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Financial Services Law Insights and Observations

2nd Circuit: Consumer plausibly alleged discrepancies between collection letters and mortgage note

Courts Second Circuit Appellate FDCPA Fees Debt Collection

Courts

On July 22, the U.S. Court of Appeals for the 2nd Circuit affirmed in part and vacated in part a district court’s dismissal of a consumer’s FDCPA claims concerning communications received from a creditor and a collection firm (defendants) related to his defaulted mortgage. The consumer alleged that the letter he received in November 2015 listed an inaccurate amount of debt in violation of FDCPA section 1692g (concerning “initial communications”), and that subsequent letters received were inconsistent because they listed varying amounts of debt. Additionally, the consumer contended that the defendants violated sections 1692e (“false, deceptive, or misleading representations”) and 1692f (“unfair or unconscionable means to collect or attempt to collect any debt”). The district court ruled that the consumer failed to plausibly state a claim or provide factual support for his allegations.

On review, the appellate court agreed that the consumer failed to state a claim under section 1692g, explaining that “the least sophisticated consumer” would not be misled by the various debt collection letters concerning the amount of the debt. The appellate court emphasized that the consumer ignored the creditor’s acceleration of the underlying mortgage loan—which accounted for the core differences in the communications about the outstanding debt—and rejected the consumer’s allegations that the letters were inaccurate and inconsistent. However, the 2nd Circuit disagreed with the district court, holding that the consumer’s claims under sections 1692e and 1692f survived the defendants’ motion to dismiss because the consumer plausibly alleged discrepancies between the collection letters and mortgage note concerning late fees and charges.

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