Rhode Island Federal Court Refuses to Dismiss FDCPA Case against Law Firm Pursuing Mortgage Foreclosure

Should a law firm pursuing foreclosure on behalf of a mortgagee be considered a debt collector? That is a question at issue in a Rhode Island federal court case, in which borrower Lloyd Amesbury filed a class action lawsuit alleging Fair Debt Collection Practices Act (FDCPA) violations against a firm retained to initiate foreclosure on his home after he received a notice of default on the firm’s letterhead. Amesbury claimed the letter was false and misleading because of a discrepancy in the amount owed described in a letter he received from the law firm in April, 2016, and a May, 2016, bankruptcy proof of claim. The law firm moved to dismiss the case on grounds that it was not a “debt collector” under the FDCPA, because the default notice was an attempt to enforce a security interest on behalf of its mortgagee client.

Although the law firm was pursuing non-judicial foreclosure of property by providing the borrower notice of default and right to cure, the Rhode Island federal court concluded that the borrower’s complaint contained facts sufficient to demonstrate that the law firm was a debt collector under the FDCPA. Here is a description of its reasoning.

First, the borrower alleged that the law firm regularly used the mails and telephone system to collect consumer debts, advertised its services to assist clients with foreclosures, and regularly assisted clients in collecting debts through foreclosure. Second, the borrower’s complaint included the allegedly offending correspondence, which stated, in bold typeface: “THIS IS AN ATTEMPT TO COLLECT A DEBT.” In denying the law firm’s motion, Judge McConnell distinguished this case from another recent Rhode Island federal court decision, Pimental v. Wells Fargo Bank, N.A., C.A. No. 14-494S, 2015 U.S. Dist. LEXIS 120571 (D.R.I. Sept. 4, 2015), report and recommendation adopted, 2016 U.S. Dist. LEXIS 1825 (D.R.I. Jan. 5 2016).

In Pimental, the Rhode Island federal court dismissed an FDCPA claim against a law firm, which while pursuing foreclosure issued a notice of default letter that included the FDCPA’s statutory advisory language: “PLEASE BE ADVISED THAT THIS OFFICE IS ATTEMPTING TO COLLECT A DEBT…” In Amesbury, Judge McConnell noted that the Pimental borrower had not alleged that the foreclosing law firm was attempting to collect a debt or engaged in debt collection. Judge McConnell also noted that if discovery confirmed that the law firm was attempting to enforce a security interest, a motion for summary judgment could be appropriate.

We are monitoring this case with particular interest in the outcome on summary judgment. It will be interesting to see how the Rhode Island federal court will rule if the undisputed facts demonstrate that the law firm was engaged in the business of collecting debts, issued a notice of default letter with the bold faced notice, but had issued the letter for the sole purpose of enforcing a security interest and specifically to seek foreclosure.

A full copy of the Rhode Island District Court decision available here, Amesbury v. Baker, Braverman & Barbadoro, P.C., C.A. No. 16-cv-598-M-PAS, 2017 WL 1957005, --F.Supp.3d -- (D.R.I. May. 10, 2017).