In an article on BOL, the author stated, "A financial institution is not a debt collector when it collects its own debts in its own name or when it collects debts that were not in default when obtained. If the institution purchases debts that were in default and it collects those debts, it may be deemed a debt collector."

My question - if an institution purchases a loan portfolio including past due loans, doesn't it become the purchasing bank's "own" debt? I could understand the applicability of the FDCPA if the bank was only purchasing servicing rights and the debt still belonged to another institution, but why could collecting on a past due loan a bank purchsed outright be subject to the FDCPA?

Thak you in advance for your clarification.

Bear Collector

You are not purchasing the past due loans solely for the intention of collecting them and therefor you are considered a creditor under the definitions of the FDCPA.

The definition of debt collectors that raises this question is found at 803(6)(F)(iii): (iii) concerns a debt which was not in default at the time it was obtained by such person.

However, the definition of creditor 803(4) indicates: "(4) The term "creditor" means any person who offers or extends credit creating a debt or to whom a debt is owed, but such term does not include any person to the extent that he receives an assignment or transfer of a debt in default solely for the purpose of facilitating collection of such debt for another. "

So basically, the purchase of a portfolio that may have a few past due loans will not subject the bank to FDCPA.

THe FTC commented on this a number of times - see Arbuckle and Trokildson:

http://www.ftc.gov/os/statutes/fdcpa/letters.shtm