On January 14, 2013, the Sixth Circuit Court of Appeals ruled that the Fair Debt Collection Practices Act (“FDCPA”) applies to foreclosures, even non-judicial foreclosures, of residential property. The law firm of Reimer, Arnovitz, Chernek & Jeffrey Co., LPA and two of its attorneys (“RACJ”) were sued for foreclosing on a home for improperly alleging that JPMorgan had conveyed, assigned and transferred all of its rights in a promissory note to Chase Home Finance LLC (“Chase”), an arm of JPMorgan. Also sued were JP Morgan and Chase. In fact, the Note had already been assigned to Fannie Mae, although the loan was serviced by JP Morgan and subsequently Chase. The Sixth Circuit held the FDCPA claims could proceed against RACJ based on the improper assertions of ownership of the Note by Chase. Mortgage foreclosure, including non-judicial foreclosures, was deemed to equal debt collection under the Act. However, the servicer, Chase, was not liable because the FDCPA only applies to a debt collector, and at the time the loan was assigned to Chase, the Note was not in default. The Sixth Circuit’s Opinion is also consistent with the Third and Fourth Circuit of the Court of Appeals. However, a number of district courts have disagreed with this result, instead analyzing foreclosures as the enforcement of security interests rather than the collection of a debt. The Sixth Circuit concluded that other than repossession agencies and their agents, it could think of no others whose only role in the collection process is the enforcement of the security interest.
The FDCPA expressly states it applies to consumer obligations to pay money arising out of transactions in which the money, property, insurance or services that are the subject of the transaction are primarily for personal, family or household purposes. 15 U.S.C. §1692(a)(5).
As to foreclosures on loans on residential homes in this circuit (Ohio, Kentucky, Tennessee and Michigan), the Fair Debt Collection Practices Act now applies.