District Court (Cal.) Finds Company that Obtained Defaulted Debt through M&A Rather than by Debt Purchase did not ‘obtain’ the Debt while the Debt was in Default for Purposes of Triggering the FDCPA.

In Esquivel v. Bank of America, N.A., 2013 WL 682925 (E.D.Cal. 2013), Judge Burrell found that a company that obtained defaulted debt through merger and acquisition rather than by debt purchase did not ‘obtain’ the debt while the debt was in default for purposes of triggering the FDCPA.

The FDCPA explicitly states certain persons are not considered “debt collectors” including: “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 … (iii) concerns a debt which was not in default at the time it was obtained by such person.” 15 U.S.C. § 1692a(6)(F)(iii) (emphasis added). “Although the statute does not define ‘ob-tained,’ at least one circuit court has held that when a defendant company acquires a debt though its merger with a previous creditor of the plaintiff rather than via a specific assignment, the debt was not ‘obtained’ while it was in default; thus, the defendant company was not a debt collector under the FDCPA.” Dues v. Capital One, NA, No. 11–CV–11808, 2011 WL 3799762, at *4 (E.D.Mich. Aug. 8, 2011) (citing Brown v. Morris, 243 F. App’x 31, 34 (5th Cir.2007), report and recommendation adopted in full, No. 11–CV–11808, 2011 WL 3799712 (E.D.Mich. Aug. 29, 2011).  ¶  This reasoning is persuasive and is adopted. Therefore, since Bank of America, N.A. “obtained” the debt when its predecessor in interest, BAC Home Loans Servicing, LP, obtained the debt, neither Defendant is a ‘debt collector’ under the FDCPA. See Meyer v. Citimortgage, Inc., No. 11–13432, 2012 WL 511995, at *7 (E.D.Mich. Feb. 16, 2012) (“[Defendant] is the successor by merger to … the originating lender and mortgagee, and therefore it is impossible for the loan to have been in default at the time [de-fendant] received its interest.”) Casas v. Wells Fargo Bank, N.A., No. 5:12–cv–01742–EJD, 2012 WL 5877641, at *4 (N.D.Cal. Nov. 20, 2012) (dismissing FDCPA claim because “[a]s World Savings Bank, FSB’s successor-in-interest, Defendant …. cannot be considered a ‘debt collector’ under the FDCPA.”); Caraang v. PNC Mortg., 795 F.Supp.2d 1098, 1123 (D.Haw.2011) (dismissing FDCPA claim “because [defendant] acquired Plaintiffs’ Note and Mortgage by merging with NCB, not through assignment.”), aff’d on separate grounds, 481 F. App’x 362 (9th Cir.2012); Centennial Bank v. Noah Grp., LLC, 755 F.Supp.2d 1256, 1260 (S.D.Fla.2010) (dismissing FDCPA claim sua sponte because “Centennial Bank is not a ‘debt collector’-it arguably originated the debt as a merged entity with Marine Bank …. [T]he FDCPA does not apply to this case.”). Since neither Defendant is a “debt collector” within the meaning of the FDCPA, Plaintiffs’ FDCPA claim will be dismissed.