Sixth Circuit Holds That Mortgage Foreclosure Constitutes Debt Collection Under the FDCPA

Declining to follow the majority of district court decisions within its circuit, the U.S. Court of Appeals for the Sixth Circuit, in Glazer v. Chase Home Finance LLC, --- F.3d ---, 2013 WL 141699 (6th Cir. Jan. 14, 2013), recently held that mortgage foreclosure constitutes debt collection under the Fair Debt Collection Practices Act ("FDCPA"). A borrower filed suit against his mortgage servicing company and its debt collection law firm, alleging violations of the FDCPA and state law arising out of a foreclosure action. The mortgage servicer and law firm moved to dismiss Glazer's complaint, and the district court granted their motions. Glazer appealed. Addressing for the first time whether mortgage foreclosure constitutes debt collection, the court first looked to the text of the FDCPA. The court found that under the definition of "debt" in 15 U.S.C. § 1692a(5), a home loan is a debt for the purposes of the FDCPA, even though it is secured. The court then found that debt collection "is performed through either 'communication,' 'conduct,' or 'means.'" Relying in part on Heintz v. Jenkins, 514 U.S. 291 (1995), the court concluded that attempting to collect a consumer debt through legal proceedings, including mortgage foreclosure activity, constitutes debt collection for the purposes of the FDCPA. The court stated that its holding is supported by cases from the U.S. Courts of Appeals for the Third and Fourth Circuits, Wilson v. Draper & Goldberg, P.L.L.C., 443 F.3d 373 (4th Cir. 2006) and Piper v. Portnoff Law Associates, LLC, 396 F.3d 227 (3d Cir. 2005), which found that legal proceedings used to collect a debt constitute debt collection under the FDCPA. Additionally, the court declined to follow the view that "the FDCPA is concerned only with preventing abuse in the process of collecting funds from a debtor, and that foreclosure is distinct from this process because 'payment of funds is not the object of the foreclosure action.'" 2013 WL 141699, at 8 (quoting Hulse v. Ocwen Fed. Bank, 195 F. Supp. 2d 1188, 1204 (D. Or. 2002)). The court also rejected the line of reasoning that relies on the definition of a debt collector and finds that the enforcement of a security interest cannot be debt collection. Accordingly, the court reversed the district court's decision and remanded the case for further proceedings. For more information on consumer finance litigation topics, please contact one of the Burr & Forman team members for assistance. We are happy to answer any questions or concerns you may have.

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