How Does The FDCPA Apply To Foreclosures?
The Fair Debt Collection Practices Act (FDCPA) is a powerful federal law that applies to debt collectors. So how is this relevant to foreclosures? If the mortgage servicer, or the owner, or the foreclosure lawyer are debt collectors under the FDCPA, and if you are dealing with your personal residence, then the FDCPA may apply and give you some powerful protection and tools to fight back against wrongful foreclosures.
Let’s take a look at this to see how it works.
Who Is A Debt Collector?
Any company that is assigned or that buys a debt that is in default the first time the company obtains the debt. This means that if your mortgage servicer (BAC Home Loan, Wells Fargo, Chase, Green Tree, etc) obtained the loan after it was in default (i.e. you were late), then normally it will be considered a debt collector.
If the alleged “owner” of the loan (a trustee such as Bank of New York, Deutsche Bank, etc) obtained the loan after it was in default – quite common in Alabama foreclosure cases – then the owner is considered a debt collector.
If the foreclosure lawfirm (Sirote & Permutt, etc) sends you a letter demanding payment of the loan, then it normally will be considered a debt collector also.
What Does It Matter If A Company Is A “Debt Collector”?
If the company you are dealing with is a debt collector, several important things happen.
First, the company cannot in any way lie or misrepresent anything to you. Now, Alabama law prohibits this as well but the FDCPA is not as strict as Alabama state law and the damages can be better.
Second, the company cannot threaten you with anything that it either cannot, or will not, actually do. So if the company threatens you with a foreclosure when it has no legal right to do so, this violates the FDCPA.
Third, there can be no bogus fees or charges or expenses added to what you owe or else the FDCPA is violated. We often see this with the inspection fees, BPO fees, and improper crediting of payments resulting in late fees.
Fourth, all communications to you have to have the warning that the communication (letter, call, email, etc) is from a “debt collector” and that this is an “attempt to collect a debt.”
Fifth, the debt collector cannot report false or inaccurate credit information about you to the credit reporting agencies such as Equifax, Experian, Innovis or Trans Union.
Finally, the FDCPA prohibits debt collectors from harassing you or treating you unfairly. They can still collect, but they can’t mistreat you.
OK, So The FDCPA Applies And Prohibts Certain Practices – So What?
Here’s what you get when the FDCPA applies:
1. Normally it is a strict liability law which means you don’t have to prove intent or negligence to show a violation . . . instead you simply show the violation. There are exceptions – such as misrepresentation and false credit reporting but for the most part the FDCPA is a strict liability statute.
2. You can receive up to $1000 in “statutory damages” even if you do not have any actual damages. In a foreclosure case this would be rare to not have actual damages but you don’t have to have them.
3. You can receive your full “actual damages” – what the jury decides the violation of the FDCPA caused you.
4. Your lawyer can receive attorney fees and litigation expenses which can increase the amount of any settlement or verdict that you keep.
How Does The Defendant Paying Legal Fees At The End Of The Case Help Me Save My Home?
It helps you because it makes the Defendant/Mortgage Company think twice about dragging out the litigation because it knows that if it loses, it will have to pay your attorney for the time spent on the case. At the time of this writing, our hourly rate according to Federal Judges in Alabama is $350 per hour. So a mortgage company takes a big chance if it wants to drag out litigation. A case we recently tried under the FDCPA that was much easier and less complicated than a foreclosure case resulted in $125,000 in fees by the end of the four day trial.
The mortgage company has to seriously think about this before deciding to not settle in a reasonable manner when it knows it has been caught violating the law.
What’s The Bottom Line To The FDCPA Applying In Foreclosure Cases?
Mortgage companies are subject to a stricter law than Alabama law. Mortgage companies face a much higher liability when you consider the FDCPA fee shifting statute.
This adds up to the mortgage company normally being more willing to try to make their wrongs right as it is in the mortgage company’s financial self interest to resolve these cases earlier, rather than fighting them all the way to trial.
And if the mortgage company will not resolve the case when it has been caught doing wrong? With the FDCPA you have the best chance to recover your damages and maybe even have your lawyer fees paid. By the mortgage company. Now that is poetic justice….
Contact Us If You Have Questions About Your Alabama Foreclosure Situation
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