In Rowe v. Educational Credit Management Corporation, 2009 WL 692006 (9th Cir. 2009), the Court of Appeals ruled on whether the Plaintiffs had pleaded a claim under the FDCPA against ECMC – a guaranty agency under the Higher Education Act of 1965 – or whether ECMC was exempt because its collection activity was “incidental to a bona fide fiduciary obligation.”  15 U.S.C. § 1692a(6)(F)(i).  The Court of Appeals for the Ninth Circuit reversed the district court’s granting of ECMC’s F.R.C.P. 12(b)(6) motion.  After a detailed review of the regulatory scheme and agency rules governing the guaranty and servicing of student loans, the Court of Appeals held that a guaranty owes a fiduciary obligation to the Department of Education .


Every court that has addressed whether a guaranty agency owes a fiduciary obligation to the DOE has held that it does. See, e.g., Pelfrey, 71 F.Supp.2d at 1179-80; Montgomery v. Educ. Credit Mgmt. Corp., 238 B.R. 806, 809-10 (D.Minn.1999); Davis v. United Student Aid Funds, Inc., 45 F.Supp.2d 1104, 1109 (D.Kan.1998); Kirk v. Ed Fund, No. 06-4205, 2007 WL 2226046, *4 (W.D.Mo. Aug. 1, 2007).


The question for the Court of Appeals was whether the collection activity was “incidental” to such fiduciary obligation, as set forth in the FDCPA.  The Court of Appeals held that it may or may not be, explaining:


The second requirement is that an entity’s collection activities be “incidental to” its fiduciary obligation. 15 U.S.C. § 1692a(6)(F)(i). The “incidental to” requirement means that the collection activity must not be “central to” the fiduciary relationship. See Wilson v. Draper & Goldberg, 443 F.3d 373, 377 (4th Cir.2006). The function of this requirement is to exclude fiduciaries whose sole or primary function is to collect a debt on behalf of the entity to whom the fiduciary obligation is owed. . .     In a 1990 “Notice of Interpretation,” the Secretary of Education was careful to distinguish between the activities of guaranty agencies and third parties collecting on defaulted loans on behalf of guaranty agencies. The Notice stated: “A great deal of the collection activities on GSL [guaranteed student loan] programs is performed for guarantee agencies by third party collection contractors…. [T]he secretary took particular note of the existence of Federal law that regulated the conduct of these third party collectors of defaulted student loans. These debt collectors were subject to the Fair Debt Collection Practices Act ( FDCPA) … prior to the promulgation of these GSL regulations, and … they remain subject to the FDCPA.” Stafford Loan, 55 Fed.Reg. 40,121, 40,121 (Oct. 1, 1990) (emphasis added). Though the Notice dealt specifically with third parties collecting debts on behalf of guaranty agencies, we cannot distinguish such activity from that of a guaranty agency collecting a debt as a third party on behalf of a loan guarantor such as OSSC. It is, of course, possible that ECMC may turn out to have had a broader role in this case than merely acting as a collector of the debt guaranteed by OSSC. But for purposes of a motion to dismiss under Rule 12(b)(6), we take at face value the allegation in the complaint. Assuming for present purposes that ECMC’s only role in this case was to collect the loan assigned to it by OSSC after Rowe’s default, we hold that ECMC’s collection activity was not “incidental to a bona fide fiduciary activity” within the meaning of the FDCPA. 15 U.S.C. § 1692a(6)(F)(i).