In Davidson v. Capital One Bank (USA), N.A., 2014 WL 4071891 (N.D.Ga. 2014), Judge Duffey held that an entity that acquires a portfolio with both current and defaulted debt is not subject to the FDCPA as to those loans in the portfolio that were in default at the time of the purchase. Judge Duffey held that 15 USC 1692a(6)’s application of the FDCPA to accounts in default at the time of the assignment still required that the entity collecting the debts be doing so “for another” and not “for itself”. The facts were as follows:
On September 12, 2013, Plaintiff, on behalf of himself and a class of similarly situated individuals, filed his Amended Complaint [13] alleging that Defendant violated certain provisions of the Fair Debt Collection Practices Act (“FDCPA”). Plaintiff alleges that Defendant regularly acquired credit card portfolios containing millions of dollars of delinquent or defaulted accounts, including its acquisition of twentyeight (28) billion dollars of credit card accounts originally held by HSBC Bank Nevada, N.A. (“HSBC”), which included Plaintiff’s credit card account. (Am. Com. at ¶¶ 7–8, 11, 15, 21, 25).FN2 Plaintiff alleges that many of the credit card receivables on accounts issued by Defendant are securitized, and thus are actually owned by others. (Id. at ¶ 16–17).FN3 Plaintiff alleges that Defendant’s regular course of business is to attempt to collect such acquired defaulted debts. (Id. at 18). Plaintiff thus claims that Defendant is a “debt collector,” as defined by the FDCPA, with respect to the delinquent or defaulted accounts it acquired from HSBC and other credit card companies. (Id. at 20). Plaintiff alleges that Defendant violated the FDCPA by undertaking to collect on Plaintiff’s credit card account. (Id. at 29–35, 44).
Judge Duffey found that the FDCPA did not apply, and refused to adopt the Magistrate Judge’s ruling to the contrary.
The Magistrate Judge interpreted § 1692a(6)’s second prong as including any person who acquired debt that was in default when acquired. The Magistrate Judge determined that collection activity on the debt in this case because it appears to have been in default when acquired was covered by the FDCPA. (R & R at 10–11).FN8 The Magistrate Judge rejected Defendant’s claim that the second prong applied only if Defendant was collecting a “debt owed or due another” and that Defendant’s collection activity was of a debt albeit in default when acquired that Defendant owned. The Magistrate Judge did not find significant that Defendant was not collecting a debt on behalf of someone else. In reaching this conclusion the Magistrate Judge incorrectly interprets the § 1692a(6)(F) exception that excludes from the definition of “debt collector” these persons who are collecting debts that were not in default when acquired. In doing so, the Magistrate Judge denied meaning to the other language in the exception that the person collecting the debt “not in default” must still have been collecting a debt “owed or due another.” The Magistrate Judge stated that his interpretation of § 1692a(6) was supported by opinions of other district courts in the Eleventh Circuit, and supported by the majority of circuits that have addressed the issue of an entity, like Defendant, acquiring a large portfolio of debt and seeking to collect it. The Magistrate Judge found that these other decisions stood for the proposition that an allegation that a defendant regularity seeks to collect on debts acquired after default is sufficient to qualify the collecting entity as a debt collector, at least at the pleading stage. (R & R at 8–10). Although the parties do not dispute that the debt at issue was in default when acquired, this fact does not necessarily lead to the conclusion that Defendant is a debt collector. It only supports that the exemption for those who seek to collect a debt that was not in default when acquired does not apply. The Magistrate Judge appears to interpret the § 1692a(6) language “owed or due or asserted to be owed or due another” to mean a debt that is originally owed or due another that is then acquired (and thus owned) by the acquirer, who then seeks to collect it. This is not consistent with the language of the exception. The Magistrate Judge, to support the interpretation offered, relies on several categories of cases that do not apply here. The first category includes cases under which the defendant’s principal business purpose was the collection of debts and, accordingly, the defendant qualified as a “debt collector” under the first prong of § 1692a(6). Kuria v. Palisades Acquisition XVI, LLC falls into the first category of cases the Magistrate Judge cited to support his conclusions. Kuria, and cases like it, do not apply here. In Kuria, the Court determined that the defendant, which was “engaged in the business of buying and collecting debts that are in default,” qualified as a debt collector despite attempting to collect debts owed to it and thus also qualifying as a creditor. See Kuria, 752 F.Supp.2d at 1296, 1301. The Kuria Court noted that an entity, even if it meets the definition of a “creditor,” may be treated as a “debt collector” under the FDCPA provided the entity is in the business of collecting debts. That is, an entity that purchases a debt already in default at the time of purchase for the purpose of collecting it is a debt collector so long as the entity’s business is debt collection. Id. at 1301. Kuria does not, however, stand for the proposition that an entity is automatically a “debt collector” based solely upon the debt being in default when acquired. The Kuria decision begins with a factual finding that the defendant “is engaged in the business of buying and collecting debts that are in default.” Id. at 1296. This fact was undisputed by the plaintiff. Id. at 1301. While not explicitly stated in the opinion, likely because it was self evident, the defendant in Kuria thus qualified as a “debt collector” under the first prong of § 1692a(6), because it was an entity whose principal purpose is the collection of debts. Kuria stands for the unremarkable proposition that an entity that qualifies as a “debt collector” under the first prong of § 1692a(6) does not avoid its qualification as a debt collector just because it also is collecting debt owed to it. The Court agrees with the Kuria Court’s implicit conclusion that one can be both a “debt collector” and a “creditor” if the entity’s principal purpose is the collection of debts and it qualifies as a debt collector under the first prong of § 1692a(6). Kuria does not apply to this case, because Defendant’s principal business is not debt collection. (R & R at 7; Res. to Mot. to Dismiss at 5). The second category of cases focus on whether debt was or was not in default when acquired. When debts are not in default when acquired, § 1692a(6)(F) plainly excludes the acquirer from the definition of “debt collector.” It thus is not necessary to evaluate whether the entity qualifies as a debt collector under the second prong of § 1692a(6). See De Dios v. Int’l Realty & Investments, 641 F.3d 1071, 1074 (9th Cir.2011) (Concluding that the debt was not in default when acquired and noting that “[r]ather than deciding whether a debt servicer falls under the primary definition of a debt collector, we follow the simpler path.”); cf. Bradford v. HSBC Mortgage Corp., 829 F.Supp.2d 340, 350 n. 21 (E.D.Va.2011) (“As a matter of logic and statutory structure, acquiring a debt that was in default at the time simply makes a defendant ineligible for this particular exclusion from the definition of ‘debt collector;’ it does not follow from this ineligibility that the defendant satisfies the definition of ‘debt collector’ that § 1692a(6) puts forth or cannot be considered a ‘creditor’ pursuant to § 1692a(4)”). The Magistrate Judge’s reliance on the Court’s prior decision in Bates falls into this second category of cases. In Bates, the plaintiff failed to prove that the debt was in default when it was acquired by the defendant from the original lender. Bates, 2008 WL 2622810, at *6. The Bates Court set out the definition of “debt collector” under § 1692a(6), but then referenced the exclusion in § 1692a(6)(F), excluding from the term “debt collector” those seeking to collect debts that are not in default when acquired. Id. The Court in Bates was entitled to conclude that the defendant was not a debt collector by determining that it was not primarily in the business of collecting defaulted debts (first prong of § 1692a(6)) and that it did not regularly attempt to collect debts owed to another (second prong of § 1692a(6)). The Bates Court chose instead to apply the § 1692a(6)(F) exception, avoiding the need to interpret or apply the § 1692a(6) prongs. In the case here, Defendant concedes that the debt was in default when it was acquired and the § 1692a(6)(F) exception, by its terms, does not apply. Unlike in Bates, the Court here is required to interpret § 1692a(6)’s prongs to determine if Defendant is a debt collector. Bates does not assist in that evaluation The third category of cases the Magistrate Judge cites are all cases decided by courts outside the Eleventh Circuit, specifically a Seventh Circuit case, Schlosser v. Fairbanks Capital Corp., 323 F.3d 534 (7th Cir.2003), and a Third Circuit case, F.T.C. v. Check Investors, Inc., 502 F.3d 159 (3d Cir.2007) (and cases which rely upon these two decisions). . . .Schlosser and Check Investors do not apply here. A careful reading of Schlosser and Check Investors shows that both of these cases involved entities whose principal business was the acquisition of defaulted debt for collection purposes. See Schlosser, 323 F.3d at 535 (“[Defendant] acquired 12,800 allegedly delinquent high interest mortgages from CitiMortgage, including one owed by the plaintiffs”); Check Investors, 502 F.3d at 162 (“Check Investors is in the business of purchasing large numbers of checks written on accounts with insufficient funds.”). The defendants in these cases, thus, were “debt collectors” pursuant to the first prong of § 1629a(6).The Seventh Circuit and the Third Circuit both have held that one cannot be both a “creditor” and a “debt collector” under the FDCPA. Constrained by this precedent, the plain language of the FDCPA would only apply to those who do not own the debts in question, as those who own the debts are “creditors,” and, thus, cannot be “debt collectors.” Our Court has held that one can be both a “creditor” and a “debt collector,” and is not so constrained. See Kuria, 752 F.Supp.2d at 1301; Bates, 2008 WL 2622810, at *6. An obvious example of an entity being both a creditor and a debt collector is where an entity’s principal business is acquiring defaulted debt for collection purposes. The ownership of the defaulted debt would technically render the entity a “creditor” an entity “to whom a debt is owed.” See 15 U.S.C. § 1692a(4). The entity simultaneously would be a “debt collector” under the first prong of § 1629a(6), because it is in a “business the principal purpose of which is the collection of any debts.” See 15 U.S.C. § 1692a(6). The conclusion that one can be both a creditor and a debt collector-if one is a debt collector under the first prong of § 1692a(6)addresses the Check Investors concern with the possibility of creating a FDCPA loophole. Those entities whose principal purpose is the collection of defaulted debts would be debt collectors regardless of their ownership of the defaulted debt. Those entities whose primary business is not the collection of debts would only be debt collectors when they regularly collected or attempted to collect debts “owed or due another.” See 15 U.S.C. § 1692a(6). The reasoning in the Schlosser or Check Investors cases is not controlling and is not persuasive. Defendant urges the Court to follow the Ninth Circuit’s reasoning in the only circuit to address the acquisition of debt by an acquirer not in the business of collecting debt and who is not collecting debt for another Schlegel v. Wells Fargo Bank, NA, 720 F.3d 1204 (9th Cir.2013). In Schlegal, the Ninth Circuit concluded that Wells Fargo, which acquired plaintiff’s loan after it was in default, was not a “debt collector” under the FDCPA. Schlegal, 720 F.3d at 1209–10. The Schlegal Court, after noting that the complaint failed to allege that Wells Fargo’s principal purpose was debt collection, rejected plaintiff’s argument that Wells Fargo satisfied the second prong of § 1692a(6), finding that Wells Fargo was attempting to collect a debt owed to it, and not due or owed to another. Id. at 1208–10. The Schlegal Court relied upon the clear statutory language in the second prong of § 1692a(6) that an entity that was seeking to collect a debt it owned was not a “debt collector.” Id. at 1209–10. The reasoning in Schlegal is sound, including because it is tethered to the express language of § 1692a(6). The Court reaches the same conclusion as the Schlegel Court, whose reasoning is persuasive, though not controlling. *9 There does not appear to be any controlling authority in the Eleventh Circuit on the statutory constructing issue presented in this case. There is, however, a well established framework for interpreting statutes. See Burlison, 455 F.3d at 1245–47; United States v. DBB, Inc., 180 F.3d 1277 (11th Cir.1999). The Eleventh Circuit’s decision in Hixson v. French, 517 F. App’x 767, 768–69 (11th Cir.2013) also is instructive. Hixson involved a loan serviced by Citimortgage that was owned by the original refinancing lender. Hixson, 517 F. App’x at 768. The question was whether Citimortgage was a debt collector under the FDCPA. Id. at 769. The Hixson Court noted: “[t]o be subject to the [ FDCPA], an entity must be a ‘debt collector’ that collects the ‘debts … due another,’ [15 U.S.C.] § 1692a(6), but Citimortgage sought to collect debt it was owed.” Id. The Hixson decision, of course, does not address Plaintiff’s argument and the Magistrate Judge’s conclusion that an entity that acquires defaulted debts originally owed to others is a “debt collector” under § 1692a(6), as the debt in Hixson was held by the original lender. Hixson does, however, support that determinations under § 1692a(6) must rely upon the language of the statute and that the statutory language must be plainly read and its terms plainly applied. See also Humphrey v. Washington Mut. Bank, F.A., 06–cv–1367, 2007 WL 1630639, at *2 (N.D.Ga. June 1, 2007) (finding that defendant “not a debt collector because it was attempting to collect its own debt from Plaintiffs.”). The Court has also noted that even where a plaintiff alleges that the debt was in default when assigned, the plaintiff’s complaint must still contain sufficient factual allegations that a defendant is a “debt collector” under one of the prongs of § 1692a(6). See Anderson v. Deutsche Bank Nat. Trust Co., 1:11–cv–4091, 2012 WL 3756512, at 4 (N.D.Ga. Aug.6, 2012) report and recommendation adopted, 1:11–cv–4091, 2012 WL 3756435 (N.D.Ga. Aug.27, 2012) (dismissing complaint because it did not allege that defendants’ principal purpose was the collection of debts or that it regularly sought to collect debts owed or due another) (citing Reese v. Ellis, Painter, Ratterree & Adams, LLP, 678 F.3d 1211, 1218 (11th Cir.2012)). While the Anderson Court makes it clear that a determination that the debt is in default is not the end of the inquiry, the decision did not address the second prong of § 1692a(6), and is, thus, not helpful in interpreting its language and determining whether Defendant is a “debt collector” under the FDCPA. After a careful review of § 1692a(6) and the cases relied upon by the Magistrate Judge, as well as arguments raised by Plaintiff and Defendant, the Court concludes that an entity is only a “debt collector” under the second prong of § 1692a(6) if it attempts to collect a debt “owed or due another.” The Court, thus, concludes that Plaintiff has not plausibly alleged that Defendant is a “debt collector” subject to liability under the FDCPA. Defendant’s Motion to Dismiss is granted. Defendant’s Hearing Motion and Motion for Leave are denied. Plaintiff’s Motion to Certify Class is denied as moot.