11th Circuit revives FDCPA lawsuit over mortgage statement language
2022 BANKDBRF 0016
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By Dave Embree
WESTLAW Finance and Banking Daily Briefing
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May 26, 2022
(May 26, 2022) - Resolving an issue of first impression, a divided federal appeals panel has held that mortgage servicers can be liable under the Fair Debt Collection Practices Act for inaccuracies in monthly mortgage statements that contain additional debt-collection language.
In a 2-1 decision, the 11th U.S. Circuit Court of Appeals on May 24 reinstated Constance Daniels' lawsuit against Select Portfolio Servicing Inc., in which she alleges the company used faulty mortgage statements to try to collect payments she did not owe.
Writing for the panel majority, U.S. Circuit Judge Adalberto J. Jordan acknowledged that Select Portfolio was required to issue the mortgage statements under the Truth in Lending Act, 15 U.S.C.A. § 1638.
However, the mortgage statements fell within the scope of the FDCPA's prohibition on false or misleading representations, 15 U.S.C.A. § 1692e, because they included additional debt-collection language — "this is an attempt to collect a debt" — the opinion said.
Judge Jordan reasoned that "in determining whether a communication is in connection with the collection of a debt, what could be more relevant than a statement in the communication than 'this is an attempt to collect a debt'?"
U.S. Circuit Judge Barbara Lagao dissented, saying the majority treated the language like "magic words" that could convert an otherwise routine mortgage statement into a communication covered by the FDCPA.
Judge Lagao also argued that the decision created a circuit split, although the panel majority insisted that the facts of Daniels' case distinguished it from others in which federal circuit courts seemed to reach a contrary result.
District Court tosses FDCPA claims
Daniels sued Select Portfolio in the U.S. District Court for the Middle District of Florida in July 2018.
According to the suit, Daniels had prevailed in a state court foreclosure action brought by lender Wells Fargo in 2015, with the judge sanctioning Wells Fargo and enforcing an earlier loan modification agreement between the parties.
But Daniels' mortgage servicer, Select Portfolio, later issued several monthly mortgage statements misstating the principal balance and amount due, and falsely claiming that her loan was in arrears, the suit says.
At least three of the mortgage statements included the sentence, "This is an attempt to collect a debt," according to the suit.
Daniels accuses Select Portfolio of using false or misleading representations in connection with the collection of a debt, in violation of the FDCA and the Florida Consumer Collection Practices Act, Fla. Stat. Ann. § 559.72.
Select Portfolio moved to dismiss, saying Daniels was attempting hold it liable for issuing mortgage statements that are required under the Truth in Lending Act.
Judge Moody said that any discrepancies in language between Select Portfolio's monthly statements and what is required under TILA "do not take the statements out of the realm of a monthly mortgage statement and into the realm of debt collection communications."
On appeal, Daniels argued that compliance with TILA does not make a mortgage servicer immune from suit under the FDCPA and, even if it did, the monthly statements at issue included language beyond what is necessary under TILA.