Allegation That The Mortgagee In A Foreclosure Falsely Claimed That It Was The Owner Of The Mortgage Which Had Not Yet Been Assigned To It Was Sufficient To State A Claim Under The FDCPA

In Wallace v. Lerner, Sampson & Rothfuss (10-3694, 6th Cir., June 26, 2012), the mortgagor sued the mortgagee, the servicer and the mortgagee’s law firm alleging false, deceptive and misleading claim of ownership under section 1692e of the FDCPA. The mortgagor alleged that in the state foreclosure action the mortgagee claimed it was the holder of the note and mortgage, however, the assignment of the note and mortgage was recorded after the foreclosure commenced. The mortgagor alleged that by falsely identifying that it was the owner of the mortgage caused her confusion and delay in trying to contact the correct party concerning payment on her loan and resolution of the debt. The mortgagor sought relief under the FDCPA and state law theories. The complaint was dismissed but reversed on appeal. The single issue on appeal was whether the filing of a foreclosure by the law firm claiming ownership of the mortgage by its client constituted a false, deceptive or misleading representation under the FDCPA. In reversing the District Court, the Sixth Circuit rejected the law firm’s argument that Ohio law allows a creditor to initiate a foreclosure in anticipation that it would become a title holder after the foreclosure action was filed but before it concluded. The issue of standing to bring the foreclosure had no bearing on the question whether misidentifying a creditor is materially misleading under the FDCPA. The materiality standard simply means that in addition to being technically false, a statement would tend to mislead or confuse a reasonable unsophisticated consumer. Although not passing judgment on the merits of the claim, the court found that the allegations that the law firm’s misidentification of the owner of the mortgage caused her confusion and delay in trying to contact the proper party concerning payment on her loan and resolution of the default were sufficient to state a claim under section 1692e of the FDCPA.

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