Led by Vincent Howard, our Loma Linda foreclosure defense attorneys frequently represent people who are fighting a foreclosure that was thrust upon them without fair consideration for a loan modification or without discussion of alternatives (a violation of California law). But every so often, we come across a case in which the foreclosure is not just railroaded through -- it's actually wrongful and against the law. That appears to be the case in Bridge v. Ocwen Fed. Bank et al, in which an accounting error led to foreclosure efforts against Lisa and William Bridge of Ohio, even after they provided proof of the mistake. The Bridges ultimately sued under the federal Fair Debt Collection Practices Act, but the district court dismissed because the lenders they sued were not debt collectors within the meaning of the Act. The Sixth U.S. Circuit Court of Appeals reversed, saying the lenders "could not have it both ways."
According to the Bridges' complaint, Lisa Bridge's bank erroneously refused to honor her check for April 2002's mortgage payment to Aames Capital Corp. Bridge had the bank issue an "official check" on April 8, but the bank dishonoroed that check as well, leading to default on the mortgage loan and a late fee. After a second official check, Firstar eventually honored two of the three April payments, leading to double payments for April. As a result, Bridge did not make a payment in May. However, in the meantime, Aames sent word that it assigned the loan to Ocwen, which began pestering Bridge and her husband (not a party to the loan) for payment. This continued even after Bridge provided proof of the double payment to Ocwen and Aames. The calls, described as "endless" by the Sixth Circuit, threatened foreclosure, assessed late fees, resulted in incorrect negative information reported to the credit bureaus. Collection was assigned to a law firm that also threatened foreclosure.
The Bridges filed a lawsuit alleging multiple violations of the FDCPA, including false representation, false credit reporting, threatening impermissible actions and harassing non-debtor William Bridge. Ocwen and Deutsche Bank separately moved to dismiss, arguing that neither was a debt collector subject to the FDCPA. Ocwen also argued that the FDCPA does not apply because the loan was not in default when it was assigned, and filed an additional counterclaim for foreclosure. The district court dismissed, finding neither company was a debt collector within the meaning of the FDCPA.
The Sixth U.S. Circuit Court of Appeals eventually reversed, finding the district court erred in that finding. The FDCPA distinguishes between debt collectors and creditors, it said, according to whether the debt was in default when acquired. It's well settled the FDCPA makes debt collectors and creditors mutually exclusive, the Sixth said -- but the court went on to find that an entity cannot be neither when it seeks to collect a debt. To find otherwise would be to remove the protections of the FDCPA, it said, by allowing the business to take contradictory factual positions. The Bridges' factual allegations establish that the defendants are debt collectors under the Act, the court said, in part because neither bank has an official, legally recorded assignment (making the debts in question "due another"). In addition, by hiring a law firm to collect, the defedants may have brought themselves under the FDCPA as well, the court said. The court called Ocwen in particular disingenous for attempting to argue that it cannot be a debt collector because Bridge's debt was not in default when it was acquired, despite Ocwen's years of allegations that the debt was in default at that time. Judge Clay, concurring in part, argued that the reversal should only be as to Ocwen Loan Servicing.
Vincent Howard and our Newport Beach foreclosure defense lawyers are pleased to see such a strong statement made on behalf of borrowers, who we frequently see pushed around by much more powerful mortgage lenders and servicers. As the majority noted, it's impossible for consumers to enforce their rights under the FDCPA if courts permit the defendants to define themselves out of the law entirely. It also noted that the "disingenuous" behavior by Ocwen -- aggressively pursuing a so-called debt, then acknowledging that no debt was owed after it was sued -- is something of a trend. The Eighth Circuit decisively rebuked a defendant in a recent case, Dunham v. Portfolio Recovery Associates, for this behavior, which sought to argue that no plaintiff may recover under the FDCPA when he or she didn't actually owe the debt. This contravenes the clear intentions of Congress in adopting the FDCPA, and the Encinitas foreclosure defense attorneys at Howard Law, P.C., are pleased to see another circuit court rejecting it.
If you're being harassed by debt collectors who have lied, bothered third parties, called at odd hours or broken other provisions of the FDCPA, don't hesitate to call Vincent Howard and the team at Howard Law for help. You can send us an email or call toll-free at 1-800-872-5925.