Editor: David Reiss
Brooklyn Law School

August 16, 2013

Stalled Foreclosures in NY Not a Violation of Federal Law

By David Reiss

Judge Townes (EDNY) dismissed a putative class action, Cole v, Baum, 11-cv-3779 (July 11, 2013), against notorious foreclosure mill Steven J. Baum, P.C. and its principal relating to their failure to submit filings that would have triggered mandatory settlement conferences for homeowners under a new New York law.  The plaintiffs alleged that the defendants violated the federal Fair Debt Collections Practices Act. Judge Townes found that the failure to comply with the NY law was not the equivalent of an unfair debt collection prohibited by the FDCPA.

In reaching its result, the Court stated that not “every violation of state or city law amounts to a violation of the FDCPA.” (16, quoting Nero v. Law Offices of Sam Streeter, P.L.L.C., 655 F. Supp. 2d 200, 209 (E.D.N.Y. 2009)). It further found that even “debt collection practices in violation of state law are not per se violations of the FDCPA.” (17) The Court concluded that in the present case,

the defendants’ debt collection practices did not violated the provisions of the FDCPA. Defendants allegedly violated 22 NYCRR § 202.12-a, a procedural rule promulgated by the Chief Administrator of the New York Courts to facilitate implementation of CPLR 340B. However, CPLR 340B is not a state analog of the FDCPA. That statute does not prohibit unfair, misleading or deceptive collection practices, but merely furthers a state interest  in  forestalling or preventing foreclosures. Although defendants may be debt collectors, and their alleged violation of Section 202.12-a may be characterized as unfair, defendants’ violation of this state procedural provision neither resulted in, nor contributed to, the sort of unfair debt collection practices prohibited by the FDCPA. (18)

I am not sure if I see the principled difference between the scope of the FDCPA and the NY law.  The Court acknowledges that the FDCPA, is meant “to protect consumers from deceptive or harassing actions taken by debt collectors with the purpose of limiting the suffering and anguish often inflicted by independent debt collectors.” (10, quoting Gabriele v. American Home Mortg. Servicing, Inc., No. 12-985-cv, 2012 WL 5908601 at *3 (2d Cir. Nov. 27, 2012)). The mere fact that the NY law was an amendment to the Civil Practice Law and Rules (CPLR) does not seem to undercut the fact that it was passed expressly to address the “mortgage foreclosure crisis.” (2) I would think that if procedural violations amounted to a substantive injustice, it could be sufficient to violate the FDCPA.

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