On December 17, in addressing an issue of first impression, the United States District Court for the Eastern District of Pennsylvania held that a letter sent by a loan servicer under the Servicemembers Civil Relief Act (“SCRA”) to a borrower in default was not subject to the Fair Debt Collection Practices Act (“FDCPA”). Accordingly, the Court dismissed the borrower’s putative class claims arising from the letter.
The plaintiff had defaulted on his mortgage loan and received a number of written communications from the defendant loan servicer regarding plaintiff’s default and available loss mitigation options. All such letters included a mini-Miranda statement required by the FDCPA in communications made in association with debt collection. One of the letters did not demand any payment or mention the plaintiff’s default, but described the rights that may be available to servicemembers under the SCRA and provided contact information for the defendant servicer, as well as the Department of Defense. The letter did not contain a mini-Miranda, and plaintiff filed a putative class action complaint alleging violation of the FDCPA, 15 U.S.C. §1692e(11).
The defendant loan servicer moved to dismiss, arguing that the SCRA letter was not a communication in connection with debt collection and therefore not subject to the FDCPA. The Court began its analysis with an observation that, for a communication to be in connection with debt collection, an animating purpose of the communication must be to induce a payment from the debtor. Although the relationship between the plaintiff and defendant – that of a creditor and a debtor – weighed in favor of finding that the SCRA letter was in connection with debt collection, all other factors – its content, context, and purpose – contradicted such a finding. Namely, the letter did not demand any payment and was sent simply to inform the plaintiff of their rights as a servicemember. The letter did not mention default or list the amount due or the due date, and it did not threaten any consequences for non-payment. Further, because the letter was sent to satisfy the SCRA’s notification requirements, it was more akin to a legally mandated notice and not an attempt to collect a debt. Accordingly, the Court held the letter was not subject to the FDCPA, and it dismissed the plaintiff’s putative class action complaint.