Appeals Court Rules Boilerplate Disclosures Do Not Turn Letter into FDCPA Communication

On many of my webinars, attorneys have exhorted companies in the accounts receivable management industry from being creative, at least when it comes to making required disclosures. Getting cute or creative is rarely a good idea. Now, the Eighth Circuit Court of Appeals has jumped on board this train, ruling that the use or boilerplate disclosures do not convert an informational communication into an official debt collection activity under the Fair Debt Collection Practices Act. The ruling from the Eighth Circuit might also be helpful to defendants fighting Hunstein cases.

A copy of the ruling in the case of Heinz v. Carrington Mortgage Services can be accessed by clicking here.

The Eighth Circuit ultimately upheld the District Court’s summary judgment ruling in favor of the defendant, after it was sued for allegedly violating the FDCPA by making false statements about the status of a loss mitigation application and a pending foreclosure sale on the plaintiff’s home. One of the letters that was sent to the plaintiff included this disclosure, “if your loan is delinquent collection activity may continue, including referral to foreclosure or foreclosure sale,” which the plaintiff seized on as turning the letter into a communication for the purposes of collecting a debt, which would subject the letter to the FDCPA. But the Eighth Circuit warned that the entire letter has to be read to determine if it counts as a communication under the FDCPA.

“Rather, we look to the substance of the letter — what information it provides and what it asks the borrower to do — to determine whether an ‘animating purpose’ is “to induce payment by the debtor. And here, for the reasons we have already explained, the letters did not try to induce Heinz to pay his outstanding debt. We thus conclude that a routine disclosure statement that is at odds with the remainder of the letter does not turn the communication into something that it is not — in this case, a communication made in connection with the collection of a debt for the purposes of the FDCPA.”

Communication in connection with the collection of a debt is a phrase that anyone defending a Hunstein case will immediately recognize and seize on as a possible defense. To count as a communication under the FDCPA, the “animating purpose” of the communication must be to induce payment by the debtor, the Eighth Circuit noted.

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