Collection of Subrogration Claims is Not Subject to the FDCPA

A district court in Florida has held that an insurance company’s efforts to collect subrogation claims are not subject to the FDCPA.  Relying upon the Eleventh Circuit’s recent decision in Davidson v. Capital One Bank, the district court granted summary judgment in favor of the insurance company.  Arencibia v. Mortgage Guaranty Insurance Corporation, 2:15-cv-00248, 2015 U.S. Dist. LEXIS 153851 (M.D. Fl., Nov. 13, 2015). 

The insurance company in question, Mortgage Guaranty Insurance Corporation, issues insurance policies to insure lenders from losses due to defaulted mortgage loans. After Arencibia defaulted on her mortgage, Mortgage Guaranty paid the lenders’ claims and then proceeded to seek collection from Arencibia.  The borrowers contended that the insurance company’s efforts violated the FDCPA. On summary judgment, Mortgage Guaranty contended that it was not a debt collector and sought dismissal of the claims.

More specifically, Mortgage Guaranty contended that it was not a debt collector because it was not seeking to collect a debt owed or due another.  Instead Mortgage Guaranty was seeking to collect on debts it owned.  The Court relied on the Eleventh Circuit’s decision in Davidson in which the court concluded that the appropriate inquiry as to whether a party is a debt collector is whether the party regularly collects on debts owed or due another at the time of collection.  In this case, Mortgage Guaranty was seeking to recoup money owed to it pursuant to subrogation law.  “Because Defendant stepped into the shoes of the lenders under subrogation law, Defendant’s collection efforts in this case relate only to debts owed to it – and not “to another.” Arencibia at *11-12.

Arencibia is consistent with other cases in which insurers seeking to collect on tort claims via subrogation have not been held subject to the FDCPA and provides the defense bar with an additional grounds to dismiss such cases.