Earlier this year, the Eleventh Circuit reversed the dismissal of a lawsuit when it held that monthly mortgage statements required by the Truth in Lending Act (TILA) and Regulation Z can constitute communications in connection with the collection of a debt under the Fair Debt Collections Practices Act (FDCPA). More recently, the court reaffirmed this ruling. These decisions highlight the difficulty mortgage servicers face in navigating the requirements under both the FDCPA and TILA and indicate it may not always be advantageous for every communication to a borrower to have a “Mini-Miranda.”
In Constance Daniels v. Select Portfolio Servicing, Inc., the borrower alleged that the loan servicer’s monthly statements violated certain provisions of the FDCPA by demanding amounts not due. In turn, the servicer argued that the statements were not communications “in connection with the collection of [a] debt” because the statements were mandated by Section 1026.41 of Regulation Z. Indeed, the statements followed Regulation Z’s model forms for periodic statements. The district court agreed and granted the servicer’s motion to dismiss.
The Eleventh Circuit reversed. The majority opinion spent considerable time focusing on the fact that the periodic statements contained the first of two disclosures required by the FDCPA’s so-called “Mini-Miranda” provision — that the servicer “is attempting to collect a debt” and that “[t]his is an attempt to collect a debt.” However, the court ruled that the second disclosure is only required under the FDCPA in the “initial communication,” and therefore, if the language was not for compliance purposes in later communications, it was intended to be debt collection.
Accordingly, the Eleventh Circuit ruled “that monthly mortgage statements required by the TILA and its regulations can plausibly constitute communications in ‘connection with the collection of a debt’ under the FDCPA and in connection with ‘collecting [a] … debt” under the FDCPA if (a) they contain ‘this is an attempt to collect a debt’ language, (b) they request or demand payment of a certain amount by a certain date, (c) they provide for a late fee if the payment is not made on time, and (d) the history between the parties suggests that the statement is an attempt to collect on a disputed debt.”
More recently, the Eleventh Circuit doubled down on this ruling in Lamirand v. Fay Servicing, LLC. There, the court held that TILA encourages lenders to give consumers information about their loan — information that is useful only if it is accurate and fair, as the FDCPA requires. Conversely, when servicers use periodic statements to collect a debt, they can be held liable for any misleading or unconscionable representations they make in those statements.
In the Eleventh Circuit, creditors should be cautious with including “this is an attempt to collect a debt” language in written communications after the initial communication. Troutman Pepper will continue to monitor developments at the intersection of litigation involving TILA and the FDCPA, specifically to see if other circuits agree that including the “Mini-Miranda” language in TILA required communications can constitute an attempt to collect a debt under the FDCPA.