption was intended to cover.
As we understand the other portion of CSG's program, it will become the legal owner of any loan after it is 180 days in default. Unless there is some aspect of the program that gives the original creditor some rights in the accounts at that point, with the result that CSG could be said to be purchasing the accounts for the purpose of facilitating collection for "another" -- a key word in the definitions of "creditor" in § 803(4) and "debt collector" in § 803(6) -- CSG would be collecting its own obligations at that point and not covered by the FDCPA.
The views set forth in this letter constitute informal staff opinion that is not binding on the Commission.
Clarke Brinckerhoff, Attorney