Consumer Finance Litigation

On February 11, 2020, the United States Circuit Court of Appeal for the Eleventh Circuit issued its opinion in Anderman v. JP Morgan Chase Bank, N.A., Case No. 19-13734 regarding the applicability of the federal Fair Debt Collection Practices Act (“FDCPA”) to certain conduct in judicial foreclosure actions. In Anderman, the plaintiffs alleged on behalf of themselves and a class of similarly situated individuals that JPMorgan Chase and its counsel violated the FDCPA by allegedly seeking to collect a debt against the potential heirs of deceased borrowers by naming them in foreclosure complaints. The plaintiffs alleged that cautionary language in Florida’s summons form and the fact that the complaint reserved jurisdiction to enter a deficiency judgment made the foreclosure action an attempt to collect a debt against the deceased borrower’s heirs – which the plaintiffs argued was improper since they do not owe the decedent’s debt.

The district court dismissed the complaint on the grounds that JPMorgan Chase was not a “debt collector” as the term is defined under the FDCPA and that JPMorgan Chase’s conduct did not constitute “an attempt to collect a debt” and therefore was not regulated by the terms of the FDCPA.

The Eleventh Circuit affirmed on both grounds.  First, the complaint alleged in a conclusory manner that the principal purpose of JPMorgan Chase’s business is to collect on defaulted debts and that it regularly collects or attempts to collect debts owed to another. The Eleventh Circuit found that this statement merely set forth the definition of debt collector from the FDCPA verbatim and that it was not accompanied by sufficient factual averments to meet federal pleading standards. What facts were plead, that JP Morgan Chase had attempted to collect on the note and mortgage did not support this conclusory allegation because JPMorgan Chase was the payee under the note and mortgage attached as an exhibit to the complaint. As to the law firm, no facts were alleged to support the conclusory allegations of the complaint that JP Morgan Chase’s counsel was a debt collector other than a conclusory averment that amounted to a legal conclusion.

The Eleventh Circuit affirmed on the second ground as well – that the foreclosure summons and complaint were not an attempt to collect a debt from the plaintiffs.  The Eleventh Circuit begins its opinion on this issue by noting that the FDCPA applies to mortgage debt and that it applies to documents filed in litigation. However, the Eleventh Circuit held that the foreclosure complaint was not an attempt to collect a debt because it did not demand payment from the plaintiffs. With respect to the possibility of a deficiency judgment in foreclosure litigation, the Eleventh Circuit held that a request for the court to retain jurisdiction for such proceedings is neither an explicit nor implicit demand for payment from the plaintiffs. Similarly, the Eleventh Circuit held that language in the form summons provided for in the Florida Rules of Civil Procedure which warns of the possible consequences of failing to answer in litigation, including default judgment and wage garnishment, is also not an explicit or implicit demand for payment.

The holding in the Andermen opinion adds to a long line of cases where the Eleventh Circuit has recognized various fact patterns where foreclosure litigation is not considered debt collection under the FDCPA, and where foreclosure plaintiffs are not considered debt collectors under the FDCPA. Consequently, Andermen is instructive to litigants in FDCPA litigation and provides yet another cautionary tale about paying attention to the details when seeking to apply the FDCPA to fact patterns relating to judicial foreclosure.