In a 9-4 decision issued by the court, it was determined that mortgage servicers can be held liable for any alleged violations of the Fair Debt Collection Practices Act (FDCPA). This ruling is likely to have far-reaching implications for the mortgage industry, as lenders now must consider the possibility that their mortgage statements could fall into the scope of the FDCPA.
The 11th Circuit's decision stemmed from a case where the plaintiff accused a loan servicer of acting as a debt collector when sending out a mortgage statement with a late fee. According to the FDCPA, debt collectors are restricted from engaging in certain behaviors while collecting debts, such as harassing or threatening borrowers, using abusive language, and providing false information about a debtor. The plaintiff argued that the servicer had violated the FDCPA, as the statement sent out contained the late fee, which amounted to a form of harassment, as well as false information.
The court ultimately decided in favor of the plaintiff, noting that a debt collector is defined as someone who is “in the business of collecting or attempting to collect debts." It ruled that, since the loan servicer was engaged in collecting a debt (the mortgage statement included a late fee) it could therefore be considered a debt collector under the FDCPA. As a result, it could be held liable for any violations of the FDCPA.
The 11th Circuit’s ruling has significant implications for the mortgage industry, as mortgage servicers and lenders now must be aware of the possibility that their mortgage statements may be subject to the FDCPA. Specifically, they must ensure that all language used in their mortgage statements is compliant with the FDCPA, so as to avoid potential violations. Additionally, they must take care to avoid any actions that could be interpreted as harassment or threats by borrowers.
Overall, the 11th Circuit’s ruling is likely to have an effect on the mortgage industry, as lenders and servicers must now take steps to ensure their mortgage statements are compliant with the FDCPA. With this ruling, lenders must now become more mindful of their statements in order to avoid any potential violations. However, it is important to note that this ruling does not apply to all forms of debt collection, but only to those activities which are specifically outlined in the FDCPA.
This article was contributed on Jul 28, 2023