The Fair Debt Collection Practices Act (FDCPA) (15 U.S.C. § 1692 and following) is a federal law that protects consumers from abusive collection practices by debt collectors. The purpose of the FDCPA is to:
Generally, a "debt collector" under the statute is someone who regularly collects debts owed to others, including collection agencies and attorneys who collect debts on a regular basis (see Heintz v. Jenkins, 115 S.Ct. 1489 (1995)), or whose main business is collecting debts, including debt buyers, in some instances. So, the term "debt collector" generally includes debt collection agencies, collection attorneys, debt buyers, and mortgage servicers that obtained the account in default. Usually, though, original creditors are excluded.
The FDCPA is usually thought of as a law used to fight the abusive tactics of aggressive debt collection agencies, but homeowners in foreclosure sometimes bring FDCPA claims to fight the action.
The FDCPA prohibits certain types of abusive and deceptive conduct when attempting to collect a debt, such as:
Historically, courts have been split on whether the FDCPA extends to firms engaged to conduct foreclosures.
Courts in some jurisdictions have held that an attorney or any other person or entity who pursues foreclosure on behalf of the creditor and who also demands payment or otherwise attempts to collect the debt, like by seeking a deficiency, is a covered debt collector and is subject to the FDCPA.
So, judicial foreclosures are sometimes viewed by courts as being subject to the FDCPA because creditors are generally able to get deficiency judgments (money) in addition to foreclosing the security interest.
Other courts have found that foreclosure activity is not covered by the FDCPA. This view is based on the premise that mortgage foreclosure involves the enforcement of security interests, which is not necessarily the same as collecting a debt.
On March 20, 2019, the U.S. Supreme Court unanimously decided that the FDCPA doesn't broadly apply to firms pursuing nonjudicial foreclosures. (See Obduskey v. McCarthy & Holthus, LLP, No. 17-1307 (March 20, 2019)). With respect to judicial foreclosures, the Court said "whether those who judicially enforce mortgages fall within the scope of the primary definition [of a debt collector] is a question we can leave for another day." But based on the holding in this case, it appears that there's a strong argument that the FDCPA wouldn't apply to firms handling judicial foreclosures that result in only in rem judgments (judgments against the property), without an in personam deficiency judgment.
Following this line of reasoning, on June 20, 2020, the U.S. Court of Appeals for the Ninth Circuit in Barnes v. Routh Crabtree Olson, P.C. held that a judicial foreclosure proceeding is not a form of debt collection when the proceeding doesn't include a request for a deficiency judgment.
If the FDCPA is applicable, the foreclosing party must comply with the notice requirements and restrictions imposed by the law. This means the firm, if it qualifies as a debt collector, must send a timely letter within five days of its first communication with the debtor containing:
What this means for homeowners facing foreclosure is that, if the FDCPA applies, you have the right to dispute the debt and ask for a verification of the existence and amount of the outstanding indebtedness. Just be sure to do so within 30 days after receiving the notice. If any amounts not permitted under the mortgage contract or applicable law are included in the outstanding indebtedness, that's a violation of the FDCPA. If they never send you the notice, that's a violation too.
Also, if you dispute the debt, the debt collector must cease its attempts to collect the debt, or the disputed portion of the debt, until it mails verification of the debt to you.
In the case of any FDCPA violation, the consumer may recover:
Additionally, many states have debt collection practices statutes that have a broader scope than the FDCPA.
To find out if the FDCPA applies in your foreclosure, talk to a lawyer. Also, keep in mind that any given foreclosure or legal situation has many potential claims and defenses. If you think you've been the victim of a FDCPA violation or multiple violations, you should speak to a qualified attorney who is knowledgeable about the FDCPA, as well as foreclosure defenses generally, and can advise you what to do in your particular situation.