When mortgage servicers use periodic statements sent under the Truth in Lending Act (TILA) to collect a debt, they can be held liable under the Fair Debt Collection Practices Act (FDCPA) for any misleading or unconscionable representations made in those statements. Applying this reasoning, the Eleventh Circuit recently overturned a dismissal of a FDCPA case — Lamirand v. Fay Servicing, LLC — by a district court, which found that the statements were not subject to the FDCPA because they were required to be sent by the TILA.
The plaintiffs settled two lawsuits with their loan servicer, including a foreclosure action, by agreeing to pay $85,790.99 in one year. Four months later, the servicer sent the plaintiffs a statement, notifying them that the loan had been accelerated because the agreed-upon payments were late, and they had one month to pay $92,789.55. The statement also notified the plaintiffs that they risked more fees and the loss of their home due to foreclosure if they failed to pay, while also providing information about multiple available payment methods.
The plaintiffs continued to receive similar statements, which increased the amount due from the month before. The plaintiffs sued the servicer, alleging that it had violated the FDCPA by sending statements with incorrect balances. The federal district court found that the statements were not related to debt collection to bring them within the FDCPA’s scope because they were required to be sent under the TILA. The Eleventh Circuit disagreed.
The court began its analysis by noting that courts must try to give meaning to both the FDCPA and the TILA, and its role is to harmonize overlapping statutes whenever possible to give effect to each.
Here, the court concluded that “[n]othing in the [TILA] says that a periodic statement cannot serve as a means of debt collection … . Nor do the two statutes irreconcilably conflict in their operation. The [TILA] requires a servicer to send periodic statements, and the FDCPA requires those statements to be fair and accurate when they contain language that would induce a debtor to pay. The statutes thus reinforce each other, ensuring that consumers receive both regular and accurate information about their mortgage loans.”
Thus, the plaintiffs’ FDCPA claim could survive a motion to dismiss so long as their complaint alleged that the statements plausibly intended, at least in part, to induce them to pay. The court then found that the statements easily satisfied that standard because they listed all the ways the plaintiffs could make their payment; included a detachable payment coupon that could be sent with the payment; and stated that the defendant was a debt collector, and information provided to it would be used for that purpose.
Importantly, the court rejected the servicer’s three key arguments. First, the servicer argued that the purpose of the periodic statements was to inform. In response, the court reasoned that providing information may be one purpose of the statements, but a communication can have more than one purpose, and a factfinder could easily conclude that the servicer also intended the statements to collect a debt.
Second, the servicer argued that periodic statements, resembling the standard form promulgated by the Consumer Financial Protection Bureau (CFPB) to guide TILA compliance, should not be construed as attempts to collect a debt under the FDCPA. The court responded, however, that “following the [CFPB’s] format does not give servicers a license to insert incorrect information.” In addition, the statements in this case contained language concerning payment options beyond that in the model form.
Finally, the court rejected the servicer’s argument that a CFPB bulletin, exempting periodic statements from creating FDCPA liability where a borrower has sent a “cease-communication” letter, carves out liability for periodic statements from the FDCPA altogether. The court responded that information sent under the TILA is “useful only if it is accurate and fair, as the FDCPA requires.”