The Eleventh Circuit Court of Appeals recently issued a concerning opinion when it overturned the Florida Intermediate District Court’s dismissal of a borrower’s claims under the Fair Debt Collections Practices Act (FDCPA) and the Florida Consumer Collection Practices Act (FCCPA) v. Select Portfolio Servicing Inc. (SPS). Daniels v Select Portfolio Servicing, Inc.no. 19-10204, 2022 WL 1639012 (11th Cir. May 24, 2022).
Daniels took out a loan from Countrywide in 2005, defaulted and entered into a loan modification agreement in March 2009 (“Modification” or “Agreement”). The change allowed Daniels to make monthly interest-only payments for 10 years. The monthly payments would gradually increase and after the 10-year period, Daniels would be required to make principal and interest payments again, as specified by the agreement. Daniels made timely payments under the agreement for over a year. Some time later, Wells Fargo secured an interest in Countrywide’s loan.
In June 2010, Wells Fargo refused to accept interest-only payments from Daniels and initiated foreclosure proceedings. Daniels was successful in applying the change nationwide. The court “sanctioned Wells Fargo for improperly initiating the foreclosure action” and ordered Daniels to resume the amended payments. As Daniels and Wells Fargo litigated the matter (over four years), $60,808.83 in interest and receivership accrued. The court ordered that this amount be added to the end of the amendment. As of November 2016, the principal outstanding on Daniels’ loan was $250,714.83. [$189,911.00 plus $60,803.83] and Daniels’ interest-only payment was $982.25.
After the lockdown concluded, Wells Fargo servicer SPS sent Daniels a number of monthly statements as required by TILA. Daniels claimed that these statements were “harassing, false, and misleading” and constituted “unfair practices in connection with the collection of debt in violation of the FDCPA and FCCPA.” Daniels identified a November 2016 statement as “the most problematic” in that it showed the outstanding principal at $356,121.53 instead of $250,741.83 and the monthly payment at $2,244.90 instead. of $982.25. Daniels also complained that the statement “wrongly stated that the loan was past due” when “there was no default at all.” Daniels’ attorney sent two letters to SPS regarding the misrepresentations, but did not receive a response.
In June 2018, Daniels sued SPS for violations of the FDCPA and FCCPA based on the misrepresentations. The Intermediate District of Florida dismissed the action with prejudice, finding that the statements were required and complied with TILA requirements and “were not communications related to the collection of a debt…” Daniels appealed the order to dismiss in the Eleventh Circuit Court of Appeals which quashed and reinstated the case against SPS. The Eleventh Circuit pointed out that the issue to be decided was whether Daniels “admitted sufficient facts to plausibly allege FDCPA and FCCPA coverage.” The Court clarified that “facial plausibility” requires more than “pure possibility”, but less than a “probability requirement”. The Court explained that if the alleged facts made it “reasonably inferred” that “the defendant is responsible for the alleged wrongdoing”, then the dismissal was improper.
The Court went on to find that Daniels “plausibly alleged” that the monthly statements were “communications in connection with the collection of a debt.” The Court relied heavily on the fact that the statements “expressly stated that they were ‘an attempt to collect a debt'”. to include this sentence. The Court explained “[v]from a global point of view, a communication expressly stating that it is an “attempt to collect a debt”, which requests the payment of a certain amount on a certain date and which provides for a delay if payment is not made on time is plausible ‘related to debt collection.’ The Court rejected SPS’s argument that since the statements were required by TILA, the statements were not actionable under the FDCPA or the FCCPA.
Notably, the Court emphasized that it was not expressing an opinion on the merits of Daniels’ claims. The court “addressed only the issue of FDCPA and FCCPA coverage” while leaving it to the district court to determine whether Daniels’ allegations demonstrate that SPS violated the FDCPA and FCCPA. The deadline for a rehearing on this opinion does not expire until June 9, 2022, so the opinion is not yet final. Assuming there is no new remand hearing, the Intermediate District may very well conclude that the Monthly Statements did not violate the FDCPA or FCCPA when considered on the merits. Stay tuned for updates on this important issue.