A Mortgage Statement May Be Deemed A Communication Under The Fdcpa And Fccpa

A SPECIAL REPORT by Tripp Scott's Chuck Tatelbaum and Corey Cohen

As Published in the Daily Business Review

In a question of first impression in the U.S. Court of Appeals for the 11th Circuit (which has jurisdiction over Florida, Georgia, and Alabama), the court was presented with the question of whether monthly mortgage statements were communications in connection with the collection of a debt under the Federal Fair Debt Collection Practices Act (FDCPA) and the Florida Consumer Collection Practices Act (FCCPA). In classic lawyer language, the answer is “it depends.” Although this seemingly equivocal response may leave lenders and their professionals to speculate as to a particular result, in this instance, the court determined that it may be subject to both statutes because the monthly mortgage statement stated it was an attempt to collect a debt, asked for payment, and threatened a late fee if not paid timely. Since many mortgage and other loan statements have all or part of this verbiage as standard “boilerplate” language, the decision needs to be a wake-up call for lenders and their attorneys.

The FDCPA is similar, but not identical, to the FCCPA. Both were enacted to protect consumers against perceptive and actual debt collection abuses. In fact, Section 559.77, Florida Statutes (applying the FCCPA) provides, “due consideration and great weight shall be given to the interpretations of the Federal Trade Commission and the federal courts relating to the federal Fair Debt Collection Practices Act.” To further emphasize consumer protection, Section 559.552 provides “in the event of any inconsistency between any provision of this part and any provision of the federal act, the provision which is more protective of the consumer or debtor shall prevail.”

On May 24, the 11th Circuit Court of Appeals remanded Daniels v. Select Portfolio Servicing, No. 19-10204 (11th Cir. 2022) back to the district court after it held a monthly mortgage statement could plausibly be deemed a communication in connection with the collection of a debt under the FDCPA or in connection with collecting a debt under the FCCPA if it contains additional debt-collection language. To be clear, this ruling does not suggest the monthly mortgage statements are communications in connection with the collection of debt as a matter of law, but that they ultimately can be if the plaintiff can show violations of the applicable FDCPA and/or FCCPA statutes. Thus, an inadvertent error in a billing statement can lead to unfortunate consequences. This holding mandates that lenders and their professionals take a “hard look” at billing statement language and steps to be taken to ensure accuracy in light of recent court and administrative rulings interpreting the FDCPA. Additionally, the broad language of the decision could be interpreted to be applicable to any billing statement dealing with protected consumer debt.

The facts leading to this decision were as follows: In 2005, Constance Daniels, the plaintiff-appellant, executed a promissory note with Countrywide Home Loans, secured by a mortgage on her home in Florida. Subsequently, she entered into a mortgage modification agreement with Countrywide. Countrywide then sold, transferred, or assigned the mortgage to Wells Fargo Bank. In 2010, Wells Fargo rejected the terms of the modified mortgage and brought a foreclosure action in state court, which was ultimately deemed improper and resulted in sanctions for Wells Fargo. The mortgage modification agreement was determined to be enforceable and require Daniels to make interest-only monthly payments.

Select Portfolio, the defendant-appellee, was the mortgage servicer. Following the foreclosure action, Select Portfolio would send Daniels statements containing “monthly payment coupon[s]“, which listed late fees that would be charged if not paid timely, in addition to instructions to “please detach bottom portion and return with your payment” and to “make checks payable to Select Portfolio Servicing.” In addition to not indicating the statements were being sent for informational purposes only, it also misstated the balances owed and contained other deficiencies. As a result, she brought claims under the FDCPA and FCCPA asserting the monthly mortgage statements were harassing, false, and misleading, and Select Portfolio engaged in unfair practices with the collection of a debt.

As noted throughout, the court addressed the question of “whether a required monthly mortgage statement that generally complies with the Federal Truth in Lending Act (TILA) and its regulations can plausibly be a communication ‘in connection with the collection of a debt under the FDCPA or in connection with “‘collecting a debt’ under the FCCPA if it contains additional debt-collection language,” to which the 11th Circuit ultimately opined the answer is yes. 

Because of the broad scope of protections created by Congress in the FDCPA, as further expanded by the FTC, mortgage lenders, mortgage loan servicers, as well as consumer lenders need to be vigilant in making sure that billing statements do not contain improper language and are accurate.