8th Circuit: No Automatic FDCPA Protection for Boilerplate Disclosures

The United States Court of Appeals for the Eighth Circuit recently affirmed summary judgment in favor of a mortgage loan servicer, finding that the communications from the mortgage loan servicer were not communications “in connection with the collection of a debt,” as required under the Fair Debt Collection Practices Act (“FDCPA”). See Heinz v. Carrington Mortg. Servs., LLC, 2021 WL 2878322 (8th Cir. July 9, 2021). In the case, a borrower obtained a loan secured by a mortgage on his home. Upon default, the assignee to the loan initiated foreclosure proceedings and advised that the foreclosure sale was scheduled to occur on August 1, 2017. In July 2017, Carrington Mortgage Services, LLC (“Carrington”) became the servicer of the loan and confirmed that the foreclosure sale would proceed as scheduled. However, a Carrington representative allegedly informed the borrower that to prevent the foreclosure sale, the borrower could submit a loss mitigation package. Thereafter, the borrower contacted the Minnesota Attorney General’s Office for assistance with the application.  The foreclosure sale was subsequently postponed to September 9, 2017, and later to November 14, 2017. Between August and November 2017, the borrower provided Carrington with financial information, which Carrington advised was incomplete. However, a Carrington representative allegedly advised that the borrower’s file had been sent to underwriting and was awaiting a final determination. Nevertheless, Carrington proceeded with the scheduled foreclosure sale. Carrington subsequently mailed the borrower a cancellation notice, dated two days after the foreclosure sale, which advised the borrower for the first time that his loss mitigation assistance application had been cancelled. The borrower then requested that Carrington rescind the foreclosure sale, which was subject to a six-month redemption period in which the borrower was able to redeem the property. Nevertheless, one day after the redemption period expired, Carrington informed the borrower that it declined to rescind the foreclosure sale because the borrower failed to provide the requisite documentation to complete the loss mitigation assistance application.

The borrower then brought a claim under the FDCPA in Minnesota state court, seeking rescission of the foreclosure sale, a temporary restraining order preventing eviction, and damages. Carrington subsequently removed the action to federal court based on federal question jurisdiction. Applying the “animating purpose” test, the District Court granted summary judgment in favor of Carrington, concluding that Carrington's communications and conduct in the course of its dealings with the borrower were not in connection with an attempt to collect a debt, and therefore not subject to the FDCPA. As to the communications that occurred after the foreclosure sale, the District Court also determined that they were immaterial because they had no impact on the borrower’s legal rights. 

On appeal, the Eight Circuit affirmed. The Court noted that in considering whether certain statements or conduct are in connection with the collection of a debt for the purposes of the FDCPA, the Eight Circuit employs the “animating purpose” test.  Under this test, “‘for a communication to be in connection with the collection of a debt, an animating purpose of the communication must be to induce payment by the debtor.’” Relying on Obduskey v. McCarthy & Holthus LLP, 139 S. Ct. 1029, 1036 (2019), the borrower argued that the Supreme Court's statement that nonjudicial foreclosure is a debt collection activity rendered each of the communications made by Carrington in connection with the attempt to collect a debt. The Court, however, found that the substance of communications demonstrated otherwise. Specifically, the communications did not contain any information about the loan, such as the principal amount remaining due, the past due amount, or a request for payment. Most importantly, the Court held that although each letter included a “Mini-Miranda” statement in the disclosures section, which stated that “[t]his communication is from a debt collector and it is for the purpose of collecting a debt and any information obtained will be used for that purpose,” the inclusion of such boilerplate language “[does] not automatically trigger the protections of the FDCPA, just as the absence of such [disclosures] does not have dispositive significance.” Further, the Court found that Carrington’s conduct in delaying communications with the borrower was not done in an attempt to collect upon a debt under the FDCPA. Thus, the Court affirmed summary judgment in favor of Carrington.

For a copy of the decision, please contact Michael O’Donnell at modonnell@riker.com, Michael Crowley at mcrowley@riker.com, or Desiree McDonald at dmcdonald@riker.com.