Sending foreclosure notices to delinquent borrowers constitutes debt collection activity subject to the federal Fair Debt Collection Practices Act (FDCPA), a federal court in Nevada recently ruled.
In Mallory v. McCarthy & Holthus, LLP, delinquent borrowers sued a foreclosure law firm under the FDCPA for sending allegedly misleading foreclosure notices.
The law firm moved to dismiss the FDCPA claim based on the argument that the notices were not “debt collection activity.” The law firm asserted that the letters were “simply notices provided as part of the foreclosure process, compliant with Nevada statutes, and do not constitute attempts to collection on Plaintiffs’ debt.”
The U. S. District Court for the District of Nevada rejected the argument, based in large part on the fact that the complaint alleged that foreclosure notices stated that “this may be considered an attempt to collect a debt and any information obtained will be used for that purpose.”
The court also rebuffed the argument that the law firm did not meet the definition of a “debt collector” under the FDCPA.
The ruling raises the specter that courts may be increasingly willing to expand the scope of conduct covered by the FDCPA to include foreclosure activities.