A&B Abstract:

In Daniels v. Select Portfolio Servicing, Inc., 2022 U.S. App. LEXIS 14013 (11th Cir. May 24, 2022) a panel of the Eleventh Circuit addressed the question “whether a required monthly mortgage statement that generally complies with the TILA and its regulations can plausibly be a communication ‘in connection with the collection of a debt’ under the FDCPA…if it contains additional debt-collection language.”  Relying almost exclusively on the single sentence in the monthly mortgage statement that read “[t]his is an attempt to collect a debt,” the panel in a 2-1 decision said “yes” and reversed the granting of a motion to dismiss in favor of the mortgage servicer.  While the majority explained that the decision was not contrary to those from other circuit courts and within its own circuit, the dissent pointed out how this decision was arguably inconsistent with such precedent.  Going forward, mortgage servicers face a risk (at least in the Eleventh Circuit) that monthly mortgage statements that otherwise comply with TILA and its regulations could subject the servicer to liability under FDCPA if the statement contains errors and includes language that “this is an attempt to collect a debt.”

Discussion:

In Daniels, the borrower sued the mortgage servicer under the FDCPA and the Florida Consumer Collection Practices Act alleging that several monthly mortgage statements contained errors.  In particular, the borrower alleged that the statements contained errors in the deferred principal balance, outstanding principal balance and the amount of the interest-only payment that was due.  The statements were consistent with the requirements of TILA and its regulations.  The statements, however, also included the following language – “This is an attempt to collect a debt.  All information obtained will be used for that purpose.”  The district court granted the servicer’s motion to dismiss, and dismissed the case with prejudice on the grounds that the mortgage statements were not communications in connection with the collection of a debt under the FDCPA.

In reversing that decision on appeal, the majority first noted that communications can have “dual purposes” – providing a consumer with information and demanding payment of a debt.  The majority then discussed two prior decisions involving letters from law firms, Reese v. Ellis, Painter, Ratterree & Adams, 678 F.3d 1211 (11th Cir. 2012) and Caceres v. McCalla Raymer, LLC, 755 F.3d 1299 (11th Cir. 2014), where the court concluded that the letters were related debt collection for purposes of the FDCPA.

After reviewing the monthly mortgage statements in Daniels, the majority concluded that “viewed holistically, a communication that expressly states that it is ‘an attempt to collect a debt,’ that asks for payment of a certain amount by a certain date, and that provides for a late fee if the payment is not made on time is plausibly ‘related to debt collection.’”  In several places in the opinion, the majority reiterated that the servicer included the “this is an attempt to collect a debt” language that was not required by TILA or its regulations.  It is clear from the opinion that the inclusion of such language was the critical factor in the decision.  The majority noted that, while some portions of the monthly mortgage statements may have been for informational purposes, the communication can have “dual purposes.”  As such, the mere fact that the monthly mortgage statements were otherwise consistent with TILA and its regulations was not dispositive.

The majority recognized that two prior unpublished district court cases from the Southern District of Florida held that the inclusion of “this is an attempt to collect a debt” language did not convert a monthly mortgage statement into a communication in connection with the collection of a debt under the FDCPA.  See Jones v. Select Portfolio Servicing, Inc., 2018 U.S. Dist. LEXIS 75886 (S.D. Fla. 2018) and Zavala v. Select Portfolio Servicing, Inc., 2018 U.S. Dist. LEXIS 201259 (S.D. Fla. 2018).  The majority, however, “respectfully disagree[d]” with the decision in both cases.

Notably, in a prior unpublished decision, Green v. Specialized Loan Servicing LLC, 766 Fed. App’x 777 (11th Cir. 2019), a prior panel of the Eleventh Circuit held that a servicer’s monthly mortgage statement did not “rise to the level of being unlawful debt collection language” when the statement did not contain any language “beyond what is required by TILA.”  The majority in Daniels distinguished Green by noting that it was unpublished and, most importantly, did not contain the “this is an attempt to collect a debt” language.  (Furthermore, the majority noted that Green reached the merits and held that the statement did not constitute an “unlawful” debt collection language, whereas the decision in Daniels merely held that the plaintiff had plausibly alleged an FDCPA violation.).

The dissent in Daniels took issue with the majority’s reliance on the “this is an attempt to collect a debt” language contained in a monthly mortgage statement that otherwise complied with the TILA and its regulations.  The dissent noted that this language “appears once on each statement, is not physically separated from other information in the statement, is not capitalized or otherwise emphasized and is printed using the same font and font size as the rest of the information contained in the statement.”

The dissent discussed Green and other prior decisions (including the district court decisions in Jones and Zavala) and concluded that the mere inclusion of the “collect a debt” language was not enough to render an otherwise TILA-compliant monthly mortgage statement a communication “in connection with the collection of a debt” for purposes of the FDCPA.  “[T]he majority’s conclusion that, by including this extra language – which is not required but is neither inconsistent with nor materially additive to TILA’s requirements – the periodic mortgage statements have become communications subject to the FDCPA is far too broad.”

The dissent in Daniels then discussed decisions from other circuits, including the Seventh Circuit and Eighth Circuit.  The dissent cited Gburek v. Litton Loan Servicing LP, 614 F.3d 380 (7th Cir. 2010), in which the court held that a communication stating that it was an attempt to collect a debt “does not automatically trigger the protections of the FDCPA, just as the absence of such language does not have dispositive significance.”  The dissent also discussed Heinz v. Carrington Mortgage Services, LLC, 3 F.4th 1107 (8th Cir. 2021).  In Heinz, the court addressed “so-called Mini-Miranda statements” where the communication notes that it is from a debt collector and for the purpose of collecting a debt.  Relying on Gburek, the court in Heinz held that such “boilerplate Mini-Miranda statements” do not trigger the protections of the FDCPA.

Therefore, according to the dissent in Daniels and consistent with these decisions in other circuits, the mortgage servicer’s inclusion of “this is an attempt to collect a debt” language in the monthly mortgage statement should not trigger the protections of the FDCPA.  Instead, the dissent would require “stronger demands for full or partial payment and threats of consequences for failure to do so” before a monthly mortgage statement would give rise to a claim under the FDCPA.

On June 14, 2022, the servicer filed a petition for rehearing and rehearing en banc asking the panel for a rehearing of the case.  In the petition, the servicer recognized that “the majority holds that inclusion of the statement, ‘this is an attempt to collect a debt,’ transforms federal-required mortgage statements into debt-collection communications under the FDCPA.”  The servicer argued that the decision conflicts with prior case law inside and outside of the Eleventh Circuit, and “the well-reasoned dissent” was correct to conclude that such language should not render TILA-compliant monthly mortgage statements subject to the FDCPA.

Takeaway:

A mortgage servicer should strongly consider removing from its monthly mortgage statements any language that reads “this is an attempt to collect a debt.”  The relevant language is not required by the TILA or the CFPB.  At least in the Eleventh Circuit now after Daniels, the inclusion of such language will give borrowers pursuing FDCPA claims a much better chance to survive a motion to dismiss and move the case into the expensive discovery phase.

It should be noted that the majority decision in Daniels included an important qualification in a footnote – “We do not hold that the statements are, as a matter of law, communications in connection with the collection of a debt.  Our ruling is that [the borrower] has plausibly alleged that they are.”  Therefore, the mere inclusion of the “this is an attempt to collect a debt” language does not mean, even in the Eleventh Circuit, that a mortgage servicer’s monthly mortgage statements are necessarily subject to the FDCPA as a matter of law.  That said, as a practical matter, it will be difficult for a mortgage servicer to convince a district court that has already denied a motion to dismiss to change its mind at the summary judgment stage and conclude that the inclusion of such language does not render the mortgage statement a communication in connection with the collection of a debt.

Of course, even if the mortgage statement is a communication in connection with the collection of a debt, the borrower must still establish that the statement otherwise was and violated the substantive provisions of the FDCPA.  See, e.g., 15 U.S.C. §§ 1692d, 1692e and 1692f.  Daniels, however, is likely to help borrowers clear the threshold hurdle at the motion to dismiss stage.

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