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Eleventh Circuit Finds Law Firm Is Debt Collector Under FDCPA - Reese v. Ellis Painter Ratterree & Adams

May 10, 2012

Vincent Howard and our Corona foreclosure defense lawyers were interested to see a foreclosure case that centers around the behavior of a law firm sent to collect the debt, rather than the loan servicer itself. In Reese v. Ellis, Painter, Ratterree & Adams, LLP, Izell and Raven Reese sued the law firm under the Fair Debt Collection Practices Act, for alleged false or misleading statements in a letter it sent to them. The Reeses filed their claim as a putative class-action lawsuit, but the Georgia district court found that they had not stated a claim because Ellis Painter was not a debt collector within the meaning of the FDCPA. The Eleventh U.S. Circuit Court of Appeals reversed on appeal, finding that they alleged enough facts showing that the firm regularly attempted to collect debts.

The Reeses bought a home in Roswell, Georgia, in 2004 by taking out a loan with Provident Funding Associates. They fell behind and defaulted, and in 2009, Ellis Painter sent them a collection notice on behalf of Provident. Under the signature on the letter was a bold, capital-lettered notice that the law firm "may be attempting to collect a debt on behalf of the above-referenced lender." Attached were a notice of foreclosure sale for the Reeses' property; a required FDCPA notice of their right to dispute the debt within 30 days, including a warning that "THIS LAW FIRM IS ATTEMPTING TO COLLECT A DEBT"; and a notice of the rights of military servicemembers. A few months later, the Reeses filed their lawsuit, seeking certification for a class of more than 500 who received letters from the law firm that contain alleged false, deceptive or misleading representations. The district court ultimately granted Ellis Painter's motion to dismiss for failure to state a claim, finding the firm was not a debt collector under the law.

The Eleventh Circuit reversed, finding a plausible claim for relief. It started by establishing that Ellis Painter was attempting to collect a debt within the meaning of the FDCPA. It found the letter's language clearly attempted to collect that debt. In addition to using language like "demands full and immediate payment," the Eleventh said, one attached document expressly said it was attempting to collect a debt and the law firm was acting as a debt collector. This is enough to sufficiently allege that Ellis Painter was attempting to collect a debt with its letter, the court said, even if the letter was also intended to give notice of foreclosure. To rule otherwise would permit "a big loophole" in the FDCPA for secured debts, the court noted. It went on to find that complaint sufficiently alleges that the law firm is a debt collector, noting that it alleges debt collection is the firm's business and that it had sent similar notices to more than 500 people.

Vincent Howard and our Orange foreclosure defense attorneys are pleased to see another bad argument by a debt collector dismissed. As other courts have recently observed, there appears to be a trend among debt collecting businesses to attempt to define themselves out of having to comply with the law. Of course no one likes to be sued, but when these businesses engage in debt collection, they agree to be regulated by the FDCPA. Indeed, the law firm's letter shows that it was well aware of the FDCPA, since it contained disclaimers required by that law. Many consumers aren't aware of this, but the FDCPA gives them a fair amount of rights when they are being harassed, deceived or otherwise mistreated by debt collectors. For example, collection agencies may not call late at night; threaten any action they cannot or will not pursue; lie; or contact a third party. Led by Vincent Howard, our Whittier foreclosure defense lawyers help families subjected to this kind of harassment, which is illegal regardless of whether they actually owe the debt.

Based in Costa Mesa, Howard Law, P.C., represents clients across California who are facing foreclosure or will be soon, and believe they are being treated unfairly by their lenders. If you'd like to talk to us about your legal rights and your options, don't hesitate to call us at 1-800-872-5925 or send us a message through our website.

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