Is a Mortgage Originator a “Debt Collector” Under the Fair Debt Collection Practices Act? No, Says Court of Appeals
A recent appellate decision holds that a mortgage originator and lender, JPMorgan Chase, is not a debt collector subject to the Fair Debt Collection Act. This post explains the background on the case, and explains the Court’s holding that Chase was not a debt collector because it did not “regularly attempt or attempt to collect debt for others.” (Our office did not represent the homeowner in this case.)
The Fair Debt Collection Practices Act (FDCPA) is a federal law that was enacted to prevent abusive debt collection. In Section 801 of the FDCPA, Congress explained in detail the problems that often occur during the debt collection process:
There is abundant evidence of the use of abusive, deceptive, and unfair debt collection practices by many debt collectors. Abusive debt collection practices contribute to the number of personal bankruptcies, to marital instability, to the loss of jobs, and to invasions of individual privacy.
In short, debt collection, when done in an unfair or abusive way, has adverse societal effects.
Relying on the provisions of the FDCPA, the lawsuit here was filed against Chase alleging that it violated that Act. The homeowner alleged that Chase used “false, deceptive, or misleading representations” and/or “unfair or unconscionable means” to collect a debt. The homeowner had fallen behind on his mortgage payments, and Chase hired a foreclosure firm to initiate the foreclosure process.
The foreclosure complaint was sent to the homeowner (who was now deceased) and his heirs, along with the standard summons required by the state. The summons said that failure to respond to the complaint would result in losing money, wages, or property. The homeowner’s heirs argued that this constituted an unlawful attempt to collect a debt from them pursuant to the FDCPA. They were not liable for the deceased’s debt, so they should not have been sent a summons stating that they could lose money, they said.
Chase, rather than arguing that its attorneys’ statements to the heirs were correct, argued that it was not a debt collector under the FDCPA. To qualify as a debt collector under the FDCPA, a company must “regularly collect or attempt to collect, directly or indirectly, debts owed or due or asserted to be owed or due another.” 15 U.S.C. § 1692a.
Chase was not a debt collector here, said the Court, because the debt (the mortgage) was not “owed or due another.” Chase was collecting the debt on its own account – Chase owed the mortgage. There was therefore no other entity to whom it was owed. Chase was not a debt collector.
The Court of Appeals affirmed the lower Court’s dismissal of the homeowner’s heirs’ case. The case is available here: Anderman v. JPMorgan Chase.
The lesson from this case is that just because a bank or other financial institution is “collecting a debt” as we commonly understand that term does not mean they are a “debt collector” subject to the FDCPA. Whether a company counts as a “debt collector” under the FDCPA is a fact-dependent inquiry that depends on the statutory definition of that term under the statute.
Consumers should be aware that Massachusetts has a separate statute that may supplement the FDCPA. The Massachusetts Attorney General has separate debt-collection regulations at 940 Code Mass. Regs. § 7.00. Rather than using the term “debt collector,” the Attorney General imposes requirements like those of the FDCPA on all creditors, debt collectors, and others engaged in collecting money or other debt from consumers. The penalty for violating the regulations is potential treble (triple) damages, costs, and attorney’s fees.
Culik Law has brought claims against banks, mortgage servicers, debt collectors, and other companies in the state and federal courts throughout Massachusetts. If you are having difficulty with a mortgage or a debt, contact us to see if we can help.