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Mortgage Foreclosures Now Considered Collection Activity Under The FDCPA

In the case of Glazer v. Chase Home Finance, LLC et al , Past _due _imgthe Sixth Circuit of the U.S. Court of Appeals rendered an opinion this week adding mortgage foreclosures to the list of defined collection activities under the Fair Debt Collection Practices Act (FDCPA).  This decision by the Sixth Circuit allows consumers to now hold collection tactics involved in mortgage foreclosures to the same standards under the FDCPA as other debts. 

Specifically, in Glazer the appellate panel stated that law firms initiating a foreclosure must comply with the provisions of the FDCPA.  In Glazer, Plaintiff inherited a property and subsequently fell behind on numerous mortgage payments.  Chase Home Finance, LLC ("Chase"), the servicer of the loan but not the original owner of the debt, hired a law firm to commence a foreclosure action on its behalf.  Under the FDCPA, in response to the collection efforts, the consumer requested verification of the debt and proof and that Chase was the rightful owner of the mortgage.  When Chase did not comply with the consumer's request, he filed suit under the FDCPA seeking damages.

On appeal to the Sixth Circuit, the Court held that while Chase was not considered a debt collector under the law, the law firm attempting to collect the debt was, and therefore must comply with the request for verification before proceeding with the foreclosure, which is considered a collection activity.   In its decision the Court held,

 … mortgage foreclosure is debt collection under the Act.  Lawyers who meet the general
 definition of a "debt collector" must comply with the FDCPA when engaged in mortgage
 foreclosure. And a lawyer can satisfy that definition if his principal business purpose is
 mortgage foreclosure or if he "regularly" performs this function. In this case, the district
 court held that [the law firm engaged in collecting on Chase's behalf] was not engaged
 in debt collection when it sought to foreclose on the property. That decision was erroneous,
 and the judgment must be reversed.

In its opinion, the Sixth Circuit refused to follow the numerous cases finding attorneys who handle mortgage foreclosure actions not subject to the rules of the FDCPA and not considered collectors under the definition of the statute.  The FDCPA defines "debt collector" as a person who regularly collects or attempts to collect consumer debts.  In the Sixth Circuit's interpretation of the definition of "debt collector", it found that any action in which the sole purpose is to collect payment of a debt must be considered collection activity and therefore attorney's initiating foreclosure actions must follow the laws of the FDCPA

The Sixth Circuit is not alone in its opinion holding attorneys involved in mortgage foreclosure actions subject to the laws of the FDCPA.  Other circuits including the 2nd, 3rd, 4th and 11th also require compliance under the FDCPA. Should you feel your involvement with a law firm attempting to collect payment on a mortgage foreclosure has failed to meet the requirements under the FDCPA contact SmithMarco, P.C. for a free consultation

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