Q 1: When is a bank a debt collector?
A: Generally, a bank that regularly participates in any
arrangement, including reciprocal service agreements, with another
person to collect defaulted consumer debts for that person, is a debt
collector for those debts only. In addition, if a bank uses a name
other than its own in collecting its own consumer debts, then it is
a debt collector for such debts as well. (§ 803(6))
6-1709
Q 2: May a bank ever regularly collect for
another person without becoming a debt collector?
A: Yes. If the bank is related to the other institution
by common ownership or corporate control, it may collect consumer
debts for that institution without becoming a debt collector; provided, it collects debts only for related institutions. However, if it
regularly collects defaulted debts for nonaffiliates, it becomes a
debt collector for regularly collected, defaulted affiliate debts
also. (§ 803(6)(B))
6-1710
Q 3: Is a bank a debt collector if it collects a consumer
debt in an isolated instance for a nonrelated person?
A: No. A bank that collects in an isolated instance for
a nonaffiliate is not covered. The bank must collect for others in
the regular course of business before it becomes a debt collector.
(§ 803(6))
6-1711
Q 4: When is a debt in default?
A: The act does not define when a debt is in default. In determining
whether a debt is in default, the following factors, among others,
should be considered: the bank’s customary policies and practices,
terms of the contract, determination by the originator, and state
law. (§ 803(6)(F)(iii))
6-1712
Q 5: When does a bank regularly collect debts due another?
A: The act does not define the level of activity
that will constitute collecting debts “regularly.” For purposes of
examination, the following are among the factors that should be considered
in determining if the bank regularly collects third-party debts:
- whether the bank has entered into a formal agreement
with another person to collect third-party debts, such as any reciprocal
service agreement program
- whether the bank has established procedures for collection
of third-party debts
- the ratio of third-party defaulted debts collected
during the past 12 months to all defaulted debts collected
- the amount of time the bank spends in third-party
debt collection. ( § 803(6))
6-1713
Q 6: Are banks that service mortgages or student loans
generally debt collectors?
A: No. Banks are
not debt collectors if they service debts that they originated or
debts that were not in default when obtained by the bank. However,
if a bank services a loan portfolio, it is a debt collector for those
loans in the portfolio that it did not originate and which were in
default when obtained. (§ 803(6)(F)(ii) and (iii))
6-1714
Q 7: Are bank trust departments debt collectors?
A: No. The activities of trust departments and
other bona fide fiduciary or escrow activities are exempt. (§ 803(6)(F)(i))
6-1715
Q 8: Are banks debt collectors if they collect
consumer debts held as security for an extension of commercial credit?
A: No. This activity is specifically exempted.
(§ 803(6)(F)(iv))
6-1716
Q 9: Are employees, officers or attorneys of a bank
considered debt collectors?
A: No. They are
not debt collectors so long as they collect the bank’s debts in the
bank’s name. (§ 803(6)(A))
