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Home Foreclosures: 1.2.4 Analyze for Servicing Claims

Generally, the loan servicer initiates the foreclosure. The servicer typically acts as an agent for the loan’s owner. A servicing agreement or pooling and servicing agreement defines the scope of the servicer’s authority to act for the owner of the loan. Servicing agreements may authorize the servicer to conduct the foreclosure in its own name, nominally as the holder of the loan. However, even in this arrangement the servicer is still an agent acting for a principal.

Home Foreclosures: 1.2.5 Analyze the Loan for Origination Claims

Often, defending against foreclosure means challenging unfair lending practices used in originating the loan. Borrowers that have been subjected to unfair lending practices may have a number of state and federal statutory claims as well as common law claims that may be asserted in response to foreclosure.

Home Foreclosures: 1.2.6 Analyze the Foreclosure for Procedural Defenses

Borrowers may have defenses to foreclosure where the servicer42 has not complied with procedures required under state and federal law. In many cases, procedural defects may bar a pending sale and require the servicer to reinitiate the foreclosure process. While this may not provide a permanent solution, it gives borrowers more time to mount a defense or find alternative housing.

When examining the sale for procedural defects, ask:

Home Foreclosures: 1.2.7 Negotiating a Workout or Modification

In some cases, a workout or loan modification can achieve a result as good as litigation with the expenditure of far less time and money. In other cases, borrowers may not have strong enough claims to pursue a litigation strategy. In either case, advocates should determine whether a workout agreement or loan modification is possible.

Fair Debt Collection: 11.4.2.3 Bringing a Class Action Seeking Declaratory or Injunctive Relief

Limiting class relief to declaratory or injunctive relief, where available under either the FDCPA or state law,234 may be the best choice in some cases, such as actions against undercapitalized, rogue debt collectors.235 The proof needed to establish a class-wide declaratory judgment is likely to be much the same as the proof needed to obtain a monetary recovery for an individual plaintiff, thus requiring few additional resources.

Fair Debt Collection: 11.4.3 A Wide Range of Parties May Bring FDCPA Actions

A private right of action is available not only to the “consumer,” that is, the putative debtor, but also, in some cases, to “any person” adversely affected by an FDCPA violation.239 Moreover, most FDCPA provisions protect not just consumers, but any person affected by violations occurring during the collection of consumer debts.

Fair Debt Collection: 11.4.4.2 Owners, Partners, Franchisors, and Parent Companies

Apart from the possibility of direct liability for those who meet the definition of “debt collector,”255 the owner of a collection agency may be held vicariously liable for FDCPA violations committed by agency employees if there is sufficient evidence to pierce the corporate veil.256 The applicable state law to evaluate piercing the corporate veil is the state of incorporation of the entity whose veil is sought to be pierced.257 Seeking to pierce t

Fair Debt Collection: 11.4.4.3 Collection Attorneys and Collectors Employing Attorneys

Collection attorneys, originally broadly excluded from FDCPA coverage, are now subject to the Act’s provisions and to private FDCPA actions, as any other debt collector would be.265 Suing a collection agency’s attorney may provide deeper pockets than suing a collection agency. If a law partner is liable under the FDCPA, the partnership may also be liable under state partnership principles.266 However, some judges may react badly to suits against collection attorneys.

Fair Debt Collection: 11.4.4.4 Forms Suppliers, Repossessors, and Insurers

It is an FDCPA violation to design, compile, and furnish any form while knowing that the form will be used to create the false impression that a person other than the creditor (such as an attorney or a collection agency) is participating in the collection of the debt.274 An example of this conduct is someone who sends a default letter to a debtor portraying themselves as a debt collector when they actually have no involvement in the debt collection effort.

Fair Debt Collection: 11.4.4.5 Creditors

Creditors who, in the process of collecting their own debts, use any name other than their own which would indicate a third party is collecting the debt are subject to the FDCPA.284 Generally, however, creditors collecting under their own name are exempt from FDCPA coverage for their own debt collection activities, but a state claim usually is available to challenge a creditor’s misconduct.

Fair Debt Collection: 11.4.5.1 Right to a Jury Trial

The Seventh Amendment to the United States Constitution guarantees the right to a jury trial in FDCPA private actions seeking actual or statutory damages.296 Collectors have argued that the use of the word “court” in 15 U.S.C. §§ 1692k(a)(2)(A) and 1692k(b)(1) evidenced a congressional intent to limit FDCPA actions to bench trials.

Fair Debt Collection: 11.4.5.2 Benefit of a Jury Trial

Generally, debtors should request jury trials at the beginning of debt collection harassment cases. This is such a strong preference that differences among courts as to the makeup, procedures, and delay in obtaining a jury may dictate the debtor’s choice of forum.

Fair Debt Collection: 11.4.5.3 Preparing for a Jury Trial of an FDCPA Case

In federal court, where cases pursuant to the Fair Debt Collection Practices Act are usually brought, a demand for trial by jury must be made “not later than [ten] days after the service of the last pleading.”304 The better practice is to request a trial by jury in the consumer’s complaint. The method of requesting a jury trial, for example, by doing so in the caption, is often governed by local rules.

Fair Debt Collection: 11.5.1 First Steps

One important first step in developing a case for debtor harassment is preparing a chronology of the events involved in the harassment. Events seemingly insignificant to the claim may prove significant later, may aid a witness’s memory, or may indicate discrepancies in evidence. It can also be helpful in establishing a client’s credibility in front of a judge or jury.

There are usually a substantial number of documents connected with a consumer transaction; these are particularly useful for pinpointing significant dates in a chronology.

Fair Debt Collection: 11.5.2.3 Is It Ethical for the Consumer’s Attorney to Suggest or Assist in the Recording?

While it may be legal in many states for a consumer to record a collector’s call, a separate question is whether it is ethical for the consumer’s attorney to participate in, assist, or even suggest that the call be recorded. ABA Opinion 337 (1974) initially held that recording without consent was conduct involving fraud, dishonesty, or misrepresentation, prohibited by ABA Ethical Rule 8.4,339 but that rule was reversed in June 2001 by ABA Formal Opinion 01-422.

Fair Debt Collection: 11.5.2.4 Alternative Means to Substantiate a Call’s Substance

In states where tape recording without consent or warning “beeps” is illegal, or where it is unethical for the attorney to suggest that collection calls be recorded, the consumer still can keep paper and pen by the telephone and take notes of future collection calls. Alternatively, the consumer can seek the collector’s consent for the call being recorded. Debt collectors increasingly are recording their conversations with consumers, and these tapes can be sought in discovery.357

Fair Debt Collection: 11.5.3 The Collector’s Own Documents

The collector’s records of collection contacts are often useful; obtaining them should be a priority at this stage. The database screens that contain the dates and amounts of payments should be requested in discovery from the creditor, collection agency, or attorney. These records, telephone logs, emails between collector and creditor, and recordings of telephone conversations may be central to the issue of liability on the purported debt.

Fair Debt Collection: 11.5.4.1 Initial Focus

Interrogatories, admissions, and a request for production of documents should be served with the complaint or soon thereafter to maintain the momentum of the case and to obtain critical evidence while it is still fresh and available. Include a request for a key to the codes and abbreviations used in the collector’s records. Sample discovery requests and depositions are included in this treatise’s digital version under Companion Material>Pleadings and Discovery.380

Fair Debt Collection: 11.5.4.3 Record Retention

Pursuant to Regulation F (effective November 30, 2021), a debt collector must follow specific rules for retaining certain records. Regulation F 1006.100 can be used to help with the development of discovery requests because it provides the requirements collectors must follow for the maintenance and retention of certain records and call recordings.

Regulation F § 1006.100 states: