On July 1, 2022, the Eleventh Circuit Court of Appeals issued a decision reported in Lamirand c. Fay Servicing SARL which dealt with an asserted conflict between the Fair Debt Collection Practices Act (FDCPA) and the Truth in Lending Act (TILA).
The Eleventh Circuit found no clear conflict between the two laws. A collection agent’s periodic statements—per TILA requirements—may be “debt collection related” and therefore fall within the scope of the FDCPA. This means that mortgage servicers, like the defendant in Service Faymust comply with both laws.
Background to the alleged conflict of laws
The FDCPA is the primary federal law governing debt collection practices, and it includes provisions that prohibit misleading representations in connection with a debt and unfair means of debt collection. TILA requires mortgage servicers to send homeowners “periodic statements” every billing cycle with information about their loans, including amount owed, due date, and full details of delinquent loans.
So, when interacting with a party that has debt, if a mortgage servicer must provide periodic statements, under what circumstances must those statements also meet the requirements of the FDCPA?
This was the question posed to the court in Service Fay. Mortgage managers argue that the answer is no; since the two laws are opposed, one must supplant the other. Because these repairers are only fulfilling TILA requirements, the argument goes, they do not need to comply with the FDCPA’s limitations on debt collection for periodic reporting.
The Eleventh Circuit’s decision in Service Fay
The question left to the court in Service Fay was whether the communications, which appeared in the periodic filings required under TILA, were “in connection with” or a “means” of debt collection. A communication is subject to the debt collection requirements of the FDCPA if, having regard to all of the circumstances, it “conveys information about a debt and its purpose is at least in part to induce the debtor to pay.”
Here, the court found both characteristics present in the loan officer’s periodic statements to plaintiffs.
Periodic statements contained details of the debt, including amount owed, overdue and overdue on the account. The statements advised claimants to pay, warned them of the consequences of failure to pay, and gave them instructions on alternative methods of payment. In addition, the statements included a detachable payment coupon, which the court interpreted as evidence that the loan officer expected his warnings to induce payment.
Based on the characteristics of the periodic statements, the court found that they “readily” showed that the loan officer’s communications were “intended[ed] … at least in part” to induce applicants to pay. Thus, the statements have satisfied both of the FDCPA’s debt collection requirements – to inform about the debt and to induce its collection – and must satisfy each law.
Best practices for businesses in the future
So what does this mean for mortgage servicers who must provide periodic statements to parties who owe them debt?
If the information in the statements includes language that could be considered to induce indebtedness, the debtor party may bring action against you under TILA and the FDCPA. You need to consider whether your interactions include more than general debt information, such as advice or payment consequences.
Of course, the “best practice” is to always remember that your debt-related interactions meet the relevant provisions of TILA and the FDCPA.