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Collection Actions: 12.4.9 Defenses Against Loan Transferees

The plaintiffs in private student loan collection actions are not typically the original lenders, such as financial institutions or for-profit schools. The private student loans at issue have often been transferred, sometimes multiple times, to one or more other entities before they get to the plaintiffs.

Collection Actions: Listing of Provisions

Title 28—Judiciary and Judicial Procedure

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Part VI—Particular Proceedings

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Chapter 176—Federal Debt Collection Procedure

Subchapter A—Definitions and General Provisions

Sec.

3001. Applicability of chapter

3002. Definitions

3003. Rules of construction

3004. Service of process; enforcement; notice

Collection Actions: 28 U.S.C. § 3001. Applicability of chapter

(a) In general.—Except as provided in subsection (b), the chapter provides the exclusive civil procedures for the United States—

(1) to recover a judgment on a debt; or

(2) to obtain, before judgment on a claim for a debt, a remedy in connection with such claim.

Collection Actions: 28 U.S.C. § 3002. Definitions

As used in this chapter:

(1) “Counsel for the United States” means—

(A) a United States attorney, an assistant United States attorney designated to act on behalf of the United States attorney, or an attorney with the United States Department of Justice or with a Federal agency who has litigation authority; and

Collection Actions: 28 U.S.C. § 3004. Service of process; enforcement; notice

(a) Manner of service.—A complaint, notice, writ, or other process required to be served in an action or proceeding under this chapter shall be served in accordance with the Federal Rules of Civil Procedure unless otherwise provided in this chapter.

(b) Nationwide enforcement.

(1) Except as provided in paragraph (2)—

Collection Actions: 28 U.S.C. § 3010. Co-owned property

(a) Limitation.—The remedies available to the United States under this chapter may be enforced against property which is co-owned by a debtor and any other person only to the extent allowed by the law of the State where the property is located. This section shall not be construed to limit any right or interest of a debtor or co-owner in a retirement system for Federal military or civilian personnel established by the United States or any agency thereof or in a qualified retirement arrangement.

Collection Actions: 28 U.S.C. § 3011 Assessment of surcharge on a debt

(a) Surcharge authorized.—In an action or proceeding under subchapter B or C, and subject to subsection (b), the United States is entitled to recover a surcharge of 10 percent of the amount of the debt in connection with the recovery of the debt, to cover the cost of processing and handling the litigation and enforcement under this chapter of the claim for such debt.

(b) Limitation.—Subsection (a) shall not apply if—

Collection Actions: 28 U.S.C. § 3014. Exempt property

(a) Election to exempt property.—An individual debtor may, in an action or proceeding under this chapter, elect to exempt property listed in either paragraph (1) or, in the alternative, paragraph (2). If such action or proceeding is against debtors who are husband and wife, one debtor may not elect to exempt property listed in paragraph (1) and the other debtor elect to exempt property listed in paragraph (2). If the debtors cannot agree on the alternative to be elected, they shall be deemed to elect paragraph (1). Such property is either—

Collection Actions: 28 U.S.C. § 3015. Discovery as to debtor’s financial condition

(a) In general.—Except as provided in subsection (b), in an action or proceeding under subchapter B or C, the United States may have discovery regarding the financial condition of the debtor in the manner in which discovery is authorized by the Federal Rules of Civil Procedure in an action on a claim for a debt.

(b) Limitation.—Subsection (a) shall not apply with respect to an action or proceeding under subchapter B unless there is a reasonable likelihood that the debt involved exceeds $50,000.

Collection Actions: 28 U.S.C. § 3201. Judgment liens

(a) Creation.—A judgment in a civil action shall create a lien on all real property of a judgment debtor on filing a certified copy of the abstract of the judgment in the manner in which a notice of tax lien would be filed under paragraphs (1) and (2) of section 6323(f) of the Internal Revenue Code of 1986. A lien created under this paragraph is for the amount necessary to satisfy the judgment, including costs and interest.

Collection Actions: 28 U.S.C. § 3202. Enforcement of judgments

(a) Enforcement remedies.—A judgment may be enforced by any of the remedies set forth in this subchapter. A court may issue other writs pursuant to section 1651 of title 28, United States Code, as necessary to support such remedies, subject to rule 81(b) of the Federal Rules of Civil Procedure.

Collection Actions: 28 U.S.C. § 3203. Execution

(a) Property subject to execution.—All property in which the judgment debtor has a substantial nonexempt interest shall be subject to levy pursuant to a writ of execution. The debtor’s earnings shall not be subject to execution while in the possession, custody, or control of the debtor’s employer. Co-owned property shall be subject to execution to the extent such property is subject to execution under the law of the State in which it is located.

Collection Actions: 28 U.S.C. § 3204. Installment payment order

(a) Authority to issue order.—Subject to subsection (c), if it is shown that the judgment debtor—

(1) is receiving or will receive substantial nonexempt disposable earnings from self-employment that are not subject to garnishment; or

(2) is diverting or concealing substantial earnings from any source, or property received in lieu of earnings;

Collection Actions: 28 U.S.C. § 3205. Garnishment

(a) In general.—A court may issue a writ of garnishment against property (including nonexempt disposable earnings) in which the debtor has a substantial nonexempt interest and which is in the possession, custody, or control of a person other than the debtor, in order to satisfy the judgment against the debtor. Co-owned property shall be subject to garnishment to the same extent as co-owned property is subject to garnishment under the law of the State in which such property is located.

Fair Credit Reporting: 7.1.9.2 Discovering an Impermissible Use

It is not always easy to discover if a consumer report has been used for an impermissible purpose. But discovering not only the use, but adequate facts to show that the use was impermissible, is critical to making out an FCRA claim. Conclusory accusations that a user obtained a consumer report without a permissible purpose may not suffice,76 especially under the Supreme Court’s pleading standards in Bell Atlantic Corp. v. Twombly77 and Ashcroft v.

Fair Credit Reporting: 7.2.1 In Response to a Court Order

A report may be furnished “[i]n response to the order of a court having jurisdiction to issue such an order, or a subpoena issued in connection with proceedings before a Federal grand jury.”90 A consumer report furnished pursuant to a court order may still be permissible even if the purpose may be otherwise prohibited under the Act.91

Fair Credit Reporting: 7.2.2 Consumer’s Written Instructions

A consumer report may be furnished when the consumer gives the CRA written instructions or permission to provide a report to the user,107 whether or not the report would otherwise be for a permissible purpose.108 However, consent for one purpose might not constitute consent for a subsequent pull for an impermissible purpose.109

Fair Credit Reporting: 7.2.3.1.1 Introduction

Users have a permissible use for a consumer report “in connection with a credit transaction involving the consumer on whom the information is to be furnished and involving the extension of credit to, or review or collection of an account of, the consumer.”124 This provision governs three separate situations: decisions to extend credit; account review of current credit customers; and collection.

Fair Credit Reporting: 7.2.3.1.3 Must credit be for personal, family, or household purposes?

The permissible purposes section of the FCRA does not require that the credit be “primarily for personal, family, or household purposes,” but it does require that the purpose be related to “the extension of credit to . . . the consumer,” defined in the Act as “an individual.”134 Thus, consumer reports may be used in connection with either personal, business, or other types of credit extended to an individual.

Fair Credit Reporting: 7.2.3.2 Extension of Credit

A user may request a consumer report when the consumer is seeking an extension of credit. This includes credit used to finance a purchase. The creditor has a permissible purpose and does not need specific authorization regardless of the form of the credit application, whether it is in person, by phone, by mail, or by electronic means.140 The fact that credit is ultimately not extended does not render a credit pull impermissible.141