11th Circuit Holds TILA Statement May Be Subject to FDCPA

The U.S. Court of Appeals for the Eleventh Circuit decided a case last week in which it held that monthly mortgage statements required under TILA may (but do not necessarily) constitute communications in connection with the collection of a debt and therefore may be subject to the FDCPA.  The Eleventh Circuit’s opinion reversed the district court’s dismissal of a borrower’s FDCPA claim against her mortgage servicer.

Summarizing its opinion, the Eleventh Circuit stated that a borrower makes a plausible claim (which is the standard on which the claim is judged on a motion to dismiss) that communications are made in connection with the collection of a debt “at least when—as here—[the communications] contain debt-collection language that is not required by the TILA or its regulations and the context suggests that they are attempts to collect or induce payment on a debt.”

In reversing the dismissal, the appellate court did not make a final finding or judgment about the merits of the borrower’s claims—in fact, it took care to point out that the ultimate result may differ: “Whether a communication was sent in connection with an attempt to collect a debt is a question of objective fact, to be proven like any other fact.”  Instead, the Eleventh Circuit accepted the claims made in the borrower’s complaint as true, as is required for the purpose of consideration of a motion to dismiss.  The borrower alleged that the mortgage servicer sent her monthly mortgage statements with inaccurate amounts for the deferred principal balance, the outstanding principal balance, and the amount of the interest-only payment that was due.  According to the borrower, those amounts had been the subject of previous state court litigation between the parties to determine whether a loan modification could be enforced by the borrower against the mortgage holder.  The borrower alleged the previous lawsuit had been decided in her favor and the modification was upheld, and her FDCPA claims therefore were based on the servicer’s failure or refusal to accurately reflect the modification (and previous judgment) in its accounting for her mortgage and on her statements.

The Eleventh Circuit made special note of the borrower’s allegation that the monthly statement included a delinquency notice listing overdue payments and the amount needed to bring the account current as well as debt-collection language such as

• “This is an attempt to collect a debt.”
• “You are late on your mortgage payments.  Failure to bring your loan current may result in fees and foreclosure – the loss of your home.”
• “[The servicer] has completed the first notice or filing required to start a foreclosure.”

The Eleventh Circuit held that mortgage statements required by TILA could serve a dual purpose as a communication related to debt-collection under the FDCPA, and it made particular note that TILA did not require the mortgage servicer to state, “This is an attempt to collect a debt.”