IN THE UNITED STATES COURT OF APPEALS
FOR THE SEVENTH CIRCUIT
No. 01-3487
CHAD SCHLOSSER AND FRANCES SCHLOSSER
Plaintiffs-Appellant,
v.
FAIRBANKS CAPITAL CORP.
Defendant-Appellee.
Appeal from the United States District Court for the
Central District of Illinois, Urbana Division
The Honorable Michael P. McCuskey
2:01cv02121
BRIEF OF APPELLEE
FAIRBANKS CAPITAL CORP.
Donald C. Brown, Jr. Terrence E. Kiwala
Cynthia G. Swann ROOKS, PITTS AND POUST
WEINER BRODSKY SIDMAN KIDER PC Suite 2300
1300 Nineteenth Street, N.W., 5th Floor 10 South Wacker Drive
Washington, D.C. 20036 Chicago, Illinois 60606
(202) 628-2000 (312) 627-2112
(202) 628-2011 (FAX) (312) 876-1156 (FAX)
CIRCUIT RULE 26.1 DISCLOSURE STATEMENT
(formerly known as Certificate of Interest)
Appellate Court No.: 01-3487
Short Caption: Schlosser v. Fairbanks Capital Corporation
To enable the judges to determine whether recusal is necessary or appropriate, an attorney for a non-governmental
party or amicus curiae, or a private attorney representing a government party, must furnish a disclosure statement
stating the following information in accordance with Circuit Rule 26.1 and Fed. R. App. P. 26.1. Each attorney is
asked to complete and file a Disclosure Statement with the Clerk of the Court as soon as possible after the appeal
is docketed in this Court. Counsel is required to complete the entire statement and to use N/A for any information
that is not applicable.
(1) The full name of every party that the attorney represents in the case (if the party is a corporation, you must
provide the corporate disclosure information required by Fed. R. App. P. 26.1 by completing item #3):
Fairbanks Capital Corporation
(2) The names of all law firms whose partners or associates have appeared for the party in the case (including
proceedings in the district court or before an administrative agency) or are expected to appear for the party in
this court.
Weiner Brodsky Sidman Kider P.C.
Rooks, Pitts and Poust
(3) If the party or amicus is a corporation:
i) Identify all its parent corporations, if any; and
Fairbanks Capital Holding Corp.
ii) List any publicly held company that owns 10% or more of the partyís or amicusí stock:
None. Fairbanks Capital Holding Corp., a privately owned corporation, owns 100% of the stock of codefendant/
appellee Fairbanks Capital Corporation.
The Court prefers that the disclosure statement be filed immediately following docketing; but, the disclosure
statement must be filed with the principal brief or upon the filing of a motion, response, petition, or answer in this
court, whichever occurs first. The attorney furnishing the statement must file an amended statement to reflect any
material changes in the required information. The text of the statement (i.e., caption omitted) shall also be included in
front of the table of contents of the partyís main brief.
Attorneyís Signature: Date:
Attorneyís Printed Name: Donald C. Brown
Address:Weiner Brodsky Sidman Kider PC
1300 19th Street, N.W., Suite 500
Washington, D.C. 20036
Phone Number: 202/628-2000
Fax Number: 202/628-2011
E-Mail Address: Brown@WBSK.com
rev. 9/99 AK
TABLE OF CONTENTS
CIRCUIT RULE 26.1 DISCLOSURE STATEMENT ÖÖÖÖÖÖÖÖÖÖÖÖÖÖÖÖ.. i
TABLE OF CONTENTS ÖÖÖÖÖÖÖÖÖÖÖÖÖÖÖÖÖÖÖÖÖÖÖÖÖÖÖ.. ii
TABLE OF AUTHORITIES ÖÖÖÖÖÖÖÖÖÖÖÖÖÖÖÖÖÖÖÖÖÖÖÖÖÖ.iv
JURISDICTIONAL STATEMENT ............................................................................................... 1
ISSUE PRESENTED ÖÖÖÖÖÖÖÖÖÖÖÖÖÖÖÖÖÖÖÖÖÖÖÖÖÖÖÖÖ..1
STATEMENT OF THE CASE ...................................................................................................... 1
STATEMENT OF FACTS ............................................................................................................. 2
SUMMARY OF ARGUMENT...................................................................................................... 4
ARGUMENT................................................................................................................................ 5
I. STANDARD OF REVIEW ÖÖÖÖÖÖÖÖÖÖÖÖÖÖÖÖÖÖÖÖÖ5
II. THE DISTRICT COURT PROPERLY FOUND THAT THE STATUTORY
LANGUAGE CLEARLY PROVIDES THAT FAIRBANKS IS NOT A DEBT
COLLECTOR UNDER THE FACTS ALLEGED ÖÖÖÖÖÖÖÖÖÖÖÖ.5
A. THE DISTRICT COURT CORRECTLY FOUND THAT THE STATUTORY
DEFINITION OF ìDEBT COLLECTORî IS PLAIN ON
ITS FACE ......................................................................................................... 6
B. THE SCHLOSSERS IMPROPERLY SEEK TO REWRITE THE
STATUTE ........................................................................................................ 7
C. THE SCHLOSSERSí PROPOSED INTERPRETATION HAS BEEN REJECTED
BY OTHER COURTS ÖÖÖÖÖÖÖÖÖÖÖÖÖÖÖÖ..8
III. THE LEGISLATIVE HISTORY OF THE FDCPA SUPPORTS THE
DISTRICT COURTíS RULING ............................................................................ 9
IV. THE DISTRICT COURTíS RULING IS CONSISTENT WITH THIS
COURTíS PRIOR RULINGS ON THE MEANING OF THE
STATUTORY LANGUAGE AND WITH DECISIONS BY OTHER
COURTS ADDRESSING THE LANGUAGE .................................................... 11
A. THE DISTRICT COURT PROPERLY CONSTRUED THE BAILEY DECISION
11
B. THE SCHLOSSERSí AUTHORITY IS INAPPOSITE AS IT PUTS THE CART
BEFORE THE HORSE ÖÖÖÖÖÖÖÖÖÖÖÖÖÖÖÖÖ...12
CONCLUSION ............................................................................................................................ 13
TABLE OF AUTHORITIES
CASES
Bailey v. Security Natíl Servicing Corp., 154 F.3d 384 (7th Cir. 1998) .................................. 6, 11
Barber v. Natíl Bank of Alaska, 815 P.2d 857 (Alaska 1991) ..................................................... 10
Bass v. Stolper, Koritzinsky, Brewster & Neider, 111 F.3d 1322 (7th Cir. 1997) ..................... 8, 9
Coppola v. Connecticut Student Loan Found., No. CIV.A.87-398, 1989 WL 47419
(D. Conn. Mar. 22, 1989) ................................................................................................. 12
Edler v. Student Loan Mktg. Assoc., No. CIV.A.92-1619, 1993 WL 625570
(D.D.C. Dec. 13, 1993) ..................................................................................................... 10
Fischer v. Unipac Service Corp., 519 N.W.2d 793 (Iowa 1994) .................................................. 10
Franceschi v. Mautner-Glick Corp., 22 F. Supp.2d 250 (S.D.N.Y. 1998) ................................. 8, 9
Harris v. City of Aubrun, 27 F.3d 1284 (7th Cir. 1994) ................................................................. 5
Jackson v. Marion County, 66 F.3d 151 (7th Cir. 1995) ................................................................ 5
Johnson v. Statewide Collection, 778 P.2d 93 (Wyo. 1989) ........................................................ 13
Jones v. Intuition, Inc., 12 F. Supp.2d 775 (W.D. Tenn. 1998) ................................................... 10
Kariotis v. Navistar Intíl Transp. Corp., 131 F.3d 672 (7th Cir. 1997) .......................................... 6
Madsen v. Park City, 6 F. Supp.2d 938 (N.D. Ill. 1998) ................................................................ 5
Perry v. Stewart Title Co., 756 F.2d 1197 (5th Cir. 1985) ........................................................... 10
Salgado v. Harvard Collection Services, Inc., No. CIV.A.01 C 2572, 2001 WL 803683
(N.D. Ill. Jul. 17, 2001)..................................................................................................... 12
U.S. v. Hayward, 6 F.3d 1241 (7th Cir. 1993) ............................................................................... 9
Villarreal v. Snow, No. CIV.A.95 C 2484, 1996 WL 28308 (N.D. Ill. Aug. 19, 1996) .............. 12
Wadlington v. Credit Acceptance Corp., 76 F.3d 103 (6th Cir. 1995) ......................................... 10
Weinberg v. Arcventures, Inc., No. CIV.A.96 C 556, 1996 WL 385951
(N.D. Ill. Jul. 3, 1996)ÖÖÖÖÖ................................................................................... 12
Whitaker v. Ameritech Corp., 129 F.3d 952 (7th Cir. 1997).ÖÖÖÖÖÖÖÖÖÖÖÖÖÖ11
FEDERAL STATUTES AND LEGISLATIVE HISTORY
15 U.S.C. ß 1692 (ìthe Fair Debt Collection Practices Actî) ÖÖÖÖÖÖÖÖÖÖÖÖpassim
S. Rep. No. 95-382, 95th Cong., 1st Sess. 3 (1977), reprinted in 1977 U.S.C.C.A.N.
1695ÖÖÖÖÖÖÖÖÖÖÖÖÖÖÖÖÖÖÖÖÖÖÖÖÖÖÖÖÖÖÖÖÖ10
JURISDICTIONAL STATEMENT
Fairbanks Capital Corp. (ìFairbanksî) agrees that Chad and Frances Schlosserís (ìthe
Schlossersî) Jurisdictional Statement is complete and correct.
ISSUE PRESENTED
Whether the district court correctly determined on a motion to dismiss that Fairbanks is not a
debt collector under the Fair Debt Collection Practices Act (ìFDCPAî), 15 U.S.C. ß 1692 when: (1)
ß 1692a(6)(F)(iii) of the Act excludes from the definition of ìdebt collectorî an entity that seeks to
collect on a debt not in default at the time of its acquisition; and (2) the Schlossers alleged in their
Amended Complaint (ìComplaintî) that their loan was not in default at the time that Fairbanks
acquired the servicing rights to it.
STATEMENT OF THE CASE
This case concerns the definition of ìdebt collectorî found in ß 1692a(6)(F) of the FDCPA,
and whether Fairbanks falls within its scope under the facts alleged.
In November 1997, the Schlossers procured a $36,000.00 mortgage loan from
ContiMortgage Corporation (ìContiî) for the purpose of refinancing existing debt. Effective August
1, 2000, Fairbanks ó a mortgage loan servicing company ó acquired the servicing rights to the
loan. The Schlossers allege that their loan was not in default when Fairbanks acquired it. Subsequent
to acquiring the loan, Fairbanks informed the Schlossers by letter that they were in default,
advised them of the amount due, and warned them that the property securing the loan could be
foreclosed on. In December 2000, a foreclosure proceeding was initiated. In February 2000, the
proceeding was dismissed.
On or about May 31, 2001, the Schlossers filed a Complaint against Fairbanks, asserting,
inter alia, that their mortgage loan was not in default when Fairbanks acquired it and that Fairbanksí
demand letter violated the technical notice requirements of ß 1692g of the FDCPA. Fairbanks
moved to dismiss the Schlossersí Complaint principally on the ground that under the clear language
of the FDCPA, Fairbanks was not a ìdebt collectorî subject to the Act as to the Schlossersí loan
because the Schlossers clearly alleged that their loan was not in default at the time Fairbanks acquired
it.
By a written Order dated August 30, 2001, the district court agreed with Fairbanks that the
FDCPAís definition of ìdebt collectorî plainly excluded Fairbanks under the facts alleged and
dismissed the Schlossersí Complaint with prejudice.
The Schlossers filed the instant appeal from that judgment.
STATEMENT OF FACTS
In 1997 the Schlosser entered into a mortgage loan transaction with Conti. (Appendix, A.10,
¶9). In July 2000, effective August 1, 2000, the servicing of the Schlossersí loan was transferred
from Conti to Fairbanks. Id. at ¶10. At the time of the transfer, Conti provided Fairbanks with
records that indicated that the Schlossersí loan was delinquent or in default. Id. at ¶11. Accordingly,
near the end of August, Fairbanks sent the Schlossers a letter that, inter alia, informed them
that they were in default, identified the amount due, disclosed to the Schlossers both that the loan
could be accelerated and the property foreclosed on, as well as that they could challenge the validity
of the default finding. Fairbanks also provided telephone numbers for consumer inquiries, as well as
for home ownership counseling. (Appendix, A.11 at ¶ 12; A.27). The Schlossers state that this letter
was Fairbanksí first communication with them. (Appendix, A.11 at ¶ 12). While the Schlossers
assert that their loan was not in default, they do not allege that they responded to Fairbanksí letter.
(Appendix, A.10 at ¶ 7).1
Nearly three and one-half months later, on December 14, 2000, a foreclosure action was
commenced. (Appendix, A.11 at ¶ 15). Only then did the Schlossers contact Fairbanks regarding
the status of their loan. (Appendix, A. at ¶ 16; A.32). Plaintiffs allege that on or about February 14,
2001, they were informed that their loan was up to date. (Appendix, A.11 at ¶ 17, A.35). On February
22, 2001, the foreclosure action was dismissed. (Appendix, A.12 at ¶ 19).
On or about May 31, 2001, the Schlossers filed a purported class action, seeking to hold
Fairbanks liable under the FDCPA for Fairbanksí alleged failure to comply with the technical notice
requirements of ß 1692g(a) in their August demand letter to the Schlossers.2 Fairbanks filed a
motion to dismiss under Fed. R. Civ. P. 12(b)(6) on the ground that the Schlossers had failed to state
a claim for which relief could be granted. Specifically, Fairbanks argued that the FDCPA was not
properly invoked under the facts alleged because under the clear terms of the statutory language,
Fairbanks was not a debt collector as to the Schlossersí loan because they alleged in their Complaint
that the loan was not in default at the time Fairbanks acquired the servicing rights to it. On August
30, 2001 the district court entered judgment in favor of Fairbanks and dismissed the Schlossersí
FDCPA claim with prejudice.3 The Schlossers challenge that ruling through this appeal.
SUMMARY OF ARGUMENT
Through their appeal, the Schlossers seek nothing short of a judicial rewrite of the FDCPA,
and argue that the district court erred in declining to read the Schlossersí self-serving definition into
the debt collector exception articulated by ß 1692a(6)(F)(iii). To that end, the Schlossers assert that
the district court should have divined their proposed meaning of the exception by engaging in a
complicated series of interpolations and substitutions to ultimately craft a version of the exception
that the Schlossers contend Congress may have had in mind but did not draft.
The district court was under no such duty. First, the district courtís ruling that the debt
collector exception says what it means and means what it says is wholly supported by and consistent
with the clear and explicit language of the statute that plainly states that an entity that seeks to collect
on a debt that is due or asserted to be due but that was not in default at the time of that partyís acquisition
of the debt is not a debt collector. Given the statuteís clear language, the district court correctly
declined to expand the scope of the ìdebt collectorî definition to accommodate the Schlossersí
result-oriented interpretation.
Second, although the plain language of the statute negates any need to turn to legislative
history, the district courtís ruling is consistent with the FDCPAís legislative history, which demonstrates
that Congress did not intend the Act to cover mortgage loan servicers seeking to collect loan
payments on loans that were not in default when the servicer acquired the loan.
Finally, the district courtís refusal to broaden the scope of ìdebt collectorî is consistent with
prior rulings from this Court that have examined the exception at issue here and have found its
language to unambiguously exclude debt that was not in default at the time of its acquisition by the
party seeking to collect on it. The lower courtís ruling also squares with the decisions of courts from
other jurisdictions that have, under similar facts, declined to give the debt collector exception the
expanded meaning advocated by the Schlossers.
ARGUMENT
I. STANDARD OF REVIEW
This Court reviews the district courtís decision dismissing the Schlossersí Complaint de
novo. Harris v. City of Auburn, 27 F.3d 1284, 1285 (7th Cir. 1994). Dismissal of a claim is proper
when no set of facts exist that would support the claim and entitle the plaintiff to relief. Id. While
all well-pleaded facts must be accepted as true, ìa plaintiff may plead himself out of court by alleging
facts showing no viable claim.î Madsen v. Park City, 6 F. Supp.2d 938, 941 (N.D. Ill. 1998).
Complaint allegations are binding admissions, and ìadmissions can of course admit the admitter to
the exit from the federal courthouse.î Jackson v. Marion County, 66 F.3d 151, 153-54 (7th Cir.
1995).
II. THE DISTRICT COURT PROPERLY FOUND THAT THE STATUTORY LANGUAGE
CLEARLY PROVIDES THAT FAIRBANKS IS NOT A DEBT COLLECTOR
UNDER THE FACTS ALLEGED.
By its express language, the FDCPA seeks to regulate the conduct of ìdebt collectors.î 15
U.S.C. ß 1692(a). The statute explicitly provides, in very clear terms, who is and who is not a debt
collector for purposes of the Act. Specifically, ß 1692a(6) states that a debt collector is one who:
uses any instrumentality of interstate commerce or the mails in any business the
principal purpose of which is the collection of debts, or who regularly collects or
attempts to collect, directly or indirectly, debts owed or due or asserted to be owed or
due another.
The statute further expressly provides that a debt collector is not one who is:
collecting or attempting to collect any debt owed or due or asserted to be owed or
due another to the extent such activity . . . concerns a debt which was not in default
at the time it was obtained by such person.
15 U.S.C. ß 1962a(6)(F) (emphasis added).
The district court properly found that the Schlossersí Complaint allegations required a ruling
that Fairbanks is not a ìdebt collectorî within the meaning of the Act as to the Schlossersí loan
because the Schlossers alleged that their loan was not in default at the time it was obtained by
Fairbanks from Conti. Specifically, the district court noted that the Schlossersí Complaint clearly
stated that ì[The Schlossersí] loan was one of those claimed to be delinquent or in default, although
the claim was not correct.î (Appendix, A.2). Accordingly, because the Schlossers pled that their
loan was not in default at the time Fairbanks acquired the servicing rights to it, the district court
correctly ruled that Fairbanks is not a ìdebt collectorî within the meaning of the statute, thus rendering
the FDCPA inapplicable under the facts alleged.
A. The District Court Correctly Found That the Statutory Definition of ìDebt
Collectorî Is Plain On Its Face.
In ruling that Fairbanks is not a debt collector under the facts alleged in the Complaint, the
district court correctly looked to the plain language of the statute. See Bailey v. Security Natíl
Servicing Corp., 154 F.3d 384, 387 (7th Cir. 1998) (ìWhere the statuteís language is plain, the
courtís function is to enforce it according to its terms.î) (quoting Kariotis v. Navistar Intíl Transp.
Corp., 131 F.3d 672, 680) (7th Cir. 1997)). Noting that in Bailey this Court found that the clear
language of ß 1692a(6)(F) unambiguously excludes from the definition of ìdebt collectorî those who
acquire a debt prior to default, 154 F.3d at 387, the district court concluded that Fairbanks is not a
debt collector as defined by the FDCPA as to the Schlossersí loan and accordingly is not subject to
the requirements of the FDCPA with respect to it. (Appendix, A.4 ñ5).
B. The Schlossers Improperly Seek to Rewrite the Statute.
Apparently recognizing that under the statuteís plain language, Fairbanks is not a debt collector
as to their loan, the Schlossers essentially argue that the district court should have judicially
rewritten the Act to include within the definition of ìdebt collectorî a loan servicer mistakenly
seeking to collect on a debt not in default at the time of its acquisition. Specifically, the Schlossers
posit that the district court was required to import definitions from elsewhere in the statute to arrive
at what they contend is the hidden, but real meaning of ìdebt collector.î In particular, the Schlossers
argue that the district court failed to take into account that the statute includes the words ìallegedî
and ìassertedî in its definitions of ìdebt,î ìdebt collector,î and ìconsumer.î (Appellantsí Brief
ìBr.î at 8).
The cutting and pasting demanded of the district court by the Schlossers is both unnecessary
and improper as the ìdebt collectorî exception itself expressly states that it speaks to ìassertedî as
well as actual debt, making crystal clear that the key to the exception is not the subjective belief of
the servicer, but rather whether the debt was in default at the time of its acquisition:
The term [ìdebt collectorî] does not include:
* * *
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 . . . concerns a debt which was not
in default at the time it was obtained by such person.
15 U.S.C. ß 1692(a)(6)(F)(iii) (emphasis added). Thus, on its face and by its plain language,
the exception speaks to both debt that is actually owed, as well as debt ìasserted to be owed.î Accordingly,
there is no merit to the Schlossersí suggestion that the district court was required to intuit
the ìtrueî meaning of the exception by borrowing from other definitions or otherwise substituting
words and phrases from various portions of the statute. The language of the Act clearly and unambiguously
provides that the ìdebt collectorî exception excludes debts not in default at the time they
were obtained ñ even if the debts were incorrectly ìasserted to be owed or due.î Accordingly,
Congressí carefully chosen words strike a deathblow to the Schlossersí assertion that the lower court
erred in finding that the FDCPA has no application under the facts alleged. See, e.g., Bass v.
Stolper, Koritzinsky, Brewster & Neider, 111 F.3d 1322, 1325-26 (7th Cir. 1997) (court not at
liberty to rewrite statutory definitions; it is Congressí role to craft statute as it sees fit).4
C. The Schlossersí Proposed Interpretation Has Been Rejected By Other
Courts.
The Schlossersí claim that the exception does not embrace debt mistakenly asserted to be
owed was squarely addressed and rejected in Franceschi v. Mautner-Glick Corp., 22 F. Supp.2d 250
(S.D.N.Y. 1998). In Franceschi, the plaintiff brought an action under the FDCPA alleging that his
landlordís management company improperly sought to collect rent money when, inter alia, that
money was not actually due, and that the demand notice provided by the management company
failed to comply with the FDCPA's notice requirements. In response, the management company
claimed that it fell within the debt collector exception because the rent was not overdue when the
management company acquired the right to collect on it. The plaintiffs countered that the exception
did not apply because the exception only covers debt actually owed ñ and the rent was not overdue,
but in fact had been paid the day before the management company sought to collect on it. In rejecting
the plaintiffís argument that ß 1692a(6)(F)(iii)ís exception applies only to debt that is actually
owed, the Franchisi court turned to the plain language of the provision, and noted that:
Section 1692a(6)(F) speaks not only of persons collecting a debt actually ìowed or
due,î but also of those collecting any debt ìasserted to be owed or due.î On its
face, therefore, the provision applies to collectors of alleged as well as real debt.
In sum, because [the defendant] is entitled to the exemption provided in Section
1692a(6)(F)(iii), it is not a debt collector within the meaning of the FDCPA, and the
plaintiff has failed to state a claim against it.
Id. at 255 (emphasis added). Similarly, the Schlossersí claim that it is Fairbanksí subjective belief as
to the validity of the debt that determines the applicability of the exception flies in the face of the
exceptionís clear language. The district courtís refusal to attach a meaning to the exception that is
contrary to its express terms was correct.
III. THE LEGISLATIVE HISTORY OF THE FDCPA SUPPORTS THE DISTRICT
COURTíS RULING.
Because the statutory language at issue is clear and unambiguous on its face, the Schlossersí
claim that review of the legislative history is necessary to ferret out their purported meaning of the
debt collector exception is incorrect. It is well established that when the language of a statute is clear
and unambiguous, its plain meaning is to be given effect, with no need for the court to examine
legislative history. See, e.g., Bass, 111 F.3d at 1325-26 (when language of statute is plain, court
should not delve into legislative history to cast different light on that language); U.S. v. Hayward, 6
F.3d 1241, 1245 (7th Cir. 1993) (when statutory language is clear and unambiguous, no need exists
for court to examine legislative history).
Here, however, even if the legislative history of the statute were to be considered, that history
supports the district courtís ruling. Indeed, review of the history clearly establishes that loan
servicers were not intended to be included within the definition of ìdebt collectorî as to any loan not
in default at the time of its acquisition. The Congressional Report on the Act plainly states that the
definition of ìdebt collectorî does not include ìmortgage service companies and others who service
outstanding debts for others, so long as the debts were not in default when taken for servicing.î S.
Rep. No. 95-382, 95th Cong., 1st Sess. 3 (1977), reprinted in 1977 U.S.C.C.A.N. 1695, 1698. The
history of the FDCPA clarifies that the focus of the statue is to regulate and control the activities of
independent debt collectors. Id. at 1696, 1697. Accordingly, under the statute, a loan servicer is not
considered to be a ìdebt collectorî with respect to any loan not in default at the time it was assigned.
Id.
Courts interpreting the plain language of the debt collector exception have adhered to this
expressed Congressional intent. In Perry v. Stewart Title Co., 756 F.2d 1197 (5th Cir. 1985), rehíg
granted on other grounds, 761 F.2d 237 (1985), for example, the issue before the court was whether
a mortgage servicing company was a ìdebt collectorî within the meaning of the statute. In holding
that it was not, the court focused on the fact that the servicer had acquired the loan in question prior
to its default. Specifically, the court stated that:
The legislative history of section 1692a(6) indicates conclusively that a debt collector
does not include the consumerís creditors, a mortgage servicing company, or an
assignee of a debt, as long as the debt was not in default at the time it was assigned.
See S.Rep. No. 95-382, 95th Cong., 1st Sess. 3, reprinted in 1977 U.S.Code Cong. &
Ad.News 1695, 1698.
Id. at 1208. Other courts have consistently embraced this position. See, e.g., Wadlington v. Credit
Acceptance Corp., 76 F.3d 103, 104 (6th Cir. 1995) (concluding that servicer is not debt collector
under FDCPA when obligation in question not in default at time of assignment); Edler v. Student
Loan Mktg. Assoc., No. CIV.A.92-1619, 1993 WL 625570, at *2 (D.D.C. Dec. 13, 1993) (same);
Jones v. Intuition, Inc., 12 F. Supp.2d 775, 779 (W.D. Tenn. 1998) (loan servicer who began servicing
loan prior to its default falls within ìdebt collectorî exception of FDCPA); Fischer v. Unipac
Serv. Corp., 519 N.W.2d 793, 799 (Iowa 1994) (loan servicer not ìdebt collectorî within meaning of
FDCPA when loan was not in default at the time servicer began servicing loan); Barber v. Natíl
Bank of Alaska, 815 P.2d 857, 859-61 (Alaska 1991) (ìThe Federal Actís definition of ëdebt collectorí
does not encompass collection of mortgage debt or mortgage service companies servicing debts
which were not in default when service commenced.î).
IV. THE DISTRICT COURTíS RULING IS CONSISTENT WITH THIS COURTíS
PRIOR RULINGS ON THE MEANING OF THE STATUTORY LANGUAGE, WITH
THE LEGISLATIVE HISTORY, AND WITH DECISIONS BY OTHER COURTS ADDRESSING
THE LANGUAGE.
A. The District Court Properly Construed the Bailey Decision.
In ruling that Fairbanks is not a debt collector under the facts alleged, the district court
pointed out that in Bailey, 154 F.3d at 387, this Court specifically determined that the statutory
language means precisely what it says and excludes from the definition of debt collector an entity
that seeks to pursue debt that was not in default prior to its acquisition. The lower court likewise
noted that the meaning of the debt collector exception was addressed by this Court in Whitaker v.
Ameritech Corp., 129 F.3d 952, 959 (7th Cir. 1991), where similarly, the exception was found to
mean exactly what it says, and excludes from the definition of ìdebt collectorî one who seeks to
collect on an obligation that was not in default when it was obtained.
The Schlossers incorrectly attempt to distinguish both Bailey and Whitaker on the ground
that in neither case did the alleged ìdebt collectorî believe the debt to be in default at the time of its
acquisition. Because, as discussed above, the statute makes clear that the subjective intent of the
party pursuing the debt has no relevance in determining whether the debt collector exception applies,
the Schlossersí attempt to dismiss Bailey and Whitaker on this basis is without support.
Further, the argument that the exception does not apply when a servicer erroneously believes
that a debt is in default, and then acts on that belief has been rejected by at least one court. Indeed,
the very issue of whether a servicer who mistakenly believes a loan to be in default ó when in
reality it is not ó falls within the meaning of a ìdebt collectorî under the FDCPA, was specifically
addressed in Coppola v. Connecticut Student Loan Found., No. CIV.A.87-398, 1989 WL 47419, at
*2 (D. Conn. Mar. 22, 1989). In Coppola, the plaintiffís loan was not in default when it was transferred
to the defendant loan servicer. The servicer, however, mistakenly believed that the loan was
in default and proceeded to contact plaintiff in an attempt to collect the alleged late payments. As in
this case, the plaintiff brought an action under the FDCPA. In rejecting the plaintiffís claim under
the FDCPA, the court noted that because the debt was not in default when the servicer began to
service the loan, the servicer was not a ìdebt collectorî within the meaning of the statute. Id. at *2.
B. The Schlossersí Authority Is Inapposite As It Puts the Cart Before the Horse.
Adamant that Fairbanks should be labeled as a debt collector as to their loan, the Schlossers
assert that the district courtís ruling that Fairbanks is not a debt collector under the alleged facts is
contrary to on-point authority. The Schlossers are wrong because their authority is not on-point.
Instead, in each of the cases touted as addressing the issue presented here, the party wrongfully
pursuing the debt was a professional debt collector. The Schlossersí reliance on these cases, of
course, puts the cart before the horse.
The Schlossersí reliance on Salgado v. Harvard Collection Services, Inc., No. CIV.A.01 C
2572, 2001 WL 803683 (N.D.Ill., Jul. 17, 2001) is illustrative of the Schlossersí desire to dispense
with the necessity of establishing the existence of a ìdebt collectorî within the meaning of the statute
before seeking relief under the FDCPA. In Salgado, at issue was whether a collection service falls
within the ambit of the FDCPA when it seeks repayment of an already satisfied debt. Similarly, in
both Weinberg v. Arcventures, Inc., No. CIV.A.96 C 556, 1996 WL 385951 (N.D. Ill. Jul. 3, 1996)
and Villarreal v. Snow, No. CIV.A.95 C 2484, 1996 WL 28308 (N.D. Ill. Aug. 19, 1996) the
FDCPA was found to have application when persons hired to collect on defaulted debt sought
collection from the wrong person. Likewise in Johnson v. Statewide Collection, 778 P.2d 93 (Wyo.
1989) the court found that the FDCPA applies to debt collectors who attempt to collect on debts that
have already been paid or otherwise discharged. The threshold question, of course, is whether a loan
servicer who attempts to collect on a debt that was not in default at the time the right to collect was
acquired is a ìdebt collector.î The district court properly ruled that the clear language of the debt
collector exception and the case law interpreting it requires a finding that Fairbanks is not a debt
collector as to the Schlossersí loan.
CONCLUSION
Because the district courtís ruling that Fairbanks is not a debt collector under the facts alleged
relied on the plain language of the FDCPA, is consistent with the statuteís legislative intent, as
well as prior decisions of this Court, and is supported by other courts that have considered the scope
and meaning of the debt collector exception at issue here, Fairbanks respectfully requests that this
Court decline to rewrite the statute and to affirm the lower courtís judgment.
__________________________
Donald C. Brown, Jr.
Cynthia G. Swann
CERTIFICATE OF SERVICE
I, Terrence E. Kiwala, hereby certify that three (3) true and accurate copies of the foregoing
document was sent via United States Mail on December 20, 2001 to:
Daniel A. Edelman
Edelman, Combs, Latturner & Goodwin, LLC
120 South LaSalle Street
18th Floor
Chicago, Illinois 60603
_____________________________
Terrence E. Kiwala
1 The district court noted that the Schlossers do not contest that their loan was not in default when
Fairbanks obtained it. (Appendix, A.4).
2 The Schlossers also asserted an individual claim against Fairbanks under the Illinois Consumer
Fraud Act.
3 Fairbanks additionally argued that the Schlossersí FDCPA claim failed because they did not
properly allege a violation under ß 1692g. Because the district court found that Fairbanks was not a
debt collector under the Act, it declined to rule on Fairbanksí alternative argument or on the
Schlossersí state law claim under the Consumer Fraud Act.
4 For the same reasons, the Schlossersí proposed rewrite of the statute and their assertion that
certain portions of the statute would be rendered meaningless unless their modified definition of
ìdebt collectorî is embraced is meritless. (Appendix, A.10-11).
