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Federal Appeals Court Rules Fair Debt Collection Practices Act Covers Mortgage Letter

August 26, 2010

As Rialto unfair debt collection lawyers, we were pleased to see a consumer-friendly ruling from a federal appeals court saying that the Fair Debt Collection Practices Act applies to some communications by loan servicers. The decision in Gburek v. Litton Loan Servicing LP (PDF) came from the Seventh U.S. Circuit Court of Appeals, which hears appeals of lower court rulings in the Midwest. Camille Gburek sued her mortgage servicer, Litton Loan Servicing, for hiring a third party, Titanium Solutions, to communicate with her about her mortgage debt. She alleged that Litton violated the FDCPA by telling Titanium about her debt; by contacting her despite knowing she was represented by an attorney; and by using deceptive means (hiring Titanium) to obtain her personal information.

Gburek, a northern Illinois resident, was in default on her mortgage when Litton contacted her to discuss it. This initial letter asked her for a variety of financial information and invited her to contact the company to discuss alternatives to foreclosure. The bottom of that letter contained a standard disclaimer that the letter was an attempt to collect on a debt and that Litton was a debt collector. A few days later, Gburek received a letter from Titanium, a company that facilitates communications between homeowners in default and loan servicers. That letter also asked Gburek to send a lot of financial information to Litton, but it contained language specifically saying Titanium is not a debt collector and cannot accept payments.

Gburek sued. In trial court, Litton moved to dismiss the case, saying the two letters were not covered by the FDCPA because they were not sent "in connection with the collection of any debt" as the law requires. The trial court granted that motion, saying the FDCPA did not apply because the letters did not explicitly demand payment of a debt. Gburek appealed.

On appeal, the Seventh Circuit disagreed. The issue was whether the letters to Gburek were made in connection with the collection of her debts. There's no hard and fast rule for testing this, the court wrote, but past Seventh Circuit cases showed that a demand for payment is not necessary for a communication to be considered an attempt to collect a debt. Other factors to consider include the relationship between the parties and the purpose and context of the communication. Applying these, the court found that both Litton's letter and Titanium's were communications from debt collectors, as were the communications between the two companies. In all three cases, content and context make it clear that the communications were attempts to further debt collection. In this case, the court noted, Gburek was seeking only to survive a motion to dismiss, which is a relatively low bar. The decision does not make a judgment on the underlying FDCPA claims.

As Chino abusive debt collection attorneys, we appreciate the court's ruling on this matter. Although the case does not directly affect our clients here in California, because we fall under a different federal appeals court's jurisdiction, it does set a precedent that our own courts may look to if the issue comes up here. Unfortunately, that is a distinct possibility in California, where unemployment and real estate prices have conspired to keep mortgage defaults high. Illegal debt collection attempts are not uncommon in better times, but with the economic downturn, they have also been increasing. As a result, we would be disappointed but not surprised to see aggressive, illegal debt collection tactics in the mortgage arena as well. This ruling helps show that these tactics are just as illegal from loan servicers as they are from conventional collection agencies.

Howard Law PC protects individuals and couples who have been targeted by illegal, abusive and harassing debt collection attempts. Many people do not realize this, but debt collectors must follow a long list of regulations handed down by the FDCPA and state laws, including California's Rosenthal FDCPA. This includes restrictions on use of threats, lies and deception, as well as obligations to validate the debt on request and comply with restrictions on when and how they call. Our Fullerton debt collection harassment attorneys help clients fight back against debt collectors who break these rules. In a lawsuit filed under the FDCPA, victims can claim up to $1,000 plus attorney fees, court costs and any actual financial harm the abusive behavior caused.

If you have been targeted by abusive debt collectors and you're ready to fight back, you should call Howard Law to learn more. To set up a free consultation, contact us online or call 1-800-872-5925 today.