New York Federal Court Holds Pre-Foreclosure Notice Is Not Subject to FDCPA

The United States District Court for the Eastern District of New York recently held that a mortgagee’s pre-foreclosure notice to a homeowner did not violate the Fair Debt Collection Practices Act (“FDCPA”) because it was not an attempt to collect a debt.  See Carbone v. Caliber Home Loans, Inc., 2017 WL 4157265 (E.D.N.Y. Sept. 19, 2017).  In the case, plaintiff and her husband fell behind on their mortgage payments and defendant mortgagee sent them a pre-foreclosure notice as required under New York law.  The notice stated, among other things, that “[t]his is an attempt by a debt collector to collect a debt and any information obtained will be used for that purpose.”  Plaintiff filed a complaint against defendant, claiming that the letter violated the FDCPA because it did not provide the requisite notices allowing plaintiff to validate the debt.  Defendant filed a motion to dismiss, arguing that plaintiff was not a consumer under the FDCPA because she did not meet the definition of “any natural person obligated or allegedly obligated to pay any debt.”  15 USC 1692a(3).  The court agreed and dismissed the action.  Although it acknowledged that the Second Circuit had not addressed whether the initiation of a mortgage foreclosure action is done in connection with the collection of a debt, it noted that the majority of other circuits had held that it is not, because the object of a foreclosure “‘is to retake and resell the security, not to collect money from the borrower.’”  Further, the court found that the notice was required under New York law and was not the type of harassing letter the FDCPA was designed to prevent.  Finally, the court held that, although the letter stated that it was an attempt to collect a debt, this language alone did not convert the letter into a debt collection letter under the FDCPA.

For a copy of the decision, please contact Michael O’Donnell at modonnell@riker.com, Michael Crowley at mcrowley@riker.com or Clarissa Gomez at cgomez@riker.com.