The U.S. Court of Appeals for the Second Circuit has ruled that a lender’s transfer of service letter was an initial communication with a borrower under the Fair Debt Collection Practices Act (“FDCPA”) that triggered disclosure obligations under the Act.
In Hart v. FCI Lender Services, Inc., No. 14-191-cv, FCI sent the plaintiff borrower a transfer-of-service disclosure letter as required by the Real Estate Settlement Procedures Act (“RESPA”), informing him that FCI had taken over the servicing of his mortgage loan. The plaintiff sued FCI, contending that the servicing transfer disclosure notice violated the FDCPA since it was an “initial communication with a consumer in connection with the collection of [a] debt,” and failed to provide him with the necessary disclosures required by 15 U.S.C. § 1692g(a).
In its motion to dismiss, FCI argued that the letter was not an attempt to collect a debt but was merely a transfer-of-service informational letter sent pursuant to RESPA. The district court agreed, and dismissed the complaint.
On appeal, the Second Circuit vacated the district court’s decision and remanded. Both parties agreed that FCI was a debt collector under the FDCPA and that the letter to the plaintiff was FCI’s “initial communication” to him.
The Second Circuit found that the district court had erred in not viewing the initial letter objectively in the motion to dismiss stage of litigation — i.e., whether a consumer could reasonably interpret the letter as being “in connection with the collection of a debt, rather than inquiring into the sender’s subjective purpose.”
Upon applying this standard, the Second Circuit found that a consumer could reasonably interpret the letter to be in connection with the collection of a debt — especially since the letter itself contained the phrase, “THIS IS AN ATTEMPT TO COLLECT A DEBT” in bold letters. The court determined that FCI was required to provide the plaintiff with the required disclosures under the FDCPA and that its ruling was consistent with the remedial nature of the FDCPA.
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