949 F.3d 1302
11th Cir.2020Background
- Hope Darrisaw received multiple letters from the Pennsylvania Higher Education Assistance Agency (PHEAA) in 2016 stating PHEAA had paid default claims and was the legal owner of four loans she contends she never took; PHEAA later sent garnishment orders to her employer and wages were garnished.
- Darrisaw called PHEAA, was told its records contained no reference to the debt, and alleged the collection was an error or a scam; she sued pro se under the Fair Debt Collection Practices Act (FDCPA).
- PHEAA is a federal guaranty agency that pays lenders for default claims, is reimbursed by the Department of Education, and then attempts to collect the loan for the Secretary; federal regulations describe guaranty agencies’ role as fiduciary in protecting federal funds.
- The central legal question: does the FDCPA exception for persons ‘‘collecting . . . any debt owed or due or asserted to be owed or due another to the extent such activity . . . is incidental to a bona fide fiduciary obligation’’ (15 U.S.C. § 1692a(6)(F)(i)) cover attempts to collect nonexistent debts?
- Darrisaw alleged procedural errors, negligence, and used the term "fraudulent" but the complaint lacked factual allegations that PHEAA knowingly tried to collect a nonexistent debt (i.e., acted in bad faith).
- The Eleventh Circuit affirmed dismissal: the statutory exception applies to debts merely "asserted to be owed" when the collector acts incidental to a bona fide fiduciary obligation; good-faith mistakes fall inside the exception, but bad-faith, knowing fraud would not—Darrisaw’s complaint did not plausibly allege bad faith.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether a guaranty agency is a "debt collector" under the FDCPA when it attempts to collect a nonexistent student-loan debt | Darrisaw: exception does not cover attempts to collect nonexistent debts; no federal assets were at risk | PHEAA: statute covers debts "owed or due or asserted to be owed or due"; exception applies when activity is incidental to a bona fide fiduciary obligation | Held: Exception applies; whether debt is actually owed is not dispositive—statutory text covers debts "asserted to be owed" when activity is incidental to a bona fide fiduciary obligation. |
| Whether Darrisaw plausibly alleged bad faith to defeat the fiduciary exception | Darrisaw: facts (continued collection after PHEAA denied records, garnishment) show bad faith | PHEAA: allegations at most show error or negligence, not conscious wrongdoing | Held: Complaint failed to plausibly allege bad faith; conclusory allegations of fraud insufficient; dismissal affirmed. |
Key Cases Cited
- Pelfrey v. Educ. Credit Mgmt. Corp., 208 F.3d 945 (11th Cir. 2000) (holding guaranty agency falls within FDCPA fiduciary exception when collecting defaulted federal student loans)
- American Dental Ass'n v. Cigna Corp., 605 F.3d 1283 (11th Cir. 2010) (pleading standard on Rule 12(b)(6): accept complaint allegations as true)
- Cliff v. Payco Gen. Am. Credits, Inc., 363 F.3d 1113 (11th Cir. 2004) (describing FFEL program and guaranty-agency role)
- Ashcroft v. Iqbal, 556 U.S. 662 (2009) (court need not accept legal conclusions or conclusory allegations)
- Marbury v. Madison, 5 U.S. (1 Cranch) 137 (1803) (canon that statutes should be interpreted to give effect to every word)
- Reese v. Ellis, Painter, Ratterree & Adams, LLP, 678 F.3d 1211 (11th Cir. 2012) (defendant’s status as a "debt collector" is an element of an FDCPA claim)