11th Circuit Holds State Guaranty Agency Is Not a Debt Collector Under the FDCPA

The U.S. Court of Appeals for the Eleventh Circuit has found that a state guaranty agency for federal student loans is not a debt collector under the Fair Debt Collection Practices Act (FDCPA) when it attempts to collect student loan debt pursuant to its fiduciary obligations under the Higher Education Act.

The state agency guarantees private lenders against loss relating to federal student loans in accordance with the Higher Education Act.  When a borrower defaults, the state agency pays the lender and is reimbursed by the Secretary of Education.  The state agency then attempts to collect the unpaid debt on behalf of the Secretary of Education.  In this case, the state agency attempted to collect a debt from the plaintiff that she did not owe.

The Eleventh Circuit noted that the FDCPA excludes from its definition of “debt collector” entities attempting to collect debt, when it is “incidental to a bona fide fiduciary obligation.”  The Eleventh Circuit found that the state agency fell within that exclusion because it attempted to collect debt pursuant to its fiduciary obligation to the Secretary of Education.  In addition, although the plaintiff argued the state agency was not excluded from the definition because she never incurred the debt, the Eleventh Circuit held that the statute was unambiguous in excluding entities attempting to collect debt that is “owed or due or asserted to be owed or due another” when it is incidental to the entity’s fiduciary obligation.  Thus, it did not matter that the debt was not owed; the state agency was not a debt collector for the purposes of the FDCPA.

The Eleventh Circuit’s decision tracks another recent decision from the U.S. Court of Appeals for the Ninth Circuit, which similarly held that a state student loan guaranty agency is not a “debt collector” under the FDCPA when it collects federal student loan debts pursuant to its fiduciary obligations under the Higher Education Act.