Foreclosure and the Fair Debt Collection Practices Act
The Fair Debt Collection Practices Act was designed to control debt collectors in the process of debt collection. Foreclosures exist in order to force the debtor, one way or another, to pay a debt, and in recent years it would be hard to find a more abused area of collection law. The FDCPA should, therefore, apply. Not all courts agree. The essay below is, perhaps unfortunately, designed to address this issue in depth and detail. Thus it will require some effort to read. There are videos at the bottom of the page about Foreclosure as a procedure for debt collection and about what jurisdiction is and how it applies in this situation.
Applying the FDCPA to Foreclosure Actions
The Fair Debt Collection Practices Act (FDCPA) is a law that, primarily, applies to “debt collectors” who are “collecting debts” (as those terms are defined by the statute. Foreclosure and all the actions leading to it are clearly attempts to collect a debt. Whether the FDCPA will be applied to them, on the other hand, is not so clear.
Currently, it appears that a majority of the district courts that have ruled on the question have found that the FDCPA does not apply. Most of the circuit courts of appeal addressing the question, on the other hand, have held that it does. Eventually the law will probably catch up with common sense and the broad remedial purpose of the FDCPA, but for now whether the Act will apply to foreclosure may depend on where you live – and what court you file your suit in.
In this essay we will first discuss the arguments in favor of applying the FDCPA to foreclosure, then the arguments against it, and finally will compare the relative merits of the arguments. The good news for anyone seeking to apply the FDCPA to foreclosure is that even the jurisdictions that have held it does not apply have exceptions that open the door to a considerable extent. In whatever jurisdiction you use, you will need to know all the arguments.
The arguments in support of applying the FDCPA to foreclosure are both numerous and intuitive. The legal purpose of foreclosure is to collect a debt, whether the process requires the filing of a lawsuit and judgment (judicial) or is simply a formal process that does not require a judgment (non-judicial). Foreclosure is designed to allow for the original owner to take the property, sell it, and use the money to pay off a debt. The foreclosure process has often been abused and in ways similar to other debt collection techniques; nothing in the Act itself exempts foreclosure; and several parts of the Act strongly suggest that foreclosure was intended to be included.
The arguments against including foreclosure, by contrast, are superficial and counterintuitive, relying on hornbook rules of statutory construction like “the expression of one concept implies the exclusion of the unexpressed” or reading a statute in a way which avoids “surplussage.” On the other hand, some courts rely on the fiction that the holder of the security interest is somehow the “true” owner of the property in question and that it is somehow unjust to allow the debtor to continue to possess the property. Thus the foreclosing entity is merely “taking back” what is truly its property and need not obtain a judgment in order to do so, a notion based on the mistaken assumption that all foreclosable liens are purchase money mortgages.
In Glazer v. Chase Home Finance, LLC, __ F.3d __, 2013 WL 141699 (6th Cir. Jan. 14, 2013), the court stated as follows:
Unfortunately, the FDCPA does not define “debt collection,” and its definition of “debt collector” adds little, as it speaks in terms of debt collection.
But the statute does offer “guideposts.” It defines the word “debt” as “any obligation of a consumer to pay money arising out of a transaction in which the … [money or credit is spent]… primarily for personal, family, or household purposes.” 15 U.S.C. Sec. 1692a(5). This language suggests that coverage depends on the purpose of the debt, rather than whether the debt is secured, citing, Haddad v. Alexander, Zelanski, Danner & Fioritto, PLLC, 698 F.3d 290, 293 (6th Cir. 2012) (applying FDCPA to condo assessments). Accordingly, home loans are debts even if secured, Reese v. Ellis, Painter, Ratterree & Adams, LLP, 678 F.3d 1211, 1216-17 (11th Cir. 2012); Maynard v. Cannon, 401 F.App’x 389, 394 (10th Cir. 2010).
This case draws significant support from important cases in two other circuits of the federal appeals courts, Wilson v. Draper & Goldberg, P.L.L.C., 443 F.3d 373 (4th Cir. 2006) and Piper v. Portnoff Law Assocs., Ltd., 396 F.3d 227 (3d Cir. 2005).
The Act’s substantive provisions indicate that debt collection is performed through either a “communication” (Sec. 1692c), “conduct,” (1692d) or “means,” (1692e, 1692f). These broad words suggest a broad view of what the Act considers collection. Nothing in these provisions limits applicability to collection actions not legal in nature. Foreclosure’s legal nature, therefore, does not prevent it from being debt collection.
Glazer referred to Black’s Law Dictionary, which the Supreme Court relied on in Heintz, 514 U.S. at 294: “In ordinary English, a lawyer who regularly tries to obtain payment of consumer debts through legal proceedings is a lawyer who regularly ‘attempts’ to ‘collect’ those consumer debts.”
Thus, if a purpose of an activity taken in relation to a debt is to “obtain payment” of the debt, the activity is properly considered debt collection. See Shapiro & Meinhold v. Zartman, 823 P.2d 120, 124 (Colo. 1992)(foreclosure is a method of collecting a debt by acquiring and selling secured property to satisfy a debt).
In fact, every mortgage foreclosure, judicial or otherwise, is undertaken for the very purpose of obtaining payment on the underlying debt, either by persuasion (i.e., forcing a settlement) or compulsion (i.e., obtaining a judgment of foreclosure, selling the home at auction and applying the proceeds to pay for the outstanding debt). Glazer v. Chase, at p. 11. The existence of redemption rights and the potential for deficiency judgments demonstrate that the underlying purpose of foreclosure is to obtain payment of a debt, Glazer, id., citing Eric M. Marshall, Note, The Protective Scope of the Fair Debt Collection Practices Act: Providing Mortgagors the Protection They Deserve from Abusive Foreclosure Practices, 94 Minn.L.Rev. 1269, 1297-98 (2010) and not, more esoterically, to repossess (or become possessed of) the security.
No provision of the Act excludes forclosure or the enforcement of security interests from its reach, generally, and some affirmatively suggest that such activity is debt collection. Section 1692f prohibits debt collectors from using unfair or unconscionable means “to collect any debt,” and the non-exhaustive list of specific activities applied to that includes “taking or threatening to take any nonjudicial action to effect dispossession or disablement of property if there is no present right to possession of the property claimed as collateral through an enforceable security interest.” 15 U.S.C. Sec. 1692f(6)(A). As Glazer points out, the example’s presence within a provision that prohibits unfair means to “collect or attempt to collect any debt” suggests that mortgage foreclosure is a “means” to collect a debt. Glazer, p. 11.
And Section 1692i requires a debt collector bringing a legal action “to enforce an interest in real property securing the consumer’s obligation” to file in the judicial district where the property is located. 15 U.S.C. Sec. 1692i(a)(1). This provision applies only to “debt collectors” as defined in the first sentence of the definition 1692a(6). This suggests that filing any type of mortgage foreclosure action is debt collection.
Piper v. Portnoff Law Assocs., Ltd., 396 F.3d 227 (3rd Cir. 2005)
Piper v. Portnoff was a case involving utility bills. The defendant lawyers made numerous demands on outstanding utility bills without adhering to the FDCPA. When the plaintiff did not pay the bills, the firm obtained a lien on the plaintiff’s home. Then the lawyers sought to foreclose on the lien. The defendants attempted to argue that the FDCPA did not apply because they had only sought to foreclose on a security, and the Third Circuit rejected this argument.
The Piper case did involve numerous pre-foreclosure notices and threatening letters involving a simple bill before the bill was converted to a lien, so the court was probably influenced by the fact that the lien’s purpose in this case was simply a step in the collection process which foreshadowed – in very short order – the foreclosure of the lien to collect the debt. The sequence of events highlighted the absence of what might be considered a “normal” part of mortgages which the courts applying an “unjust enrichment” theory accept as given, i.e., that the lien was part of the means by which the plaintiffs had purchased the house.[1] The sequence of events in Piper demonstrates that not all property liens arise in a way which suggests that the lender truly “owns” the property rather than the debtor, and negated the unjust enrichment aspect of the argument in favor of permitting foreclosure as not the “collection of a debt.”
In reality, as Glazer points out, nothing is clearer than that mortgage foreclosure is all about collecting a debt. Its purpose is very simply to obtain money to pay a debt, and any overage is due back to the debtor. The holding of Piper was that a debt’s conversion to a lien did not alter its character as a debt. Nothing in the FDCPA suggests a different rule for cases involving purchase-money security vs. security interests that arise in other ways as it did in Piper. An even more powerful case relating to this is Romea v. Heiberger & Assocs., 163 F.3d 111 (2d Cir. 1998).
Romea v. Heiberger & Associates, 163 F.3d 111 (2d Cir. 1998)
Romea was a case involving eviction for failure to pay rent. In this case, the plaintiffs had fallen behind in rent due, and the defendant sent them a “three-day notice” as required byNew Yorklaw as a prerequisite of eviction. The notice did not contain the required FDCPA mini-miranda warning or right to demand verification, and the plaintiffs filed suit under the FDCPA.
The defendant argued that since the three-day notice was a statutory prerequisite for repossession of the property for nonpayment of rent, it was not a “communication” in an attempt to collect a debt. Noting that the defendant “made no attempt to deny that its aim in sending the letter was at least in part to induce Romea to pay the back rent she allegedly owed,” the court held that the fact that the letter was a statutory prerequisite to eviction was “wholly irrelevant to the requirements and applicability of the FDCPA.” The notice was an attempt to collect a debt that had to comply with the FDCPA’s requirements.
The Romea court also rejected the argument that because the 3-day notice was a statutory prerequisite to eviction it was a pleading. In the first place, the required notice was not a pleading at all under New York law, but merely a notice to the tenant of what must be done to forestall a summary proceeding. More significantly, however, the 2nd Circuit construed the 15 U.S.C. Sec. 1692a(6)(D) exemption to apply “only to process servers, and not to those who prepared the communication that was served on the consumer.”
Wilson v. Draper & Goldberg, PLLC, 443 F.3d 373 (4th Cir. 2006)
In Wilson v. Draper & Goldberg, PLLC, 443 F.3d 373 (4th Cir. 2006), a bank hired a law firm to foreclose on a house because the home loan was in default. The firm commenced foreclosure proceedings and contacted the plaintiff to say her home would soon be sold at auction. The plaintiff filed suit under the FDCPA.
The defendant argued that the plaintiff’s debt ceased to be a debt for purposes of the Act once foreclosure proceedings began, and that foreclosure was distinct from the enforcement of an obligation to pay money. The Fourth Circuit rejected the argument, holding that the debt remained a “debt” and that the firm’s actions surrounding the foreclosure proceeding were attempts to collect that debt. Id., 443 at 376. The court noted specifically that “the firm’s argument, if accepted, would create an enormous loophole in the Act immunizing any debt from coverage if that debt happened to be secured by a real property interest and foreclosure proceedings were used to collect the debt.” Id. Seeing “no reason to make an exception to the Act when the debt collector uses foreclosure instead of other methods,” the court held that the firm’s “foreclosure action was an attempt to collect a debt.” Id. at 376, 378.
Cases Against Applying the FDCPA to Foreclosures
The cases opposing application of the FDCPA to foreclosure are much more cursory in their analysis. Some hold that foreclosure is distinct from the debt collection process because “payment of funds is not the object of the foreclosure action.” Hulse v. Ocwen Fed Bank, 195 F.Supp. 2d 1188, 1204 (D. Or. 2002). The court in Glazer flatly rejects this argument for the reasons stated above, holding that “there can be no serious doubt that the ultimate purpose of foreclosure is the payment of money.”
Gray v. Four Oak Court Ass’n, Inc. 580 F.Supp.2d 883 (D.Minn. 2008)
In Gray v. Four Oak Court Ass’n, Inc., 580 F.Supp.2d 883 (D.Minn. 2008) the court rejects application of the FDCPA to foreclosure based on the supposed definition of “debt collector.” According to the Gray court, “the statute’s definition of a ‘debt collector’ clearly reflects Congress’s intent to distinguish between the ‘collection of any debts’ and ‘the enforcement of security interests.’”
This is so, according to Gray, because the first sentence of the definition in Sec. 1692a(6) defines a debt collector as “an person who uses any instrumentality of interstate commerce or the mails [for] the collection of any debts… The third sentence of Sec. 1692a(6) provides that for purposes of Sec. 1692f(6) a debt collector is also “any person who uses any instrumentality of interstate commerce…[for] the enforcement of security interests.” Therefore, if a party satisfies the first sentence, it is a debt collector for all purposes, but if the party only satisfies the third sentence it is only a debt collector for purposes of 1692f(6). “If the enforcement of a security interest was synonymous with debt collection, the third sentence would be surplussage because any business with a principal purpose of enforcing security interests would also have the principal purpose of collecting debts.” Id., 580 F.Supp.2d 883, 888. (emphasis added). Thus the court held that the enforcement of a security interest, including a lien foreclosure, does not constitute the “collection of any debt.”
Although there is a superficial appeal to the Gray court’s reasoning, it is untenable. It simply ignores the fact that foreclosure is inevitably intended as a means to collect a debt and builds a huge loophole into the Act which would frustrate the legislative intent. There is no basis in Gray for distinguishing the situations that arose in Piper, where the debt was converted to a security interest – a process which happens, incidentally, under Missouri law where a judgment in civil court becomes a lien on real property.
Again, the Glazer court flatly rejects the argument, citing Piper. The third sentence of the definition does not except from the definition of debt collection the enforcement of security interests; it simply “makes clear that some persons who would be without the scope of the general definition are to be included where Sec. 1692f(6) is concerned:”
[e]ven though a person whose business does not primarily involve the collection of debts would not be a debt collector for purposes of the Act generally, if his principal business is the enforcement of security interests he must comply with the provisions of the Act dealing with non-judicial repossession abuses. Section 1692a(6) thus recognizes that there are people who engage in the business of repossessing property whose business does not primarily involve communicating with debtors in an effort to secure payment of debts.
Piper, 396 F.3d at 236. And, in the words of the Fourth Circuit, “[t]his provision applies to those whose only role in the debt collection process is the enforcement of a security interest.” Wilson, 443 F.3d at 378.
This reasoning may seem a little strained, but a contrary reading excludes a large category of debt collectors for no principled reason at all in a way which inevitably would, and widely has, led to abuses that frustrate the purposes of the Act. And there is a group that satisfies this definition: repossession agencies and their agents, “who typically ‘enforce’ a security interest – i.e., repossess or disable property – when the debtor is not present, in order to keep the peace. See, Glazer v. Chase Home Fin. Slip. Op. at 15, citing cases applying the definition’s third sentence to repossession agencies: Montgomery v. Huntington Bank, 346 F.3d 693, 700 (6th Cir. 2003), Nadalin v. Auto Recovery Bureau, Inc., 169 F.3d 1084, 1085 (7th Cir. 1999), James v. Ford Motor Credit Co., 47 F.3d 961, 962 (8th Cir.1995)(noting that “a few provisions of the Act subject repossession companies to potential liability when they act in the enforcement of others’ security interests”).
Seventh and Eleventh Circuit Interpretations
The Seventh Circuit has not ruled whether foreclosure is per se debt collection, but in a non-foreclosure case took a “pragmatic” approach. In Gburek v. Litton Loan Servicing, LP, 614 F.3d 380, 386 (7th Cir. 2010, the court looked at a number of communications sent by the debt collector to the consumer. The letters threatened foreclosure and also offered to discuss “foreclosure alternatives,” and the court held that this was a communication related to debt collection.
Since most communications related to foreclosure contain information about foreclosure alternatives, whether by statutory requirement or not, it seems likely that most of them will be communications relating to debt collection. A truly pragmatic view of them would go the further step of recognizing that foreclosure is itself a form of debt collection.
The Eleventh Circuit has officially held that non-judicial foreclosure was not debt collection under the Act. In Warren v. Countrywide Home Loans, Inc., No. 08-16171 (11th Cir. 2009)(unpublished), the court perfunctorily recited the majority of district courts finding foreclosure not a debt collection and held the same way. The court did not intend for the opinion to be published, however, so it has little controlling force, if any, and was not even cited by Reese v. Ellis, Painter, Ratterree & Adams, LLP, 678 F.3d 1211 (11th Cir. 2012), which cited Wilson, Piper, Romea and Gburek with approval and holding that “A communication related to debt collection does not become unrelated to debt collection simply because it also relates to the enforcement of a security interest. A debt is still a “debt” even if it is secured.”
Reese involved a foreclosure notice required by Georgia law as part of its non-judicial foreclosure process which also contained various statements demanding money and advising that attorney’s fees would be added to the “amount sought.” The Reese court regarded these statements as attempts to collect which converted the foreclosure into a debt collection effort. Or to put it as the Reese court did, the fact that the documents also constituted a foreclosure did not immunize their communications, clearly within the FDCPA, from the Act.
Conclusion
The majority of circuit courts have held that foreclosure is an attempt to collect a debt, and those that have not have adopted an approach that will, in the majority of cases, lead to a similar result. It is very likely that eventually all the courts will reach this common sense application of the FDCPA.
[1] A frequent justification for the special treatment of security interests is that, unlike the payment of general debts where a debtor is unable to pay, where there is a security interest made as part of the payment, it could be said that the debtor does not really own the house and would be unjustly enriched by being permitted to keep it without paying. As Piper shows, however, this is an extremely slippery slope.
How to Argue Motions in Court
What to Say and How to Say it
When you’re sued for debt, you may need to make or defend motions in court, and this sometimes means making arguments before the court. This video will help you know what to say and how to argue motions in court.
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Defending Motions for Summary Judgment in Debt Collection Cases
Much More on Foreclosure
Foreclosure and the Fair Debt Collection Practices Act
The Fair Debt Collection Practices Act was designed to control debt collectors in the process of debt collection. Foreclosures exist in order to force the debtor, one way or another, to pay a debt, and in recent years it would be hard to find a more abused area of collection law. The FDCPA should, therefore, apply. Not all courts agree. The essay below is, perhaps unfortunately, designed to address this issue in depth and detail. Thus it will require some effort to read. There are videos at the bottom of the page about Foreclosure as a procedure for debt collection and about what jurisdiction is and how it applies in this situation.
Applying the FDCPA to Foreclosure Actions
The Fair Debt Collection Practices Act (FDCPA) is a law that, primarily, applies to “debt collectors” who are “collecting debts” (as those terms are defined by the statute. Foreclosure and all the actions leading to it are clearly attempts to collect a debt. Whether the FDCPA will be applied to them, on the other hand, is not so clear.
Currently, it appears that a majority of the district courts that have ruled on the question have found that the FDCPA does not apply. Most of the circuit courts of appeal addressing the question, on the other hand, have held that it does. Eventually the law will probably catch up with common sense and the broad remedial purpose of the FDCPA, but for now whether the Act will apply to foreclosure may depend on where you live – and what court you file your suit in.
In this essay we will first discuss the arguments in favor of applying the FDCPA to foreclosure, then the arguments against it, and finally will compare the relative merits of the arguments. The good news for anyone seeking to apply the FDCPA to foreclosure is that even the jurisdictions that have held it does not apply have exceptions that open the door to a considerable extent. In whatever jurisdiction you use, you will need to know all the arguments.
The arguments in support of applying the FDCPA to foreclosure are both numerous and intuitive. The legal purpose of foreclosure is to collect a debt, whether the process requires the filing of a lawsuit and judgment (judicial) or is simply a formal process that does not require a judgment (non-judicial). Foreclosure is designed to allow for the original owner to take the property, sell it, and use the money to pay off a debt. The foreclosure process has often been abused and in ways similar to other debt collection techniques; nothing in the Act itself exempts foreclosure; and several parts of the Act strongly suggest that foreclosure was intended to be included.
The arguments against including foreclosure, by contrast, are superficial and counterintuitive, relying on hornbook rules of statutory construction like “the expression of one concept implies the exclusion of the unexpressed” or reading a statute in a way which avoids “surplussage.” On the other hand, some courts rely on the fiction that the holder of the security interest is somehow the “true” owner of the property in question and that it is somehow unjust to allow the debtor to continue to possess the property. Thus the foreclosing entity is merely “taking back” what is truly its property and need not obtain a judgment in order to do so, a notion based on the mistaken assumption that all foreclosable liens are purchase money mortgages.
In Glazer v. Chase Home Finance, LLC, __ F.3d __, 2013 WL 141699 (6th Cir. Jan. 14, 2013), the court stated as follows:
Unfortunately, the FDCPA does not define “debt collection,” and its definition of “debt collector” adds little, as it speaks in terms of debt collection.
But the statute does offer “guideposts.” It defines the word “debt” as “any obligation of a consumer to pay money arising out of a transaction in which the … [money or credit is spent]… primarily for personal, family, or household purposes.” 15 U.S.C. Sec. 1692a(5). This language suggests that coverage depends on the purpose of the debt, rather than whether the debt is secured, citing, Haddad v. Alexander, Zelanski, Danner & Fioritto, PLLC, 698 F.3d 290, 293 (6th Cir. 2012) (applying FDCPA to condo assessments). Accordingly, home loans are debts even if secured, Reese v. Ellis, Painter, Ratterree & Adams, LLP, 678 F.3d 1211, 1216-17 (11th Cir. 2012); Maynard v. Cannon, 401 F.App’x 389, 394 (10th Cir. 2010).
This case draws significant support from important cases in two other circuits of the federal appeals courts, Wilson v. Draper & Goldberg, P.L.L.C., 443 F.3d 373 (4th Cir. 2006) and Piper v. Portnoff Law Assocs., Ltd., 396 F.3d 227 (3d Cir. 2005).
The Act’s substantive provisions indicate that debt collection is performed through either a “communication” (Sec. 1692c), “conduct,” (1692d) or “means,” (1692e, 1692f). These broad words suggest a broad view of what the Act considers collection. Nothing in these provisions limits applicability to collection actions not legal in nature. Foreclosure’s legal nature, therefore, does not prevent it from being debt collection.
Glazer referred to Black’s Law Dictionary, which the Supreme Court relied on in Heintz, 514 U.S. at 294: “In ordinary English, a lawyer who regularly tries to obtain payment of consumer debts through legal proceedings is a lawyer who regularly ‘attempts’ to ‘collect’ those consumer debts.”
Thus, if a purpose of an activity taken in relation to a debt is to “obtain payment” of the debt, the activity is properly considered debt collection. See Shapiro & Meinhold v. Zartman, 823 P.2d 120, 124 (Colo. 1992)(foreclosure is a method of collecting a debt by acquiring and selling secured property to satisfy a debt).
In fact, every mortgage foreclosure, judicial or otherwise, is undertaken for the very purpose of obtaining payment on the underlying debt, either by persuasion (i.e., forcing a settlement) or compulsion (i.e., obtaining a judgment of foreclosure, selling the home at auction and applying the proceeds to pay for the outstanding debt). Glazer v. Chase, at p. 11. The existence of redemption rights and the potential for deficiency judgments demonstrate that the underlying purpose of foreclosure is to obtain payment of a debt, Glazer, id., citing Eric M. Marshall, Note, The Protective Scope of the Fair Debt Collection Practices Act: Providing Mortgagors the Protection They Deserve from Abusive Foreclosure Practices, 94 Minn.L.Rev. 1269, 1297-98 (2010) and not, more esoterically, to repossess (or become possessed of) the security.
No provision of the Act excludes forclosure or the enforcement of security interests from its reach, generally, and some affirmatively suggest that such activity is debt collection. Section 1692f prohibits debt collectors from using unfair or unconscionable means “to collect any debt,” and the non-exhaustive list of specific activities applied to that includes “taking or threatening to take any nonjudicial action to effect dispossession or disablement of property if there is no present right to possession of the property claimed as collateral through an enforceable security interest.” 15 U.S.C. Sec. 1692f(6)(A). As Glazer points out, the example’s presence within a provision that prohibits unfair means to “collect or attempt to collect any debt” suggests that mortgage foreclosure is a “means” to collect a debt. Glazer, p. 11.
And Section 1692i requires a debt collector bringing a legal action “to enforce an interest in real property securing the consumer’s obligation” to file in the judicial district where the property is located. 15 U.S.C. Sec. 1692i(a)(1). This provision applies only to “debt collectors” as defined in the first sentence of the definition 1692a(6). This suggests that filing any type of mortgage foreclosure action is debt collection.
Piper v. Portnoff Law Assocs., Ltd., 396 F.3d 227 (3rd Cir. 2005)
Piper v. Portnoff was a case involving utility bills. The defendant lawyers made numerous demands on outstanding utility bills without adhering to the FDCPA. When the plaintiff did not pay the bills, the firm obtained a lien on the plaintiff’s home. Then the lawyers sought to foreclose on the lien. The defendants attempted to argue that the FDCPA did not apply because they had only sought to foreclose on a security, and the Third Circuit rejected this argument.
The Piper case did involve numerous pre-foreclosure notices and threatening letters involving a simple bill before the bill was converted to a lien, so the court was probably influenced by the fact that the lien’s purpose in this case was simply a step in the collection process which foreshadowed – in very short order – the foreclosure of the lien to collect the debt. The sequence of events highlighted the absence of what might be considered a “normal” part of mortgages which the courts applying an “unjust enrichment” theory accept as given, i.e., that the lien was part of the means by which the plaintiffs had purchased the house.[1] The sequence of events in Piper demonstrates that not all property liens arise in a way which suggests that the lender truly “owns” the property rather than the debtor, and negated the unjust enrichment aspect of the argument in favor of permitting foreclosure as not the “collection of a debt.”
In reality, as Glazer points out, nothing is clearer than that mortgage foreclosure is all about collecting a debt. Its purpose is very simply to obtain money to pay a debt, and any overage is due back to the debtor. The holding of Piper was that a debt’s conversion to a lien did not alter its character as a debt. Nothing in the FDCPA suggests a different rule for cases involving purchase-money security vs. security interests that arise in other ways as it did in Piper. An even more powerful case relating to this is Romea v. Heiberger & Assocs., 163 F.3d 111 (2d Cir. 1998).
Romea v. Heiberger & Associates, 163 F.3d 111 (2d Cir. 1998)
Romea was a case involving eviction for failure to pay rent. In this case, the plaintiffs had fallen behind in rent due, and the defendant sent them a “three-day notice” as required byNew Yorklaw as a prerequisite of eviction. The notice did not contain the required FDCPA mini-miranda warning or right to demand verification, and the plaintiffs filed suit under the FDCPA.
The defendant argued that since the three-day notice was a statutory prerequisite for repossession of the property for nonpayment of rent, it was not a “communication” in an attempt to collect a debt. Noting that the defendant “made no attempt to deny that its aim in sending the letter was at least in part to induce Romea to pay the back rent she allegedly owed,” the court held that the fact that the letter was a statutory prerequisite to eviction was “wholly irrelevant to the requirements and applicability of the FDCPA.” The notice was an attempt to collect a debt that had to comply with the FDCPA’s requirements.
The Romea court also rejected the argument that because the 3-day notice was a statutory prerequisite to eviction it was a pleading. In the first place, the required notice was not a pleading at all under New York law, but merely a notice to the tenant of what must be done to forestall a summary proceeding. More significantly, however, the 2nd Circuit construed the 15 U.S.C. Sec. 1692a(6)(D) exemption to apply “only to process servers, and not to those who prepared the communication that was served on the consumer.”
Wilson v. Draper & Goldberg, PLLC, 443 F.3d 373 (4th Cir. 2006)
In Wilson v. Draper & Goldberg, PLLC, 443 F.3d 373 (4th Cir. 2006), a bank hired a law firm to foreclose on a house because the home loan was in default. The firm commenced foreclosure proceedings and contacted the plaintiff to say her home would soon be sold at auction. The plaintiff filed suit under the FDCPA.
The defendant argued that the plaintiff’s debt ceased to be a debt for purposes of the Act once foreclosure proceedings began, and that foreclosure was distinct from the enforcement of an obligation to pay money. The Fourth Circuit rejected the argument, holding that the debt remained a “debt” and that the firm’s actions surrounding the foreclosure proceeding were attempts to collect that debt. Id., 443 at 376. The court noted specifically that “the firm’s argument, if accepted, would create an enormous loophole in the Act immunizing any debt from coverage if that debt happened to be secured by a real property interest and foreclosure proceedings were used to collect the debt.” Id. Seeing “no reason to make an exception to the Act when the debt collector uses foreclosure instead of other methods,” the court held that the firm’s “foreclosure action was an attempt to collect a debt.” Id. at 376, 378.
Cases Against Applying the FDCPA to Foreclosures
The cases opposing application of the FDCPA to foreclosure are much more cursory in their analysis. Some hold that foreclosure is distinct from the debt collection process because “payment of funds is not the object of the foreclosure action.” Hulse v. Ocwen Fed Bank, 195 F.Supp. 2d 1188, 1204 (D. Or. 2002). The court in Glazer flatly rejects this argument for the reasons stated above, holding that “there can be no serious doubt that the ultimate purpose of foreclosure is the payment of money.”
Gray v. Four Oak Court Ass’n, Inc. 580 F.Supp.2d 883 (D.Minn. 2008)
In Gray v. Four Oak Court Ass’n, Inc., 580 F.Supp.2d 883 (D.Minn. 2008) the court rejects application of the FDCPA to foreclosure based on the supposed definition of “debt collector.” According to the Gray court, “the statute’s definition of a ‘debt collector’ clearly reflects Congress’s intent to distinguish between the ‘collection of any debts’ and ‘the enforcement of security interests.’”
This is so, according to Gray, because the first sentence of the definition in Sec. 1692a(6) defines a debt collector as “an person who uses any instrumentality of interstate commerce or the mails [for] the collection of any debts… The third sentence of Sec. 1692a(6) provides that for purposes of Sec. 1692f(6) a debt collector is also “any person who uses any instrumentality of interstate commerce…[for] the enforcement of security interests.” Therefore, if a party satisfies the first sentence, it is a debt collector for all purposes, but if the party only satisfies the third sentence it is only a debt collector for purposes of 1692f(6). “If the enforcement of a security interest was synonymous with debt collection, the third sentence would be surplussage because any business with a principal purpose of enforcing security interests would also have the principal purpose of collecting debts.” Id., 580 F.Supp.2d 883, 888. (emphasis added). Thus the court held that the enforcement of a security interest, including a lien foreclosure, does not constitute the “collection of any debt.”
Although there is a superficial appeal to the Gray court’s reasoning, it is untenable. It simply ignores the fact that foreclosure is inevitably intended as a means to collect a debt and builds a huge loophole into the Act which would frustrate the legislative intent. There is no basis in Gray for distinguishing the situations that arose in Piper, where the debt was converted to a security interest – a process which happens, incidentally, under Missouri law where a judgment in civil court becomes a lien on real property.
Again, the Glazer court flatly rejects the argument, citing Piper. The third sentence of the definition does not except from the definition of debt collection the enforcement of security interests; it simply “makes clear that some persons who would be without the scope of the general definition are to be included where Sec. 1692f(6) is concerned:”
[e]ven though a person whose business does not primarily involve the collection of debts would not be a debt collector for purposes of the Act generally, if his principal business is the enforcement of security interests he must comply with the provisions of the Act dealing with non-judicial repossession abuses. Section 1692a(6) thus recognizes that there are people who engage in the business of repossessing property whose business does not primarily involve communicating with debtors in an effort to secure payment of debts.
Piper, 396 F.3d at 236. And, in the words of the Fourth Circuit, “[t]his provision applies to those whose only role in the debt collection process is the enforcement of a security interest.” Wilson, 443 F.3d at 378.
This reasoning may seem a little strained, but a contrary reading excludes a large category of debt collectors for no principled reason at all in a way which inevitably would, and widely has, led to abuses that frustrate the purposes of the Act. And there is a group that satisfies this definition: repossession agencies and their agents, “who typically ‘enforce’ a security interest – i.e., repossess or disable property – when the debtor is not present, in order to keep the peace. See, Glazer v. Chase Home Fin. Slip. Op. at 15, citing cases applying the definition’s third sentence to repossession agencies: Montgomery v. Huntington Bank, 346 F.3d 693, 700 (6th Cir. 2003), Nadalin v. Auto Recovery Bureau, Inc., 169 F.3d 1084, 1085 (7th Cir. 1999), James v. Ford Motor Credit Co., 47 F.3d 961, 962 (8th Cir.1995)(noting that “a few provisions of the Act subject repossession companies to potential liability when they act in the enforcement of others’ security interests”).
Seventh and Eleventh Circuit Interpretations
The Seventh Circuit has not ruled whether foreclosure is per se debt collection, but in a non-foreclosure case took a “pragmatic” approach. In Gburek v. Litton Loan Servicing, LP, 614 F.3d 380, 386 (7th Cir. 2010, the court looked at a number of communications sent by the debt collector to the consumer. The letters threatened foreclosure and also offered to discuss “foreclosure alternatives,” and the court held that this was a communication related to debt collection.
Since most communications related to foreclosure contain information about foreclosure alternatives, whether by statutory requirement or not, it seems likely that most of them will be communications relating to debt collection. A truly pragmatic view of them would go the further step of recognizing that foreclosure is itself a form of debt collection.
The Eleventh Circuit has officially held that non-judicial foreclosure was not debt collection under the Act. In Warren v. Countrywide Home Loans, Inc., No. 08-16171 (11th Cir. 2009)(unpublished), the court perfunctorily recited the majority of district courts finding foreclosure not a debt collection and held the same way. The court did not intend for the opinion to be published, however, so it has little controlling force, if any, and was not even cited by Reese v. Ellis, Painter, Ratterree & Adams, LLP, 678 F.3d 1211 (11th Cir. 2012), which cited Wilson, Piper, Romea and Gburek with approval and holding that “A communication related to debt collection does not become unrelated to debt collection simply because it also relates to the enforcement of a security interest. A debt is still a “debt” even if it is secured.”
Reese involved a foreclosure notice required by Georgia law as part of its non-judicial foreclosure process which also contained various statements demanding money and advising that attorney’s fees would be added to the “amount sought.” The Reese court regarded these statements as attempts to collect which converted the foreclosure into a debt collection effort. Or to put it as the Reese court did, the fact that the documents also constituted a foreclosure did not immunize their communications, clearly within the FDCPA, from the Act.
Conclusion
The majority of circuit courts have held that foreclosure is an attempt to collect a debt, and those that have not have adopted an approach that will, in the majority of cases, lead to a similar result. It is very likely that eventually all the courts will reach this common sense application of the FDCPA.
[1] A frequent justification for the special treatment of security interests is that, unlike the payment of general debts where a debtor is unable to pay, where there is a security interest made as part of the payment, it could be said that the debtor does not really own the house and would be unjustly enriched by being permitted to keep it without paying. As Piper shows, however, this is an extremely slippery slope.
Debt Collectors Do Not Fear You
And they Never Will
If debt collectors can almost never make money on a case if you fight intelligently, then why don’t they just give up when you file an answer and counterclaim? This article discusses why and explains why you should keep fighting.
If you have read my articles or watched my videos, you know that I believe the debt collectors rarely if ever start out with what they need to win a case. And they can almost never get what they need in a cost-effective way if you defend yourself intelligently (i.e., if you know a little bit about what you’re doing). In other words, I believe that in most cases if you defend yourself—with a little help that my site and materials are designed to provide—the debt collectors cannot win their case against you in a way that makes money for them.
So here’s a question: why don’t they just drop your case as soon as you begin defending yourself intelligently? Shouldn’t they be afraid of you?
Well, why do blackmailers publish the damaging stuff when their victims promise that the can’t afford the asking price? Or why does the mob break legs when you don’t pay a debt?
For a legitimate business, companies focus on creating products and making profit. Debt collectors don’t produce anything – their goal is only to make you pay. And they know that if they get a reputation for letting people get away, other people won’t be afraid enough to pay. They need fear.
Sometimes it is good business to lose money.
The debt collectors are operating a “scam” on an essentially heroic scale: I’d venture to guess that they couldn’t win ten percent of their cases on a profitable basis if the people they were suing would resist intelligently. That isn’t to say that the debt collectors couldn’t win the cases, or even shouldn’t win them (sometimes), but the model of their business is such that they buy huge amounts of debt without really knowing what sort of proof exists to support that debt. And proving cases in a court of law, in the face of intelligent and determined opposition, is an expensive and risky proposition even when all the documents exist—and in debt law, they often do not. Even where there are lawyers on both sides of big-time commercial disputes, cases very rarely go to trial—they almost always settle at a significant discount to what one side demanded.
That’s life in the real world. Lawyers are expensive, and lawsuits are wasteful and bitter.
Not so in the make-believe world of debt litigation. There, the debt collectors get judgments for everything they ask for something like 80 or 90% of the time they serve the lawsuit on the defendants. And this, as I’ve pointed out before, is all the more bizarre because their business model suggests that they would seldom if ever actually win the cases! What gives?
Pain. Pain and fear.
The debt collectors are very much like extortionists in that they strike terror into the hearts of their victims. People rightly fear lawsuits, and people without money fear them more than people with money.
So what could mess up a blackmailer or a debt collector? A reputation as a “soft touch.” Imagine what would happen if a blackmailer gave in to every victim claiming a lack of money! The same thing that would happen to a debt collector who dropped every case where someone filed an answer and counterclaim. They’d get a reputation for giving up, and that would ruin the business. In the case of the debt collectors, it would eventually reverse the strange numbers that make the whole business so profitable.
They can’t let that happen. And that is why debt collectors rarely just drop your case when you show up (although they do sometimes). If you fight your case with determination, though, they will seldom feel the need to go all the way to trial. They want to manage their reputations, but they don’t want to lose a lot of money while they’re doing it, especially since losing a lot of cases after trial might be as bad for them as settling too easily. That means they will almost always eventually either drop your case or offer you the kind of settlement you could actually afford to pay. Pennies on the dollar. There’s a good chance they’ll drop the case entirely if you refuse to settle, but there may come a time and price where it makes sense to settle just to end the fight.
That’s what happens in the real world of law.
So – Do they Ever Fear Anybody?
No. Not really. See, you worry about debt collection suits because losing would hurt you and could seriously cramp your lifestyle. It’s a new and awful experience for you where you never really know what you’re doing and whether it’s enough. Debt collectors are different, though. In the first place, they file many, many lawsuits and almost always in them. Regardless of the circumstances, that doesn’t hurt the self-confidence.
More importantly, lawsuits are just a business for these guys. They have no real “skin in the game.” Losing costs them almost nothing, and they do this every day. There’s nothing scary about a day’s work. And if they lose your case, they have a thousand more to file.
They DO worry about wasting time, though. The one thing that could seriously reduce the profits of the debt collectors is something that would multiply the amount of time they must spend on the cases. That WOULD be a disaster for them, as they have figured costs out very carefully, and lawyers are their biggest expense. Thus, the longer you stick around, the bigger a problem for them you become.
But fear you? Nah. They’ll drop the case eventually because it isn’t profitable – that’s all you need.
Blaming Banks for the Problems they Caused
Has it occurred to you that all or most of your problems were caused by the very bank that is now suing you or that the debt collector purchased the debt from and is now suing you for? Some people argue that you could use that as a defense against their claims against you.
It will not.
Blaming the banks is a kind of “unclean hands” argument, and as far as I’m concerned, it is absolutely justified in a moral sense. The courts won’t see it that way, though.
Proximate Cause
The problem with arguing that “the banks” caused your problems is “proximate cause.” Proximate cause means the “specific problem” must be linked to specific actions by a specific entity. Viewed in that light, how can you argue that, say, Capital One, by extending credit cards and maintaining their policies, has really “caused” anything to happen in society? Many people may believe that the banks, collectively, caused big problems that resulted in raising taxes and sucking resources away from regular people, but how can you assign a specific role in that to Capital One?
Likewise, how do you prove that Capital One caused you problems that you could not have, and should not have, overcome? If we were truly in a capitalistic society the argument simply could not be made: the fact that you did not overcome the problem would be proof that you should not have done so. But we live in an age of bailouts and government interference, of course.
Tell that to the judge, a life-time public employee wielding far-reaching government power every day of his or her professional life.
And then the final zinger: how do you prove what specific action by your specific bank caused some specific injury to you?
Cigarette Litigation
This whole complex of proximate cause issues prevented anyone from winning cigarette litigation for decades. What finally allowed people to get through and win some of the cases was very strong evidence of conspiracy to hide specific facts that the companies knew and had a duty to disclose. There may be evidence of banking conspiracy – there is in some cases – but unlike a cigarette plaintiff who died of lung cancer, you will be hard pressed to show how your injury came from the banks’ action unless there are more specific grounds for applying the doctrine of unclean hands.
Cutting Edge Arguments and a Warning
As I say, I have my sympathies for the position that banks should not be permitted to profit from disasters they themselves caused. And many arguments that end up winning started out as sounding a little far-fetched. So you could consider it. On the other hand, the courts sometimes punish what they consider to be “frivolous” arguments and disputes. Arguments talking about banks and banking, like arguments claiming that our monetary system is completely corrupt live on the edge of “frivolousness” from the point of view of the courts. It would be possible that they could make you pay for taking that position.
Keep Your Eye on the Ball in Debt Defense
If you are a pro se debt defendant, remember this: Keep your eye on the ball or you will lose.
It is a cliché in sports and the rest of life that one must keep one’s eye on the ball. Anybody who has played a sport involving a moving ball has had that simple idea drilled into his or her head a million times. And yet it may be the single hardest thing to do. There are so many temptations to look elsewhere.
It’s the same in litigation, and the difficulty justifies this tip. You must watch the action and remember that your case isn’t over until it comes back “dismissed with prejudice.” Until then, you must not let your attention wander too far from the lawsuit.
Of course I’m not saying you should think about the case 100% of the time. What I am saying, though, is that you must always know where you are in the litigation, how far from trial, whether you have what you need or a plan for how to get it, whether you have responded to all the things needing response, etc. Lawsuits are played out in life over a fairly significant amount of time – you just have to stay on top of it during that time.
Any lapse in attention could make you lose valuable rights or the case in general.
This may seem like simply a pep-talk, but actually it isn’t. You are living a whole life with a lot of things going on. I’m reminding you that while lawsuits can seem to proceed slowly and could seem to allow you to forget about them for stretches of time until the other side does something, this is really not the case. Organization, focus and intensity on your goal here are necessary if you want to have a chance.
Our materials at Your Legal Leg Up can give you a lot of help, and our mission is to help you beat the debt collectors. We give you checklists and samples, but we cannot really make you keep your eyes on the ball. That can only come with your decision to be in your case to win. You have an excellent chance if you stay on top of things.
You are Either Winning or Losing
Today’s tip is about “keeping on track.” That is, sometimes people facing debt litigation are challenged by the mere numbers, and the debt – and everything about the case – can seem unreal and meaningless. Today’s tip is to remind you that it is real, and it does matter.
First, the deadlines are real, and they do matter. If you neglect to respond to discovery, for example, and the the time for responding to requests for admissions passes, you will likely face a motion for summary judgment. If you cannot get your responses permitted, you will probably lose the case. If the debt collector adds fees and manages to make them stick by means of a judgment, then you will likely spend a lot of time and effort trying to pay them – and get caught on the wheel of endless poverty. Unless you find a way off. Better to avoid that wheel!
It All Matters in Real Life
My point here is simple, though. It seems, when you have ten, twenty or fifty thousand dollars of debt, that a few bucks more won’t count. It seems that if you have two lawsuits pending against you already, it won’t matter if you take actions to avoid a third – or settle down and begin fighting them one at a time.
At a lower level, it looks like if you’re missing a payment, it doesn’t matter whether the late fee is correct or not.
In reality, it all counts.
I’m not saying that you will pay, dollar for dollar, on any money that is owed, but you will pay, one way or another, for everything that happens. The world is full of strange twists and turns, and all kinds of things happen – you inherit money, or one of the creditors drops the ball and disappears. One of them might make a settlement offer, or you need to refinance your house… if you don’t take care of what you can, your ability to act becomes more and more constricted.
There are no free lunches in this world, but if you keep trying things tend to work out eventually one way or the other – and the better you start, the more likely you are to have things work out in the end.
It All Matters in Litigation
In the world of litigation, on the other hand, it also all matters. In a way, the only thing that counts is the final score: you win or they win. But that’s not really the way it plays out. And the reason for that is actually similar to the reason the debt all counts. People – all people, but specially lawyers – are constantly evaluating what they should do. Should they drop the case and move on to someone a little easier to beat? A little more likely to pay? Could they actually lose the case? And how many other judgments could they get instead of pursuing you?
Cases almost never go to trial. Instead, the lawyers are constantly assessing the risk-reward ratio of continuing in the direction they’re going. If you are conducting yourself well and pushing them hard, it is more likely they will let you go and go off in search of easier victims. If you are doing the things you should do, and not doing the things you should not – you will make yourself a harder target.
You won’t necessarily know they’re going to give up until they actually do, so you have to play every play like it matters.
Hidden Risks of DebtConsolidation
Debt consolidation is combining outstanding loans (debt) into a single package (consolidation). The debts therefore become one “new” loan. Instead of making several small payments on the loans you used to have, you make one payment on the new loan. Ideally, this payment will be smaller than the previous payments added together. Occasionally people ask whether debt consolidation is a good, economically constructive solution to credit card problems. Usually, the answer is that it is not. Certainly not as a solution all by itself. This article discusses some of the drawbacks of debt consolidation.
Debt Consolidation Loans
Debt consolidation is combining outstanding loans (debt) into a single package (consolidation). The debts therefore become one “new” loan, and instead of making several small payments on the loans you used to have, you make one larger payment on the new loan. Ideally and typically—and what has made debt consolidation loans popular as a home remedy for debt—the new loan is secured by some asset, often your home, and this allows you to obtain lower interest rates. Thus consolidation, in the final analysis, is the conversion of debt that is not secured into debt that is secured by some real asset, in exchange for lower interest rates. It can reduce your monthly payments considerably, and of course that could be very helpful.
It also converts “old” loans into new loans, giving them a new statute of limitations (new life for loans that could be at or near their time of expiring). And it can even turn loans with short statutes of limitations into loans with long ones).
Why Doesn’t Debt Consolidation “Work?”
Economics
As a pure financial transaction, exchanging a lower interest rate for a security arrangement can be a very reasonable decision. Why then has it been such a disaster for so many people? Risk. Most people entering into complex financing are not able to assess risk and account for it, particularly when they are under economic pressure—which they usually are when they consider debt consolidation loans. Thus people systematically underestimate the risk that they won’t be able to make the payments on the new debt.
Additionally, since most people do not really want to go into debt in the first place, the existence of large credit card debt is indicative of other problems, either too little money or a tendency to overspend on unnecessary items. These issues are more likely to be made worse by the sudden reduction of economic pressure and the sudden, apparently greater amount of money or credit available to be spent.
The Hidden Legal Risks of Debt Consolidation
In addition to these “systemic” issues, there are two other main hidden costs of consolidation that should be considered: loss of flexibility, and the nature of secured debt versus unsecured debt.
Consolidated Loans are Less Flexible
When you have ten loans for different things, from automobiles to credit cards, you have flexibility if hard times strike. If you simply cannot make your payments, you can give up some, but not all, of the things you have purchased. You can let some, but not all of the credit cards go into default.
This is certainly not a happy thing, of course, but it raises the possibility of individualized debt negotiations, debt forgiveness, or even missed statutes of limitation. Again, these are not the choices and hopes of someone in flush economic conditions, but they are real options facing many people right now. In order for a debt collector to start garnishing your wages, it must find and sue you, must win, and then find your assets. It is an expensive and risky process for the debt collector if you fight. They sometimes drop the ball, and there are limits to how much of your wages can be garnished.
If everything else fails for you, you can declare bankruptcy, where homestead exemptions are likely to allow you to remain in your home.
The Nature of Secured Debt
The bigger risk of debt consolidation loans is the nature of secured, versus unsecured, debt. Remember that what powers the lower payments for consolidation is the existence of security—usually your home. Your home secures the debt, and that means that if you do not make your payments on the new debt, the lender can foreclose on your home and take it away. Foreclosures are generally “expedited” proceedings, meaning that your defenses are limited and the time for asserting them is restricted. In many states foreclosure is not even a judicial proceeding, although you have some legal rights you could assert in certain circumstances.
And what all that means is that instead of facing the prospect of years of battling over high-risk debts and questionable payoffs that could be trumped by bankruptcy or homestead exemptions, the banks can waltz into court and emerge in a very short time with your house. Put a little differently, your debt consolidation loan could make you homeless almost before you know it. And bankruptcy often, if not usually, will do nothing to protect you from it.
Anyone considering debt consolidation should think about these risks very carefully.
Foreclosure and FDCPA
Foreclosure and the FDCPA: Introduction to a Complicated Relationship
This video introduces the issue of whether and how the Fair Debt Collection Practices Act (FDCPA) applies to Foreclosure. As part of this page we will link a series of posts addressing specific issues, with a small textual introduction to provide context and a description of the video to follow. Each video will also be based upon an article, and this will be on the same page as the video.
Fair Debt Collection Practices Act
The Fair Debt Collection Practices Act (FDCPA) is a law that, primarily, applies to “debt collectors” who are “collecting debts” (as those terms are defined by the statute. Foreclosure and all the actions leading to it are clearly attempts to collect a debt. Whether the FDCPA will be applied to them, on the other hand, is not so clear. Currently, it appears that a majority of the district courts that have ruled on the question have found that the FDCPA does not apply.
Most of the circuit courts of appeal addressing the question, on the other hand, have held that it does. Eventually the law will probably catch up with common sense and the broad remedial purpose of the FDCPA, but for now whether the Act will apply to foreclosure may depend on where you live – and what court you file your suit in. In this essay we will first discuss the arguments in favor of applying the FDCPA to foreclosure, then the arguments against it, and finally will compare the relative merits of the arguments.
This article will provide you the case law and arguments you will need to decide what to do and defend whatever choice you make. The good news for anyone seeking to apply the FDCPA to foreclosure is that even the jurisdictions that have held it does not apply have exceptions that open the door to a considerable extent. In whatever jurisdiction you use, you will need to know all the arguments.
Foreclosure is the process by which the holder of a foreclosable interest (a lien or mortgage) causes the property to be sold, all the interests in the property to be divided, prioritized, and paid off according to priority. It does not necessarily lead to a change in possession of the property (i.e., who lives in the house), although it often does. It is about changing the rights of ownership and cutting off the rights of the subservient interests. Click here for more on Foreclosure, its history and function.
Applying the FDCPA to Foreclosure
The arguments in support of applying the FDCPA to foreclosure are both numerous and intuitive. The legal purpose of foreclosure is to collect a debt, whether the process requires the filing of a lawsuit and judgment (judicial) or is simply a formal process that does not require a judgment (non-judicial). Foreclosure is designed to allow for the original owner to take the property, sell it, and use the money to pay off a debt. The foreclosure process has often been abused and in ways similar to other debt collection techniques; nothing in the Act itself exempts foreclosure; and several parts of the Act strongly suggest that foreclosure was intended to be included.
Despite the strength of the arguments in favor of applying the FDCPA to the Foreclosure process, the courts are divided on whether to do so. Click here for much more on foreclosure and the FDCPA.
Gotta Go Gold
Introducing Debt Litigation Memberships
The solution to the advantages debt collectors have when they bring suit against people who can’t afford lawyers.
Since you’re here, you probably already know that although most debt collectors begin litigation against consumers without the evidence they need – or even any idea whether that evidence might exist – they file suit and usually win. This is because most people don’t fight back, of course. But even if you do fight back you start with some obstacles that make the whole process more difficult for you than the debt collectors.
The Institutional Advantages of the Debt Collectors are:
You have some advantages, too, though. The case means more to you than it does to the debt collector, and so it makes sense for you to work harder than they do. And if you do defend yourself (with a little help), you will likely expose the weaknesses of their case – namely that they lack the evidence (which in many cases does not exist at all) they need to prove their case against you. And even if the evidence can be found, your fighting back will probably make the case too expensive for the debt collectors to want to keep chasing you. Thus they very often will drop the case and walk away from you.
Our new memberships are designed to help you neutralize the advantages of the debt collector while exploiting your advantages with less trouble, annoyance, and anxiety.
How Membership Neutralizes the Advantages of the Debt Collectors
The advantage of familiarity is largely a factor of experience and so cannot be directly neutralized, but to offset that lack of experience, the memberships provide greater access to articles and videos, to the staff at Your Legal Leg Up, to member forums and to other members. where members can trade stories about their cases (and the companies suing them – often identical, always similar). The sense of solidarity can break down the sense of isolation that so many of my customers and clients have related to me.
Plus, we have made our document banks available to members so that they can use them as samples or even choose from a collection of possible arguments and cut and paste some of the documents they need to prepare. Of course this won’t completely nullify the debt collectors’ time advantage. In the very early stages of the debt litigation the debt collectors will still be handling your case on a “bulk” case basis, but as the case moves to the discovery phase, the time advantage will shift to you because, as I have often pointed out, lawyers are always “on the clock,” and if they have to spend significant time on your case it rapidly becomes unprofitable.
You will still spend more time on your case than they do – because they don’t really care whether they win or not – they know most people will just give up. You have to care, though, because it’s your money they have in their sights. The amounts aren’t large or significant to the debt collectors (no matter how much they’re suing you for), but they obviously can make a big difference to you. Debt collection lawyers typically charge at least $200 per hour of time. How long would you work for $200? We’ll help you work smarter, too.
Click here to learn about Gold Membership.