Judge Cleland from the United States District Court in the Eastern District of Michigan recently ruled that not all letters from a debt collector to a consumer are subject to the FDCPA. In Francis v. GMAC Mortg., 2007 U.S. Dist. LEXIS 41022, In Francis, Old Canal Financial (“Old Canal”) attempted to collect on a 12 year old mortgage debt.. Francis sued Old Canal and eventually agreed to dismiss his case in exchange for a full release of the mortgage debt. End of story right? WRONG!
Old Canal then transfers its mortgage rights (although none existed) to GMAC who begins to collect the debt. Plaintiff immediately sent GMAC a letter, enclosing a copy of the settlement agreement between herself and Old Canal, and explaining that she had been released from the alleged mortgage debt. Plaintiff asserted that she did not owe the debt, the debt was not valid, and GMAC should not attempt to collect on it. The subject line of Plaintiff’s letter stated: “Your Account Number: B001305055; Dispute and Qualified Written Request and FDCPA [D]emand for Validation.” In response to her June 29 letter, Plaintiff received two letters from GMAC’s “Voice of the Customer” department. The first letter, dated August 4, 2006, states:
“I would like to thank you for contacting GMAC Mortgage Corporation concerning your mortgage account. This will acknowledge receipt of your letter of June 29, 2006. We will review this matter and provide you with a written response. Should you need to contact me directly, you may reach me at 888-462-2864, extension 5750.”
The second letter was sent September 22, 2006, and states:
“Please be advised that this letter will serve as our response to your qualified written request regarding the above-referenced loan. The Mutual Release and Settlement Agreement that you have provided is not sufficient to terminate your obligations to GMAC Mortgage Corp. After a thorough review, based on the information that you provided, it does not give us enough detail to grant your request for release of mortgage. We would need additional information to research. Please provide a copy of the executed Release of Mortgage from Old Canal or any other documentation that would prove that this loan has been released. If you should have any further questions or concerns, please contact me directly at 888-462-2864 extension 5750.”
Plaintiff alleges that GMAC did not accept the validity of Plaintiff’s explanations, and continued collection activities. Plaintiff initiated this action on December 29, 2006, asserting two counts against GMAC. In her first count, Plaintiff asserts an individual claim under the Fair Debt Collection Practices Act (“FDCPA“), 15 U.S.C. § 1692, alleging that GMAC violated the FDCPA by attempting to collect the alleged debt from Plaintiff. In her second claim, Plaintiff asserts that in the two “Voice of the Customer” letters, GMAC failed to include the disclosures required under the FDCPA, 15 U.S.C. § 1692e(11). .
NOT ALL COMMUNICATIONS FROM A DEBT COLLECTOR TO A CONSUMER ARE GOVERNED BY THE FDCPA.
Judge Cleland held that just because a letter comes from a collector to a consumer, it is not necessary governed by the FDCPA. He states:
First, the court does not accept the proposition that all “communications” sent by a debt collector to a consumer must contain the notices specified by § 1692e(11). While § 1692e(11) applies to “communications,” § 1692(e) generally prohibits “false, deceptive, or misleading representation or means in connection with the collection of any debt.” 15 U.S.C. § 1692e. It is fundamentally the general statutory prohibition which gives rise to the cause of action, admittedly as further defined by the respective sub-parts. Nonetheless, the court’s initial inquiry focuses on whether the two letters were sent “in connection with the collection of [a] debt.” Id. They were not.
Although the letters were sent by a debt collector and, therefore, perhaps remotely related to Plaintiff’s alleged debt, the letters were, in context, undisputedly sent in response to an inquiry made by Plaintiff. The first letter amounts to nothing more than an acknowledgment of receipt of Plaintiff’s June 29, 2006 letter. The second letter was similarly not sent in connection with the collection of Plaintiff’s alleged debt, but rather in connection with Plaintiff’s June 29, 2006 inquiry. To the extent the second letter sought any additional information from Plaintiff (or stated that Plaintiff could voluntarily send in further information), it was in connection with the prospect of a potential discharge of Plaintiff’s mortgage, rather than its collection. The letters were, on their face, in the nature of a customer service response, rather than a debt collection demand. Neither letter provided terms of payment or deadlines, threatened further collection proceedings, or, indeed, demanded payment in any form. While the court does not hold that any of these actions are necessarily required to fall within the scope of § 1692e, they would have been at least indicia of actions taken “in connection with the collection of [a] debt,” as opposed to customer service actions taken in response to an inquiry.
From my experience, Judge Cleland is a very smart man and an excellent judge. However, on this issue, I have to wonder whether he is reading a requirement into 15 USC 1692e that does not exist. After all, the FDCPA simply talks about the required language that must be contained in communications with a consumer. The statute does not condition the requirement to provide this language based upon the contents of the communications to threats or proceedings. I think Judge Cleland may have over analyzed this requirement in the FDCPA, although I can appreciate the nature of his reasoning.
Collectors – DO NOT BE FOOLED OR LULLED INTO COMPLACENCY. While this holding makes it appear that you may avoid your responsibilities to advise your debtor that you are a debt collector, this ruling has no precedential value. Zero…nada… Be safe. Just write in the words “This is a communication from a debt collector” on every letter you send to your debtors. Make sure your collectors say it on the telephone when talking with your debtors. Do not rely upon this holding.
Debtors – This is a very interesting case. I don’t foresee other courts ruling as Judge Cleland has in this case. If you get any communication from a debt collector that does not advise you that it is from a debt collector, I would strongly advise you to pursue your rights.