In debt collection — as in love — there is no such thing as a harmless error. Even when a plaintiff doesn’t suffer an actual, measurable harm, statutes can provide her with a cause of action that results in damages.
The Eleventh Circuit Court of Appeals recently highlighted one such case under the Fair Debt Collection Practices Act (FDCPA).
Joni Shoup entered into a mortgage contract with America Wholesale Lender in 2003. The contract identified America Wholesale as the "lender" and Mortgage Electronic Registration Systems, Inc. (MERS) as "the grantee under" the mortgage contract and as "a separate corporation that is acting solely as a nominee for Lender and Lender's successors and assigns."
Shoup defaulted on her mortgage, and McCurdy & Candler, MERS' law firm, contacted Shoup. McCurdy & Candler's initial communication letter entitled, "NOTICE PURSUANT TO FAIR DEBT COLLECTION PRACTICES ACT 15 USC 1692," identified MERS as Shoup's creditor and stated that the firm was attempting to collect a debt.
The FDCPA carefully outlines debt collection practices. Under the FDCPA, a debt collector may not use a false, deceptive, or misleading representation or means in collecting debt or obtaining information concerning a customer. Shoup alleged that the McCurdy & Candler letter violated the FDCPA by misrepresenting MERS as her "creditor."
The FDCPA states that a creditor is "any person who offers or extends credit creating a debt or to whom a debt is owed, but such term does not include any person to the extent that he receives an assignment or transfer of a debt in default solely for the purpose of facilitating collection of such debt for another." Shoup claimed that MERS did not offer or extend credit to her, and that she did not owe a debt to MERS.
A customer can sue any debt collector who violates the FDCPA for actual and statutory damages and costs. After a district court dismissed Shoup's claim on a 12(b)(6) motion, Shoup argued to the Eleventh Circuit Court of Appeals that she had a plausible claim for statutory damages under the FDCPA because McCurdy & Candler's initial letter falsely identified MERS as her "creditor." The Eleventh Circuit agreed, and reinstated her case.
Because the FDCPA provides a claim for statutory damages based on any violation of the statute, the court ruled that McCurdy & Candler's alleged FDCPA violation was not a harmless error.
Lawyers: If you're acting as debt collectors, you need to brush up on the specific requirements of the FDCPA. Mischaracterizing MERS as a creditor -- even if by accident -- will not be a harmless error in an Eleventh Circuit FDCPA claim.
- Shoup v. McCurdy & Candler (Eleventh Circuit Court of Appeals)
- No Split-Note Defense: MERS Can Foreclose on Homes (FindLaw's Tenth Circuit Blog)
- MERS? It May Have Swallowed Your Loan (The New York Times)
- Man Sues Debt Collector For FDCPA Violations (Atlanta Bankruptcy Law News)