In Milburn v. SN Servicing, LLC, a district court in the Ninth Circuit denied a defendant’s motion for summary judgment regarding the plaintiffs’ allegations that the defendant violated the Fair Debt Collection Practices Act and Oregon Unlawful Debt Collection Practices Act in its mortgage servicing activity. In denying summary judgment, this decision serves as a reminder to servicers to ensure a thorough review of correspondence from a borrower to evaluate whether they may file for nonjudicial foreclosure without implicating the FDCPA or state collection laws.

In that case, the plaintiffs fell behind on their mortgage payments. The defendant subsequently sent the plaintiffs notices in November 2018 and February 2019 stating that the mortgage was past due and supplying loss mitigation options, respectively. After the plaintiffs retained counsel to assist them, a notice of default and election to sell was filed in September 2019, and the plaintiffs’ counsel contacted the defendant twice in October 2019 in attempts to resolve the issue and receive a copy of the deed of trust. A representative for the defendant notified the plaintiffs’ counsel that, although they received both letters, “[the defendant’s representative] did not have the authorization from [the plaintiff] to speak with [the plaintiff’s counsel].” Therefore, the plaintiffs’ counsel re-sent the authorization she had previously supplied to the defendant. However, in November 2019, a Foreclosure Avoidance Measure Notice (FAMN), stating that the plaintiffs “were not eligible for any foreclosure avoidance measures because ‘[the plaintiff] ha[d] never responded to any correspondence that [the defendant] ha[d] issued,” was served on the plaintiffs, and a nonjudicial foreclosure was scheduled for February 2020.

The plaintiffs filed suit on January 17, 2020, moving for a temporary restraining order and a preliminary injunction. The plaintiffs alleged violations of § 1692d and § 1692f of the FDCPA and § 646.639(2)(k) of Oregon’s UDCPA. Specifically, the plaintiffs alleged that in sending the FAMN, the defendant engaged in abusive conduct. Furthermore, they alleged that the trustee’s scheduling of the nonjudicial foreclosure dates on multiple occasions was an unfair and unconscionable means to attempt to collect the debt. Ultimately, the defendant moved for summary judgment, which the court denied on all counts.

First, the court held that there was a genuine issue of material fact regarding whether the defendant violated § 1692d of the FDCPA. The plaintiffs alleged that the FAMN was “on its face abusive” as it stated the plaintiffs “never responded to any correspondence” despite the plaintiffs’ counsel’s attempts. The court found the defendant’s contention that the FAMN “referred solely to the [plaintiffs’ failure to respond to] letters regarding loss mitigation options” unconvincing, and reasoned that the least sophisticated debtor should not be expected to interpret the FAMN language “any correspondence” to mean the letters specifically referring to loss mitigation. Accordingly, it denied the defendant’s motion for summary judgment on this count.

Second, the court held that there was a genuine issue of material fact regarding whether the defendant violated § 1692f of the FDCPA. The court emphasized that § 1692f prohibits the use of an “unfair and unconscionable means to collect or attempt to collect and debt” and “‘[t]aking or threatening to take any nonjudicial action to effect dispossession or disablement of property … [when] there is no present right to possession of the property claimed as collateral through an enforceable security interest’” is one of the debt collection means prohibited. Accordingly, it held that the trustee’s actions in resetting the nonjudicial foreclosure date twice, when it did not have the present right of possession, created a genuine issue of material fact as to whether the defendant violated the FDCPA, and denied the defendant’s motion for summary judgment.

Finally, for the reasons stated above, the court held that there was a genuine issue of material fact regarding whether the defendant violated § 646.639(2)(k) of Oregon’s UDCPA — prohibiting a debt collector from “[a]ttempt[ing] or threaten[ing] to enforce a right or remedy while knowing or having reason to know that the right or remedy does not exist” while attempting to collect on a debt.