The 11th Circuit Court of Appeals has affirmed its prior holding in Arencibia v. Mortgage Guaranty Insurance Corp., that an entity that acquires and collects debt on its own behalf does not qualify as a debt collector under the Fair Debt Collection Practices Act (FDCPA), regardless of the default status of the debt when acquired.

The plaintiff filed a purported class action lawsuit against Mortgage Guaranty Insurance Corp. (Mortgage Guaranty), a mortgage insurance provider, alleging the company had violated the FDCPA by purchasing mortgagors' debt after the lender had obtained a foreclosure judgment, and filing a deficiency lawsuit without providing prior notice of the assignment of the debt as required by Florida law. Mortgage Guaranty moved for summary judgment, arguing that it was not a debt collector under the FDCPA. Arencibia argued that Mortgage Guaranty was a debt collector because it "regularly collected or attempted to collect debts that were originally owed to others and acquired after default." Shortly after the motion for summary judgment was filed, the 11th Circuit held, in a separate case, that an entity collecting on its own debts—even debts originally owned by another and acquired after default—does not qualify as a debt collector under § 1692a(6). Accordingly, the district court granted summary judgment in favor of Mortgage Guaranty, and Arencibia appealed.

On appeal, Arencibia argued that the 11th Circuit's precedent is erroneous, and conflicts with the decisions of a majority of the other circuits that have addressed the issue. The court rejected this argument, noting that it is bound by its precedent under the prior panel precedent rule, which provides that the holding of a prior panel is binding unless and until it is overruled or undermined to the point of abrogation by the U.S. Supreme Court or the appellate court sitting en banc. See United States v. Archer, 531 F.3d 1347, 1352 (11th Cir. 2008).

While the decision merely affirms the 11th Circuit's prior precedent, it highlights an important split among the circuits regarding the FDCPA. The court noted that the Fourth Circuit issued an opinion in line with its precedent in early 2016. Moreover, as Arencibia notes, several other circuits, including the Third, Sixth, and Seventh, hold that an entity that seeks to collect debt that it acquired when it was in default is a debt collector under the FDCPA. See, e.g., McKinney v. Cadleway Props., Inc., 548 F.3d 496, 501 (7th Cir. 2008) ("the purchaser of a debt in default is a debt collector for purposes of the FDCPA even though it owns the debt and is collecting for itself.") (citing FTC v. Check Investors, Inc., 502 F.3d 159, 171-74 (3d Cir. 2007) (holding that an entity engaged in collection activity on a defaulted debt acquired from another is a "debt collector" under the FDCPA even though it "may actually be owed the debt").

Accordingly, unless and until additional circuits or the Supreme Court decide to address this issue, an entity's status as a creditor will continue to vary based on the jurisdiction.

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