Appeals Court Says Mortgage Servicer Violated The Fair Debt Collection Practices Act
Does a mortgage servicing company who tries to collect a discharged debt violate the Fair Debt Collection Practices Act? Yes, said a federal Court of Appeals in the recent case of Garfield v. Ocwen.
When a consumer files for bankruptcy, most of their debts, including mortgages, are discharged. This means that the consumer no longer has a legal obligation to pay them. (In Massachusetts, a homeowner must still continue to pay the mortgage to avoid foreclosure, though.)
Ocwen, a major mortgage servicer, contacted the homeowner in this case and attempted to collect from her personally. It also violated a laundry list of provisions of the Fair Debt Collection Practices Act, including failing to provide the so-called “Mini Miranda” warning debt collectors are supposed to provide, disclosing that they are debt collectors.
Although Ocwen successfully argued at the trial-court level that it was exempt from complying with the FDCPA under bankruptcy laws, a federal appellate court disagreed and reversed the trial court. The appellate court held that “the Bankruptcy Code does not broadly repeal the FDCPA for purposes of FDCPA claims based on conduct that would constitute alleged violations of the discharge injunction.”
Essentially, just because the FDCPA and the bankruptcy laws overlap, it doesn’t mean that the FDCPA does not apply.
What is the takeaway from this case? It’s actually more simple than the court made it sound: if you don’t owe a debt, it’s illegal for a debt collector to try to collect it from you.
Our office handles cases under the Fair Debt Collection Practices Act, as well as mortgage-servicing cases involving unfair and deceptive mortgage practices. If you are having an issue, call or email us for a no-cost case evaluation.