The U.S. District Court for the Middle District of Florida recently granted in part a mortgage loan servicer’s motion to dismiss a consumer borrower’s claims under the federal Fair Debt Collection Practices Act (FDCPA), the Florida Consumer Collection Practices Act (FCCPA), the Real Estate Settlement Procedures Act (RESPA), the federal Fair Credit Reporting Act (FCRA), and the federal Declaratory Judgment Act (DJA), holding:

(a) the borrower’s complaint stated claims under the FDCPA and FCCPA because the allegations raised a plausible inference that the servicer knew the borrower was represented by counsel;

(b) the borrower’s allegations that the statute of limitations had run on a portion of the mortgage loan debt did not provide a plausible basis for the borrower’s claims, and that the statute of limitations issue should be raised, if at all, as an affirmative defense to an actual collection or foreclosure action;

(c) the borrower’s allegations of fraudulent loan documents did not provide a plausible basis for her claims because neither the FDCPA nor the FCCPA authorize the borrower to demand: (1) ‘presentment’ of the original note from a mere debt collector; or (2) premature compliance with the standing and proof requirements of a foreclosure action;

(d) the borrower’s FCRA claim failed because it provided no well-pleaded factual allegations and simply parroted the statutory provisions; and

(e) the Court declined to exercise subject matter jurisdiction under the DJA because the relief sought was available under the FDCPA, FCCPA and RESPA.

A copy of the opinion in Garrison v. Caliber Home Loans, Inc. is available at: Link to Opinion.

A borrower signed a promissory note in 2008 secured by a mortgage on her home. The loan went into default on December 2009 and the mortgagee sued to foreclose, but ended up voluntarily dismissing the case without prejudice in October 2014.

In November 2015, a new loan servicer began servicing the loan. One year later, the mortgagee sold the loan to a trust and notified the borrower of the new owner’s identity.

In June 2016, the borrower filed a complaint in the district court against the loan servicer, alleging that the servicer called her at least 50 times on her cellular phone trying to collect the loan knowing that the borrower was represented by counsel with respect to the loan in supposed violation of the TCPA, FDCPA, and FCCPA.

The borrower also alleged that the servicer improperly reported and attempted to collect the full amount of the unpaid debt, instead of a lesser amount because the statute of limitations had run on a portion of the debt, and failed to correct the error, in violation of the FDCPA, FCCPA, RESPA and FCRA. Florida has a five-year statute of limitations for mortgage foreclosures, and more than five years had passed since the borrower defaulted and the prior servicer filed the foreclosure action.

The complaint sought a declaratory judgment, actual, statutory and punitive damages, attorney’s fees and costs.

The loan servicer moved to dismiss the FDCPA, FCRA, RESPA, declaratory judgment and FCCPA claims. The District Court found that the complaint stated claims under the FDCPA and FCCPA because the allegations raised a plausible inference that the servicer knew the borrower was represented before receiving a RESPA letter from the attorney.

The Court then rejected the servicer’s argument that the statute of limitations barred the action because the defendant began servicing the loan in November 2015, and the plaintiff’s claims arose from conduct after that date.

The Court turned to address the borrower’s argument that the note and mortgage were fraudulent and that she had the right to demand “presentment” of the original note under three sections of Florida’s version of the Uniform Commercial Code dealing with negotiable instruments, and that if the servicer could not do so, its debt collection efforts necessarily violated the FDCPA and FCCPA.

The Court disagreed, rejecting the borrower’s “unsupported and confusing arguments” because “[e]ven construed broadly, neither the FDCPA nor the FCCPA provide authority for [the borrower] to demand: (1) ‘presentment’ from a mere debt collector; or (2) premature compliance with the standing and proof requirements of a foreclosure action.” The court concluded that borrower’s allegations of fraudulent loan documents “does not provide a plausible basis for [the borrower’s] claims.”

As to the borrower’s argument that the loan servicer was trying to collect on a portion of the loan balance that was time-barred, the servicer argued that (a) the statute of limitations is a defense, not a cause of action; (b) the statute of limitations does not extinguish a lien or a claim; and (c) the statute of limitations does not apply until a lawsuit to enforce the loan is filed.

In response, the borrower argued, based on a Federal Trade Commission publication and Eleventh Circuit case law, that a billing statement that attempts to collect a sum certain from a consumer, which includes an unenforceable portion, and that threatens legal action avoidable only by payment, is “coercive and misleading.”

The Court held that while the FTC publication relied upon does state that it is unlawful for a debt collector to “threaten to sue you on a time-barred claim,” because it also contained other language that debt collectors may contact consumers about time-barred claims, such “seemingly inconsistent statements … simply do not support Plaintiff’s reliance on the [statute of limitations] [i]ssue to support her claims.”

Turning to the case law cited by the borrower, the Court distinguished the Eleventh Circuit’s decisions in Crawford v. LVNV Funding LLC and Johnson v. Midland Funding, LLC as “unavailing because neither concern non-judicial debt collection activity of a partially time-barred claim. Rather, for reasons peculiar to bankruptcy proceedings, the Crawford and Johnson courts held that bankruptcy debtors can assert FDCPA adversary proceedings based on a creditor’s filing of a proof of claim that is entirely unenforceable under the applicable statute of limitations.”

Finding no specific authority supporting the borrower’s argument in a non-bankruptcy context, the Court found that the statute of limitations argument did not “provide a plausible basis for [her] claims [and that the issue] should be raised, if at all, as an affirmative defense to an actual collection or foreclosure action.”

As to the borrower’s FCRA claim that the servicer was liable for willfully or negligently reporting allegedly incorrect “delinquency information,” the Court found that these claims failed because: “aside from the wholesale incorporation by reference of paragraphs 1 through 58, Plaintiff provided no well-pled factual allegations [in the FCRA counts]; and (2) Plaintiff simply parroted certain provisions of the FCRA….” For these reasons, which amounted to impermissible “shotgun pleading,” the Court dismissed the FCRA claims.

Turning to the borrower’s RESPA claim, the Court again agreed with the servicer’s argument that it consisted only of conclusory allegations and “shotgun pleading” and accordingly dismissed it as well.

Addressing the borrower’s final claim for declaratory judgment, the Court explained that the Declaratory Judgment Act “does not establish federal jurisdiction on its own” and, even if subject matter jurisdiction exists, a court has discretion to decline to exercise it. Because the relief sought was the same available under the FDCPA, FCCPA or RESPA, the Court declined “to exercise its discretion to consider the equitable relief of a declaratory judgment.”

Accordingly, the Court dismissed the FDCPA, FCRA, RESPA, declaratory judgment and FCCPA claims without prejudice, giving the borrower 10 days to file an amended complaint, failing which the case would proceed on the remaining TCPA claim only.