Does the FDCPA apply to mortgage foreclosures?

A recent Eleventh Circuit decision responded to this question in the affirmative. In Reese v. Ellis, Painter, Ratterree & Adams LLP, 678 F.3d 1211 (11th Cir 2012) the Reeses defaulted on a loan and mortgage. A law firm representing the lender sent the Reeses a letter and documents demanding payment of the debt and threatening to foreclose on the property if they did not pay it. The Reeses then filed a lawsuit against the law firm alleging that the communication violated the Federal Debt Collection Practices Act. The district court dismissed the complaint finding that the law firm was not a “debt collector” under the FDCPA and that the letter and documents it sent were not covered by the FDCPA. The basis for the trial Court’s dismissal was, in part, based on the decision in Warren v. Countrywide Home Loans, 342 Fed. Appx. 458 (11th Cir. Ga. 2009) which held that the FDCPA, except for limited circumstances, does not apply to mortgage foreclosures and such collection activity does not constitute debt collection activities governed by the FDCPA. In holding that the FDCPA applied to the collection efforts of the lender’s law firm, the Court rejected defendant’s arguments that the purpose of the letter was to inform the Reeses that the lender intended to enforce its security deed. That argument, the Court observed, wrongly assumed that the letter could not have had a dual purpose – to give notice of foreclose and to demand payment on the note. The Court went on to state that the rule the law firm was asking the Court to adopt would exempt from the provisions of the FDCPA any communication that attempted to enforce a security interest regardless of whether it also attempted to collect the underlying debt. That rule, the Court said, would create a loophole in the FDCPA and the practical result of such a rule would be that the FDCPA would apply only to efforts to collect unsecured debts. Under such a rule, the court noted, a lender (or its law firm) could harass or mislead a debtor without violating the FDCPA as long as a debt was secured. That, the Court said: “can’t be right.” In summarizing its ruling on this point, the Court said: “A communication related to debt collection does not become unrelated to debt collection simply because it also relates to the enforcement of a security interest.”