April 9, 2015
Foreclosures and the Fair Debt Collection Practices Act
Bloomberg BNA quoted me in Third Circuit Says Foreclosure Complaint May Serve as Basis for Claims Under FDCPA (behind a paywall). The article opens,
A foreclosure complaint may form the basis of a Fair Debt Collection Practices Act (FDCPA) claim, the U.S. Court of Appeals for the Third Circuit held, saying foreclosure meets the broad definition of “debt collection” under the statute (Kaymark v. Bank of Am. N.A., 2015 BL 97853, 3d Cir., No. 14-cv-01816, 4/7/15).
Dale Kaymark filed a class suit against Bank of America and Udren Law Offices, P.C., a Cherry Hill, N.J., law firm, including in its claims an allegation that Udren violated the FDCPA by listing in a foreclosure complaint not-yet-incurred fees as due and owing.
Kaymark also said the firm violated the statute by trying to collect fees not authorized by the mortgage agreement.
A district court dismissed those and other claims by Kaymark, but the Third Circuit reversed April 7, allowing all but one of his FDCPA claims against Udren.
According to the court, a 2014 Third Circuit ruling on debt collection letters also applies to foreclosure complaints.
“We conclude that a communication cannot be uniquely exempted from the FDCPA because it is a formal pleading or, in particular, a complaint,” Judge D. Michael Fisher said. “This principle is widely accepted by our sister Circuits,” he said.
Wide Impact Seen
Udren Law Offices did not immediately respond to a request for comment on the case. In separate briefs filed in August 2014 and December 2014, lawyers for the firm predicted that application of the FDCPA to foreclosure complaints might allow any state foreclosure action to spark an FDCPA suit, with ill effects for legal practice.
A Bank of America spokeswoman April 8 declined to comment on the ruling. The FDCPA claim was directed only at the law firm, not the bank. Lawyers for Kaymark also did not immediately respond to a request for comment.
Brooklyn Law School Professor David Reiss, the Research Director of the Center for Urban Business Entrepreneurship, said the decision highlights increased judicial sensitivity in some areas of the law.
“It’s a well-reasoned ruling that clarifies application of the statute in the foreclosure context and that will affect contacts that lawyers have with alleged debtors,” said Reiss, who maintains a real estate finance blog. “In terms of practical effects, it won’t necessarily mean thousands of new lawsuits, but it does mean that lawyers will have to be very careful about how they communicate fees and estimates. It’s going to mean, to some extent, a cleaning-up of informal practices in the foreclosure bar, such as treating not-yet-accrued costs as accrued costs,” Reiss told Bloomberg BNA.
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