National Consumer Law Center on the Fair Debt Collection Practices Act and Foreclosure Acitivities

Overview of FDCPA Coverage of Mortgages and Foreclosure Activities

by Robert Hobbs

NCLC eReports January 2013 #19

Debt Collection; Foreclosures and Servicing

All of the published U.S. Courts of Appeal opinions that have examined the application of the FDCPA to mortgages and debt collection activities in connection with a mortgage rule that the FDCPA may apply under many common circumstances.[1]  The circumstances under which the FDCPA applies is determined by the lengthy and somewhat complicated definitions used by the FDCPA to define its scope.

The FDCPA generally applies to “debt collectors.” The FDCPA generally does not apply to creditors,[2] debt originators,[3] or those that “obtain” the loan before default.[4]  However, a mortgage purchaser,[5] mortgage servicer,[6] foreclosure company,[7] or foreclosure law firm[8] are debt collectors covered by the FDCPA, as long as they foreclose regularly, and seek payment,[9]  obtained the mortgage or servicing rights after default,[10] or treated the mortgage as in default when it obtained it or the servicing rights.[11] Foreclosing law firms and mortgagees and servicers acquiring the account after default have often not contested that they were subject to the FDCPA.[12] If servicers do contest coverage, it is  helpful to point out that Congressional drafters specifically expressed their intent for the FDCPA to apply to mortgage servicers that obtained their mortgage servicing rights after default:

Finally, the committee does not intend the definition to cover the activities of…mortgage service companies and others who service outstanding debts for others, so long as the debts were not in default when taken for servicing…[13]

FDCPA Exemptions from Coverage Narrowly Construed

The FDCPA provides numerous specific exemptions from its coverage including limited exemptions for creditor employees,[14]corporate affiliates,[15] government officials,[16] process servers,[17] credit counselors,[18] fiduciaries and escrow agents,[19] credit originators,[20] companies obtaining a debt before default,[21] and other entities that are not likely to be involved in mortgage collections.  The exemptions from FDCPA coverage are generally narrow and qualified so it is necessary to be familiar with the statutory language and the case law.  For example, the Fourth Circuit in Wilson v. Draper & Goldberg, P.L.L.C.,[22] rejected the argument that a trustee under a deed of trust was an exempt “fiduciary” because that FDCPA exemption was available only if debt collection was “incidental” to the “fiduciary obligation,” but the court found debt collection was “central” to a trustee’s duties under a deed of trust.

Exceptions That Bring Even Creditors Within FDCPA Coverage

There are also exceptions to the FDCPA’s creditor exemption which bring a creditor within the FDCPA’s requirements.  For example, § 1692a(6) provides in part:

Notwithstanding the exclusion provided by clause (F) of the last sentence of this paragraph, the term [debt collector] includes any creditor who, in the process of collecting his own debts, uses any name other than his own which would indicate that a third person is collecting or attempting to collect such debts.

This exception could make mortgage note holders debt collectors when a foreclosure is brought in the name of an intended future assignee of the mortgage note. While the courts have not yet reached this argument , the 11th Circuit held an intended future assignee is covered because it obtained the mortgage after default. [23] The Court also rejected the idea that the future assignee’s  misrepresentation of itself as the creditor was an immaterial “technicality.”[24]

Broad Definition of “Communications” Encompasses Foreclosure Activity

In addition to the requirement that a “debt collector” be involved, many of the FDCPA’s requirements apply only to “communications.”  While the FDCPA uses very broad language to define “communication”, the industry for years had construed that term narrowly and the courts and Federal Trade Commission also at times adopted narrow definitions, including that there must be a reference to the debt for there to be a “communication.”[25]

In Gburek v. Litton Loan Servicing LP,[26] however, the Seventh Circuit rejected that argument in an FDCPA case involving a mortgage. The court found that the debt collectors were communicating to explore the consumer’s mortgage payment options, and those communications were covered by the FDCPA even though therewas no demand for payment.

Similarly, in Allen ex rel. Martin v. LaSalle Bank, N.A.,[27] the Third Circuit found that an offer from a foreclosure attorney to work out an arrearage in a mortgage debt to avoid foreclosure was a communication in connection with the collection of a debt covered by the FDCPA, notwithstanding the lack of an explicit demand for a payment of money.

While there is a growing consensus among the circuits that foreclosure activities are frequently covered by the FDCPA, many circuits have not weighed in.  Particularly troubling are a large number of decisions in the lower courts in the Ninth Circuit summarily finding foreclosure outside of the FDCPA’s scope.[28]

CFPB Amicus Brief Supporting FDCPA Coverage Entitled to Chevron Deference

The Consumer Financial Protection Bureau (CFPB) has gone on record in an amicus brief supporting broad application of the FDCPA to mortgage debt collection activities.[29] One court has held a CFPB amicus brief is entitled to Chevron deference by the courts.[30]

Copyright 2013 National Consumer Law Center, Inc.


[1] See notes 1 – 7, supra; NCLC, Fair Debt Collection § 4.2.6.3 (7th Ed. 2011 & 2012 Supp.).

[2] § 1692(4).

[3] § 1692a(6)(F)(ii)). See Perry v. Stewart Title Co., 756 F.2d 1197 (5th Cir. 1985).

[4]  § 1692a(6)(F)(iii). See Perry v. Stewart Title Co., 756 F.2d 1197 (5th Cir. 1985).

[5]  Bridge v. Ocwen Federal Bank, FSB, 681 F.3d 355 (6th Cir. 2012)

[6] See Wallace v. Washington Mutual Bank, F.A.683 F.3d 323 (6th Cir. 2012); Gburek v. Litton Loan Servicing LP, 614 F.3d 380, 386 (7th Cir.2010).

[7] See Gburek v. Litton Loan Servicing LP, 614 F.3d 380, 386 (7th Cir.2010) (seeking information to evaluate foreclosure alteratives was debt collection activity).

[8] See Glazer v. Chase Home Finance LLC, — F.3d —-, 2013 WL 141699 (6th Cir. Jan. 14, 2013); Wilson v. Draper & Goldberg, P.L.L.C., 443 F.3d 373 (4th Cir. 2006); Kaltenbach v. Richards, 464 F.3d 524 (5th Cir. 2006); Pettway v. Harmon Law Offıces, P.C., 2005 WL 2365331 (D.Mass. Sept. 27, 2005).  But see Hulse v. Ocwen Fed. Bank, FSB, 195 F.Supp.2d 1188, 1204 (D.Or.2002) (“the activity of foreclosing on the property pursuant to a deed of trust is not the collection of a debt within the meaning of the FDCPA.”).

[9] § 1692a(6) (first sentence). See Reese v. Ellis, Painter, Ratterree & Adams, L.L.P.,678 F.3d 1211 (11th Cir. 2012);  Gburek v. Litton Loan Servicing LP, 614 F.3d 380, 386 (7th Cir.2010) (seeking information to evaluate foreclosure alteratives was debt collection activity); Wilson v. Draper & Goldberg, P.L.L.C., 443 F.3d 373 (4th Cir. 2006);

[10] See Wallace v. Washington Mutual Bank, F.A.683 F.3d 323 (6th Cir. 2012); Schlosser v. Fairbanks Capital Corp., 323 F.3d 534 (7th Cir. 2003).  But see Brown v. Morris, 243 Fed. Appx. 31 (5th Cir. 2007) (unpublished) (a mortgage in default obtained by merger of two banks may not be covered by § 1692a(6)(F)(iii)).

[11] See Bridge v. Ocwen Federal Bank, FSB, 681 F.3d 355 (6th Cir. 2012); Schlosser v. Fairbanks Capital Corp., 323 F.3d 534 (7th Cir. 2003).

[12] See e.g., Jerman v. Carlisle, McNellie, Rini, Kramer & Ulrich LPA, 130 S.Ct. 1605 (2010) (Law firm did not dispute FDCPA applied to its § 1692g debt verification rights notice sent in connection with a foreclosure law suit.); Wallace v. Washington Mutual Bank, F.A.,683 F.3d 323 (6th Cir. 2012) and Bourff v. Rubin Lublin, L.L.C.,674 F.3d 1238 (11th Cir. 2012) (FDCPA applied to notice requesting consumer to contact law firm); Reese v. Ellis, Painter, Ratterree & Adams, L.L.P, 678 F.3d 1211 (11th Cir. 2012); Allen ex rel. Martin v. LaSalle Bank, N.A., 629 F.3d 364 (3rd Cir. 2011) (FDCPA applied to request for illegal mortgage collection fees); Federal Home Loan Mortg. Corp. v. Lamar, 503 F.3d 504 (6th Cir. 2007); Robey v. Shapiro, Marianos & Cejda, L.L.C., 434 F.3d 1208 (10thCir. 2006) (Foreclosure suit sought damages and attorney fees.  Consumer’s FDCPA claim of unauthorized attorney fees dismissed as not supported by state law.); Singer v. Pierce & Associates, P.C., 383 F.3d 596 (7th Cir. 2004) (Consumer’s FDCPA claim of unauthorized attorney fees dismissed as not supported by state law.); Stark v. Sandberg, Phoenix & von Gontard, P.C., 381 F.3d 793 (8th Cir.  2004) (Foreclosing creditor that purchased the mortgage loan after default and law firm did not dispute they were debt collectors.  Consumers’ FDCPA claim of communicating with them while represented by counsel upheld.); Crossley v. Lieberman, 868 F.2d 566 (3rd Cir. 1989) (In finding that a collection lawyer “regularly” collected debt, the court cited his large volume of foreclosure and other collection suits.).

[13] Sen.Rpt, 95-382, pp. 3-4 (Aug. 2, 1977), available in NCLC, Fair Debt Collection Appx. A.3 (6th Ed. 2011) (emphasis added).

[14] 15 U.S.C.A.. § 1692a(6)(A).  See NCLC, Fair Debt Collection § 4.3.2 (7th ed. 2011 and Supp.).

[15] 15 U.S.C.A.. § 1692a(6)(B).  See NCLC, Fair Debt Collection § 4.3.3 (7th ed. 2011 and Supp.).

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