UNITED STATES OF AMERICA
FEDERAL TRADE COMMISSION
WASHINGTON, D.C.
20580
Division of Credit Practices
Bureau of Consumer Protection
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November 9, 1992
Patricia A. Torkildson, Esq.
Vice President and Associate General Counsel
CUNA Service Group, Inc.
Post Office Box #431
Madison, Wisconsin 53701
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).
"CSG acts as a loan servicer, performing all the
back-office operations necessary to operate a credit card program.
The services CSG provides include, but are not limited to, soliciting
the credit union's members on behalf of the credit union, review-ing
applications to determine which meet the credit union's lending
policy, providing the periodic statements, responding to cardholder
questions and disputes and doing collection work. The collection
work includes calling accountholders that are past due and sending
letters. After a account is 180 days past due or charged off
in bankruptcy, CSG will purchase the account from the credit
union (for the principal amount of the account) and col-lect
what it can from the accountholder."
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.
Sincerely yours,
Clarke Brinckerhoff, Attorney
Division of Credit Practices
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