This week, we have another Fair Debt Collection Practice Act (FDCPA) claim in which the Eleventh Circuit Court of Appeals ruled that homeowners could sue attorneys acting as debt collectors.
Yes, attorneys are being sued, and you don't want to be one of them, so you need to heed the court’s warnings.
Izell and Raven Reese defaulted on a loan that they had secured by giving the lender, Provident Funding Associates, L.P. a mortgage on their property. In 2009, Provident's law firm, Ellis, Painter, Ratterree & Adams LLP, sent the Reeses a letter and documents demanding payment of the debt and threatening to foreclose on the property if they did not pay it.
The Reeses filed a putative class action lawsuit against the law firm, alleging that the communication violated the FDCPA provisions on false or misleading representations. The district court dismissed the complaint on a 12(b)(6) motion, finding that the law firm was not a debt collector under the Act, and that the letter and documents it sent were not subject to the Act. The Eleventh Circuit Court of Appeals disagreed, and reinstated the Reeses' FDCPA claim.
In order to state a plausible FDCPA claim under the false or misleading representations provision, a plaintiff must allege, among other things, that the defendant is a "debt collector" and that the challenged conduct is related to debt collection. The Eleventh Circuit concluded that the Reeses' obligation to pay off the promissory note is a "debt" under the FDCPA, and the Ellis law firm's letter and enclosed documents were an attempt to "collect" that debt.
The Eleventh Circuit spent a substantial part of the opinion discussing promissory notes and security interests. (The law firm's defense was that it wasn't collecting a debt, it was simply informing the Reeses that Provident intended to enforce its security deed through the process of non-judicial foreclosure.) The court refused to ignore the language in the letter and documents demanding payment on the promissory note in favor of what the firm says was the purpose.
The court also noted that a letter can have dual purposes. Even if the Ellis law firm intended the letter and documents to give notice of the foreclosure to the Reeses, they also could have -- and did -- demand payment on the underlying debt. Furthermore, the law firm's note versus security deed would create an easily exploitable loophole in the FDCPA.
Lawyers must be particularly cautious when sending collection or enforcement notices; borrowers are suing law firms under the FDCPA, and they are winning in the Eleventh Circuit Court of Appeals.
- Izell Reese, Raven Reese v. Ellis, Painter, Ratterree & Adams, LLP (Eleventh Circuit Court of Appeals)
- There Are No 'Harmless Errors' in FDCPA Violations (FindLaw's Eleventh Circuit Blog)
- FDCPA Claim Survives Mootness Challenge (FindLaw's Fourth Circuit Blog)