Mortgage statements may be subject to collection rules: 11th Circuit

Abstract

Attorneys are starting to warn mortgage companies that a recent 11th Circuit Court of Appeals decision means servicers need to be more careful about the wording in their billing statements. In the case, Daniels v. Select Portfolio Servicing, a panel of judges, in a two-to-one vote, decided that monthly mortgage statements could be considered communications related to the collection of a debt under state and federal rules. Interpretations of the Truth in Lending Act and the Federal Debt Collection Practices Act were at issue in the decision issued late last month, in which the panel found some types of communications in monthly statements could be covered by the FDCPA and a similar Florida statute. The move reversed a lower court's opinion, which supported Select Portfolio Servicing's view that monthly statements "Were not communications in connection with the collection of a debt and therefore not covered by the FDCPA and the FCCPA."The next step could be either a rehearing by the full 11th Circuit or seeking certiorari by the Supreme Court. "Could this become a Supreme Court issue? I don't know, potentially, but I think the immediate takeaway should be that the language in the monthly statement is important," said Richard Horn, an attorney with law firm Garris Horn. "It seems like if you stay within the four corners of the standard form and the requirements under Reg Z that you may have a measure of safety in terms of that periodic statement not turning into a debt collector's communication, but if you start to get fancy that's when problems could come up," The prior district court's opinion relied on 2013 Consumer Financial Protection Bureau guidance aimed at addressing conflicts between "Cease communications" notices under debt collection rules that might conflict with other servicing requirements, but circuit court judges disagreed with that interpretation. "Courts should look at the substance of the communication to determine whether the FDCPA applies, i.e., by determining whether the communication uses language typically seen or used in debt-collection efforts," Lagoa said, noting "That type of language is not present here."Dissent within the panel opens up a slim chance that the 11th Circuit Court could end up reconsidering the case if SPS were to appeal it.