Home > Uncategorized > U.S. 6th Circuit: Mortgage Foreclosure is debt collection under the Fair Debt Collection Practices Act.

U.S. 6th Circuit: Mortgage Foreclosure is debt collection under the Fair Debt Collection Practices Act.

 The Fair Debt Collection Practice Act (“FDCPA”) is a consumer protection act that requires that debt collectors treat debtors fairly and prohibits certain methods of debt collection. Russell v Equifax ARS, 74 F3d 30, 33 (2d Cir 1996). Michigan has its own state statute, MCL 339.901 et seq., that mirrors the FDCPA.
In the context of residential real estate foreclosures the question has come up over the past few years whether a party foreclosing on a mortgage, being the law firm, mortgagee, or the mortgage servicer, is a “debt collector” for purposes of
the FDCPA.
A majority of courts have held that foreclosure is not “debt collection” and therefore lawyers, lenders, and servicers are exempt from the FDCPA, and presumably the state statutes as well.
Then came the Glazer decision.
The U.S. Court of Appeals for the Sixth Circuit recently bucked the majority trend in  its opinion, Glazer v Chase Home Finance LLC, 704 F3d 453, 455 (6th Cir 2013). There the Court held that mortgage foreclosure IS debt collection under the FDCPA. You can see the Full Text Opinion by clicking to the following link through the State Bar of Michigan. http://www.michbar.org/opinions/us_appeals/2013/011413/53675.pdf
The 6th Circuit goes through a detailed analysis of the FDCPA and other jurisdictions’ analyses.  In coming to its conlusion,  the 6th Circuit found the 4th Circuit’s opinion persuasive in Wilson v Draper & Goldberg, PLLC, 443 F3d 373 (4th Cir. 2006). The Wilson Court opined that if mortgage foreclosures were not “debt collection” under the FDCPA then it: “would create an enormous loophole in the [FDCPA] immunizing any debt from coverasge if that debt happened to be secured by a real property interest and foreclosure proceedings were used to collect the debt.” Glazer, citing Wilson at 376.
The practical application of the Glazer case (unless overturned by the U.S. Supreme Court) is that mortgagees, servicers, and law firms in the 6th Circuit’s jurisdiction who are sued under the FDCPA can no longer claim in defense that “mortgage foreclosure is not debt collection”.
That being said, there are still valid exceptions that might exempt a mortgage lender or servicer, or law firm for that matter, from the FDCPA.
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