Eleventh Circuit says that mortgage statement containing “mini-Miranda” warning can be an “attempt to collect a debt” under the FDCPA

The Eleventh Circuit in Daniels v. Select Portfolio Servicing, Inc., 34 F.4th 1260 (11th Cir. May 24, 2022) reversed a district court ruling in favor of a mortgage servicer that monthly mortgage statements sent in compliance with Truth In Lending Act (“TILA”) are not communications in connection with the collection of a debt under the Fair Debt Collection Practices Act (“FDCPA”). Critical to the Court’s decision was the inclusion in the statements of the FDCPA’s “mini-Miranda” warning. Justice Lagoa issued a compelling dissent contending that the “this is an attempt to collect a debt” language has “no independent legal significance” and should not turn a TILA compliant mortgage statement into an attempt to collect a debt.

The Court first addressed whether the statements were “communications in connection with the collection of a debt”. Construing the statements in their entirety, the Court concluded they “attempts to collect a debt” under the FDCPA. It noted that they expressly said they were “an attempt to collect a debt” and that “[a]ll information obtained will be used for that purpose.” They had entries for “loan due date,” “payment due date,” “amount due,” “total amount due,” “interest-bearing principal,” “deferred principal,” “outstanding principal,” and “interest rate.” In addition, the statements attached a monthly payment coupon which included late fee information and instructions to the borrower to return the coupon with the payment by a date certain. Finally, the Court considered the context in which the statements were sent. The borrower had prevailed in a foreclosure action where the new servicer was ordered to honor a prior loan modification agreement that tacked on unpaid interest to the end of the loan

The key issue was whether the TILA’s requirement that the statements containing most of this information be sent to the borrower put them outside of “communications in connection with the collection of a debt”. The servicer argued that the statements cannot be actionable under the FDCPA because they largely conform to the requirements of the TILA and its regulations. It relied on an unpublished opinion from the Eleventh Circuit, Green v. Specialized Loan Servicing LLC, 766 F. App’x 777 (11th Cir. 2019) which held that the servicer’s monthly mortgage statement contained no language “beyond what is required by [the] TILA” and therefore did “not rise[ ] to the level of being unlawful debt collection language.” Id. at 784.

The Court acknowledged that TILA requires servicers to send borrowers monthly statements detailing important information about the loan, such as the reinstatement amount, the interest rate, the payment due date, late payment fee information, the monthly payment amount, the total sum of any fees charged since the last statement, etc. But the Court also noted, a communication can have “dual purposes” such as providing a consumer with information and demanding payment on a debt, which means that merely because the statements were required by law does not preclude them from also being debt collection communications. The Court distinguished Green on the ground that the statement reviewed in Green did not include the “this is an attempt to collect a debt” language. It also noted that the TILA regulations include three sample standard forms for the required monthly mortgage statements, that the servicer’s statements largely followed. But it also noted that none contain the words “this is an attempt to collect a debt.”

The Court also rejected the argument that a guidance bulletin issued by the Consumer Financial Protection Bureau, opining that servicers are not liable under the “cease communications” option provided by the FDCPA if they comply with the TILA, immunized servicers from any claim under the FDCPA. The Court held that the bulletin addressed only a specific issue, the “cease communications” options available to a debtor under the FDCPA and should not be read any more broadly than that. Unlike the conflict between the FDCPA prohibiting certain communications and the TILA requiring those same communications, a debt collector can satisfy the TILA’s information requirements and at the same time comply with the FDCPA provisions prohibiting communications that were harassing, false and misleading.

In sum, the Daniels Court concluded that the monthly mortgage statements required by the TILA may plausibly constitute communications in connection with the collection of a debt under the FDCPA if (a) they contain “this is an attempt to collect a debt” language, (b) they request or demand payment of a certain amount by a certain date, (c) they provide for a late fee if the payment is not made on time, and (d) the history between the parties suggests that the statement is an attempt to collect on a disputed debt.

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