Lima v. Educational Credit Management Corp., No. 17-16299 (9th Cir. 2019)
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The Ninth Circuit affirmed the district court's grant of summary judgment for defendant, a nonprofit guaranty agency, on claims under the Fair Debt Collection Practices Act (FDCPA) and the Due Process Clause. In this case, defendant caused an offset against plaintiff's Social Security benefits, in order to recover on a judgment obtained after plaintiff defaulted on his student loans.
The panel held that defendant fulfilled the criteria of the fiduciary exception for the definition of a debt collector under the FDCPA. The panel explained that, although defendant regularly collects or attempts to collect debts asserted to be owed or due another, defendant's collection activities were incidental to a bona fide fiduciary obligation. The panel also held that, assuming without deciding that defendant is a state actor, defendant did not violate plaintiff's due process rights because plaintiff was provided with notice of the debt, defendant's intention to seek an offset, and the means by which plaintiff could respond.
Court Description: Debt Collection. The panel affirmed the district court’s summary judgment in favor of the defendant on claims under the Fair Debt Collection Practices Act and the Due Process Clause. Defendant, a nonprofit guaranty agency, caused an offset against plaintiff’s Social Security benefits, to recover on a judgment it had obtained by assignment after plaintiff defaulted on his student loans. Under the Higher Education Act, student loans are guaranteed by guaranty agencies, which receive guarantees from the United States. The panel held that, under the FDCPA’s definition of a debt collector, defendant regularly collected or attempted to collect debts asserted to be owed or due another. Defendant was not collecting a debt for its own account, but rather was collecting a debt for the United States. Nonetheless, defendant fulfilled the criteria of the fiduciary exception because it had a broader fiduciary role with respect to plaintiff’s debt than merely collecting the debt, and its collection activity was incidental to its fiduciary obligation to the Department of Education. Accordingly, defendant was not a debt collector under the FDCPA. Assuming without deciding that defendant was a state actor, the panel held that defendant did not violate plaintiff’s procedural due process rights because it provided plaintiff LIMA V. EDUC. CREDIT MANAGEMENT CORP. 3 with notice of the debt, of defendant’s intention to seek a Treasury offset against plaintiff’s Social Security benefits, and of the means by which plaintiff could respond.
The court issued a subsequent related opinion or order on January 13, 2020.
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