Eleventh Circuit Finds Mortgage Servicer Not Covered by FDCPA

The Eleventh Circuit Court of Appeals dismissed a plaintiff’s claim that her home mortgage lender violated both the federal Fair Debt Collection Practices Act (“FDCPA”) and Florida state law, by attempting to foreclose on her home after her loans had been discharged in bankruptcy.

In Helman v, Bank of America, the plaintiff was unable to meet her home mortgage loan and home equity line of credit payments and filed for relief under Chapter 7 of the Bankruptcy Code.  The bankruptcy court granted her a discharge, issued a final decree, and closed the case.  The servicer, which had also originated the loans, continued to send the plaintiff statements regarding the status of both loans.  The statements notified the plaintiff of the bank’s intention to foreclose on the property.  The plaintiff then filed a putative class action, alleging violations of the FDCPA and its state analogue, as well as state fraudulent inducement and negligent misrepresentation claims.  The district court dismissed the case on the grounds that the originator did not fall under the definition of a debt collector under the FDCPA and that the state law claims failed to state a claim upon which relief could be granted.

On appeal, the Eleventh Circuit agreed with the district court’s determination that the loan originator was not a debt collector under the FDCPA, which specifically exempts any person collecting any debt that was originated by that person (provided that the person collecting the debt does not use any name other than his own which would indicate that a third person is collecting or attempting to collect the debt).

On the state law claims, the Eleventh Circuit similarly agreed with the lower court because, although the defendant did fall under the ambit of the Florida Consumer Collection Practices Act (which covers anyone who attempts to collect a consumer debt), the notices of foreclosure contained in the monthly statements passed the “least sophisticated consumer” test.  The bankruptcy discharge received by the plaintiff clearly conveyed that creditors would still have the right to foreclose on the property after bankruptcy if the lien was not avoided or eliminated, and the defendant’s monthly statements clearly conveyed that the debtor was not personally liable.  Accordingly, nothing in the communications could have misled even the least sophisticated consumer.

The entire opinion may be found here.