Consumer Finance Litigation

In DeMoss v. Peterson, Fram & Bergman, 2013 WL 1881058 (D. Minn. May 6, 2013), Plaintiffs filed a putative class action complaint alleging that a cover letter and preforeclosure notice violated the Fair Debt Collection Practices Act (FDCPA). The subject line of the cover letter referenced "Mortgage Foreclosure on …" The letter provided the principal balance due on the mortgage, that reinstatement and payoff figures would be provided upon request, and that documents had been forwarded to counsel's office to initiate foreclosure proceedings due to a default in the mortgage. A preforeclosure notice, which is a requirement under Minnesota law, was also included with the cover letter and provided information regarding foreclosure prevention counseling.

Plaintiffs argued that the cover letter violated the FDCPA by (1) providing the principal balance of the mortgage rather than the total amount owed, and (2) containing false, deceptive and misleading statements. Plaintiffs also contend that even if foreclosure activity is outside the scope of the FDCPA, the mailings were not property characterized as foreclosure activity because the correspondence predated any foreclosure activity and the letter included a disclaimer that reads: "This is an attempt to collect a debt."

Defendant moved to dismiss the class action complaint on the grounds that no violation of the FDCPA occurred because the correspondence is not subject to the FDCPA. The District Court of Minnesota agreed. The Court recognized the distinction between debt collection activity and the enforcement of security interests. Relying on this distinction, the Court specifically found that mortgage foreclosure activities are not taken "in connection with the collection of any debt" for purposes of the FDCPA. Accordingly, it concluded that the correspondence at issue was not subject to the FDCPA. The Court went further to confirm that the cover letter to the preforeclosure notice did not demand payment so as to convert the correspondence to debt collection. The fact that the letter, in an abundance of caution, included the FDCPA disclaimer, without more, did not persuade the Court to alter its conclusion.

Therefore, the Court held that the foreclosure-related mailings should not be characterized as debt collection and granted the motion to dismiss the FDCPA claim.

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