Second Circuit Holds That RESPA Compliance Letter Was Subject to FDCPA

Second Circuit Holds That RESPA Compliance Letter Was Subject to FDCPA
Banking Alert October 12, 2015

The United States Court of Appeals for the Second Circuit recently held that a mortgage loan servicer’s letter to a borrower advising that the servicer had assumed mortgage servicing responsibilities for the borrower’s mortgage was subject to the requirements of the Fair Debt Collection Practices Act (“FDCPA”).  See Hart v. FCI Lender Servs., Inc., 797 F.3d 219 (2d Cir. 2015).  In the case, the defendant servicer sent a letter entitled “Transfer of Servicing Letter” in which it informed the plaintiff that the servicing of plaintiff’s loan had been assigned to the defendant, instructed the plaintiff on where to make payments, and provided the plaintiff with other information about the assignment pursuant to the Real Estate Settlement Procedures Act (“RESPA”).  See 12 USC 2605(c) (“Each transferee servicer to whom the servicing of any federally related mortgage loan is assigned, sold, or transferred shall notify the borrower of any such assignment, sale, or transfer”).  The letter also attached some notices pursuant to the FDCPA, including that (i) the letter is “an attempt to collect a debt”; (ii) the debt “will be assumed to be valid” unless disputed within 30 days of receipt of the letter; (iii) the defendant would mail plaintiff verification of the debt within 30 days, if disputed; and (iv) the defendant would provide the name of the original creditor, if requested.  

The plaintiff filed a lawsuit against the defendant as a putative class action, alleging that the letter violated the FDCPA by failing to identify the current creditor, among other alleged violations.  See 15 USC 1692g.  The defendant filed a motion to dismiss, arguing that the letter was not an “initial communication . . . in connection with the collection of any debt” that would subject it to the provisions of the FDCPA.  The district court agreed and dismissed the action, holding that the letter was intended only to provide information and comply with RESPA, and was not subject to the FDCPA because it was not an attempt to induce payment.  The Second Circuit disagreed, however, and reversed the lower court’s decision.  It held that the issue of whether a communication was sent in connection with the collection of any debt should be viewed objectively, based on how a consumer would reasonably interpret it.  It also rejected the interpretation proffered by the lower court, as well as the Sixth and Seventh Circuits, that a communication must be made with the intent to induce payment in order to be subject to the FDCPA, finding instead that any communication “related to” the collection of a debt would suffice.  It further held that the defendant’s letter, which included references to where the plaintiff should send his payments, directions for how to dispute the debt and, “most importantly,” language that “this is an attempt to collect a debt,” would reasonably be interpreted by a consumer as an attempt to collect a debt.  In response to the defendant’s objection that it only included some FDCPA language in order to protect itself, the Court instructed that “[w]hile it may be unfortunate for debt collectors that the use of a defective notice helps give rise to an obligation to provide a proper notice, the solution is to improve the defective notice.”

For a copy of the decision, please contact Michael O’Donnell at