Court denies law firm’s request for judgment on Texas debt collection claim

Courts State Issues Foreclosure Debt Collection

On August 14, the U.S. District Court for the Southern District of Texas entered judgment in favor of a bank, mortgage loan servicer, and servicer’s law firm (defendants) on all but one Texas Debt Collection Practices Act (TDCPA) claims, among others, brought by homeowner plaintiffs, but determined the law firm was not entitled to judgment as a matter of law regarding its attempted foreclosure on the property despite an attorney exemption provision in the TDCPA. The court agreed with the defendants that the plaintiff failed to allege material facts that support the majority of the claims brought, but disagreed with the law firm as to the remaining TDCPA claim. According to the opinion, the plaintiffs alleged the law firm violated the TDCPA by operating as a third-party debt collector in Texas without the surety bond required by law. The law firm moved for judgment, arguing, among other things, that it was not subject to the TDCPA bond requirement because it simply “assisted” the mortgage servicer with the foreclosure, which is not considered debt collection absent a collection attempt on a deficiency judgment. The court rejected this argument as a matter of law. The court also rejected the law firm’s argument that it was not a “third-party debt collector,” concluding there was a genuine dispute about whether the law firm was a debt collector under the TDCPA despite the attorney exemption, due to whether the letters sent were in its capacity as attorneys for the servicer or as a debt collector.