The Court of Appeals for the Eleventh Circuit has overturned the dismissal of a Fair Debt Collection Practices Act case, ruling that statements sent to the plaintiffs indicating that the balance on the debt was accruing when a settlement had been reached is enough for the plaintiffs to state a claim under the statute.
A copy of the ruling in the case of Lamirands v. Fay Servicing can be accessed by clicking here.
In situations where a collector has to follow two different laws — the FDCPA and the Truth in Lending Act, in this case — it is incumbent that both are adhered to, the Eleventh Circuit ruled. So, when TILA requires periodic statements be sent to the borrower and the FDCPA prohibits making false or misleading statements, both of those statutes must be complied with.
In this case, the plaintiffs defaulted on the mortgage and the servicer sued for foreclosure. While the foreclosure suit was pending, the defendant took over servicing of the loan. A disagreement arose, leading the plaintiffs to sue the defendants. A settlement was reached for both lawsuits and it was agreed that the plaintiffs owed $85,790.99, which was to be paid in one year.
But four months later, the defendant sent the plaintiffs a statement saying the loan had been accelerated because the plaintiffs were late making their payments. That meant the plaintiffs owed $92,789.55 to be paid in one month. The plaintiffs continued to receive statements and, in each one, the amount due increased from the month before. The plaintiffs sued, saying the defendant violated the FDCPA by sending statements with incorrect balances. A District Court judge ruled the statements were not related to debt collection because the statements were required under TILA.
But, as it did in Daniels v. Select Portfolio Servicing, the Appeals Court ruled that statements must comply with the FDCPA, even if they are not required to be sent under the statute.
The statements sent to the plaintiffs listed all the ways that the plaintiffs could make their payment and included a detachable payment coupon that could be sent in with the payment. The back of the statement also mentioned that the defendant was a debt collector and information provided to it would be used for that purpose.
“Nothing in the Truth in Lending Act says that a periodic statement cannot serve as a means of debt collection,” the Appeals Court wrote in overturning the dismissal. “Nor do the two statutes irreconcilably conflict in their operation. The Truth in Lending Act requires a servicer to send periodic statements, and the FDCPA requires those statements to be fair and accurate when they contain language that would induce a debtor to pay. The statutes thus reinforce each other, ensuring that consumers receive both regular and accurate information about their mortgage loans.”
