The U.S. Court of Appeals for the Ninth Circuit has joined a number of other courts in holding that guaranty agencies act as fiduciaries for the U.S. Department of Education when they operate under the Federal Family Education Loan Program (FFELP) – and so are not subject to the federal Fair Debt Collection Practices Act (FDCPA).

In Rowe v. Educational Credit Management Corporation, issued on March 18, 2009, the Ninth Circuit agreed that when a guaranty agency collects on a loan it has guaranteed under the FFELP, its collection activities are "incidental to a bona fide fiduciary obligation." Accordingly, the guaranty agency is not a debt collector, and its collection activities are not covered by the FDCPA.

Rowe involved the collection by the Educational Credit Management Corporation (ECMC) of a student loan originally guaranteed by the Oregon State Scholarship Commission (OSSC). Although Rowe claimed that the loan had been turned over and assigned to ECMC for collection only, in fact, on January 1, 2005, ECMC took over for OSSC as the guaranty agency for Oregon.

Nonetheless, the Ninth Circuit reversed the lower court’s dismissal of the FDCPA complaint against ECMC because – in the absence of any record establishing that the loan and guaranty had been transferred from OSSC to ECMC – it assumed that ECMC's role was as a mere collector of a defaulted loan, not as a guaranty agency. However, ECMC should be able to establish its role as such in future court action.

Ballard Spahr's Higher Education Group brings together attorneys in various practice areas to provide advice on issues of concern to colleges and universities, lenders, guaranty agencies, and secondary market participants. Its members also defend higher education industry clients in litigation with regulatory authorities and private parties, including plaintiffs attempting to pursue class action lawsuits. For further information, please contact John L. Culhane, Jr., 215.864.8535 or

Copyright © 2009 by Ballard Spahr LLP.
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