The U.S. District Court for the Northern District of Indiana recently held that a notice of transfer of servicing letter to a borrower did not qualify as a debt collection demand and, therefore, the new servicer was not required to send a debt validation notice under Section 1692g of the Fair Debt Collection Practices Act (“FDCPA”). A copy of the opinion is attached.
When the plaintiff borrower received the transfer of servicing notice from Defendant BAC Home Loans (“BAC”), plaintiff’s loan was in default and he had filed for Chapter 13 bankruptcy. More than five days later, BAC sent Plaintiff a debt validation notice under Section 1692g of the FDCPA.
Plaintiff brought suit against BAC, alleging that BAC violated Section 1692g of the FDCPA by failing to send Plaintiff the debt validation notice within five days after it first communicated to Plaintiff that the mortgage loan had been transferred. BAC moved to dismiss the complaint, arguing that the first communication did not trigger the debt validation notice requirement and, even if it did, BAC was precluded from sending the debt validation notice because of Plaintiff’s pending bankruptcy. The District Court for the Northern District of Indiana granted BAC’s motion.
As you may recall, under the FDCPA, an “‘initial communication with a consumer in connection with the collection’” of the consumer’s debt triggers the duty to provide a debt validation notice to the consumer. However, the FDCPA does not define what “in connection with the collection” means. In the Seventh Circuit, whether something is sent “‘in connection with’ an attempt to collect a debt is a question of objective fact,” and the “subjective purpose of the communication[‘s] [sender] does not control” the inquiry. Rather, the “language used in the communication is important in determining” the inquiry.
The Court held that BAC did not undertake collection efforts. The Court reasoned that, among other things, the letter did not “address the status of Plaintiff’s home mortgage loan, declare that it is in default, or demand payment pursuant to such default…[the notice] indicates [the] amount that is due for the next regular payment, and does so via a courtesy payment coupon that does not even contain a due date…[and] advises the borrower that if his previous servicer was automatically deducting monthly payments from a bank account, to disregard the attached coupon because BAC Home Loans would continue that service without interruption.”
Moreover, the notice had “no mention of default, delinquency, or foreclosure.” The “debt collector” boilerplate at the bottom of the notice, which is required by FDCPA, “did not alter the nature of the communication or the information provided in the letter” and “‘did not transform the letter into an unlawful demand for payment.’”
Based upon the language in the notice from BAC, the court concluded that a “reasonable person would not believe that the Notice…was a debt collection demand…and thus a communication in connection with the collection of the debt.” Therefore, “it was not a communication which triggered the requirement to send a Validation Notice,” and BAC’s motion to dismiss was granted.
Ralph T. Wutscher
Kahrl Wutscher LLP
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