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Student Loan Law: 18.2.3.1 Violations Unique to Federal Student Loans

A number of collection violations relate to the unique ways that federal loans can be collected—administrative wage garnishments, tax refund intercepts, and government benefit offsets. Dunning letters threatening that the Department will garnish borrower wages without “legal action” may violate the FDCPA.70 These letters imply that the former student will receive no notice before the wage garnishment and that there will be no opportunity to either contest the validity of the student loan or to present defenses.

Fair Debt Collection: 7.4.8 Student Loans

FDCPA violations involving student loans are also detailed in NCLC’s treatise on Student Loan Law.947 Although generally not dischargeable in bankruptcy, federal student loans offer a number of special rights to discharge or restructure a student loan obligation, including closed school, false certification, disability, and bankruptcy discharges.948 Thus, it can be deceptive for a student loan collector to indicate that a student is ineligible for a discharge where that is not the case.

Fair Debt Collection: 7.4.9.1 Generally

This section considers violations both of FDCPA § 1692e (deception) and § 1692f (unfairness) concerning a debt collector collecting on, threatening to sue on, or suing on time-barred debts. Additional court cases involving these issues are summarized in Appx. E.2.4.17, infra.

Home Foreclosures: 5.3.1 Overview

When it applies, the statute of limitations can provide a powerful defense to foreclosure. The expiration of a controlling statute of limitations can bar foreclosure in a non-judicial as well as in a judicial foreclosure jurisdiction.47 This section addresses a number of common issues that are likely to arise when advocates consider a statute of limitations challenge.

Fair Debt Collection: 7.4.9.3 Suits on Time-Barred Debts

Prior to Regulation F (effective November 30, 2021), numerous courts had concluded that suing on a time-barred debt violated FDCPA § 1692e (deception) or § 1692f (unfairness).965 Regulation F codified this, providing that, “[a] debt collector must not bring or threaten to bring a legal action against a consumer to collect a time-barred debt.”966

Fair Debt Collection: 7.4.9.4 Threats to Sue on Time-Barred Debts

Prior to Regulation F (effective November 30, 2021), courts consistently found FDCPA § 1692e violations where a collector threatens to sue on time-barred debt.982 FDCPA § 1692e(5) prohibits “the threat to take any action that cannot legally be taken” and suing on a time-barred debt is an action that cannot be legally taken.983 The practice should also violate FDCPA § 1692e(2)(A) (debt’s legal status) and § 1692e(10) (deception) because, by threatening, the collector “implicitly represented that

Fair Debt Collection: 7.4.9.5 Time-Barred Proofs of Claim in Bankruptcy Cases

In Midland Funding, L.L.C. v. Johnson,990 the Supreme Court held that a debt buyer’s proof of claim in a chapter 13 bankruptcy case on an obviously time-barred debt was not “false” or “deceptive” in violation of FDCPA § 1692e or unfair under FDCPA § 1692f. The debt collector, Midland Funding, filed a proof of claim that stated the last time that any charge appeared on Johnson’s account was in May 2003, well beyond the six-year Alabama statute of limitations.

Fair Debt Collection: 7.4.9.6.1 Introduction

The statute of limitations is a defense to a lawsuit on a debt, but, except in Mississippi, Wisconsin, and, for debts owned by a debt buyer, North Carolina,999 it does not extinguish the debt.1000 For that reason, it is not always deceptive to seek voluntary payment on a time-barred debt.

Fair Debt Collection: 7.4.10.1 Generally

Millions of lawsuits are filed to collect on consumer debts, and almost all result in default judgments.1027 Collection law firms file these suits in astonishing volumes, and often will little effort to investigate a case or to carefully draft legal pleadings. 1028

Fair Debt Collection: 7.4.10.2 Does FDCPA § 1692e Apply to Filings Submitted to the Court?

The Seventh Circuit has held that FDCPA § 1692e does not apply to collector representations directed at the court, such as where attachments to a pleading filed with the court were fabricated and were meant to deceive the court, not the defendant.1040 But even the Seventh Circuit finds that legal pleadings filed with the court can violate FDCPA § 1692e where the claim is that the deception is on the consumer.1041

Mortgage Servicing and Loan Modifications: 4.2.6.4 Coverage, Limitations, and Exemptions

The Dodd-Frank Act amendment provides that the requirement is applicable to all “home loans,” a term not defined by the Act that is presumably broader than “residential mortgage loans.”294 The final regulation implements the statutory language by providing that the requirement applies to any consumer credit transaction secured by a “consumer’s dwelling.”295 Thus, the rule applies to open-end, home-secured loans such as HELOCs.296 By not limiting ap

Mortgage Servicing and Loan Modifications: 4.2.12 Private Remedies for Violation of the TILA Servicing Requirements

The Dodd-Frank Act’s mortgage servicing provisions are within part B of TILA.417 Section 1640(a) of TILA provides that part B violations lead to TILA private remedies of actual and statutory damages and attorney fees, in both individual and class actions.418 Claims must generally be brought within one year of the date on which the violation occurred, although equitable tolling may be appropriate in certain circumstances.419

Mortgage Servicing and Loan Modifications: 4.2.7.1 Generally

When defending against a foreclosure or challenging servicing abuses it is important to know not only who the servicer is, but also who is the current owner of the mortgage. The identity of the current mortgage owner, however, may not always be apparent. Many mortgages today are assigned by the loan originator to a purchaser on the secondary market. Very often the mortgage owner at the time of foreclosure (or even shortly after the loan closing) is not the bank or mortgage company that originated the loan.

Mortgage Servicing and Loan Modifications: 4.2.7.2 Persons Subject to the Notice Requirement

TILA applies to persons to whom an obligation is initially made payable and that regularly engage in extending credit. However, section 1641(g)’s new transfer notice requirement is not limited to loan originators and applies to persons that acquire ownership of an existing debt. Thus, the rule uses the term “covered person” rather than “creditor” to describe persons subject to its requirements.319

Mortgage Servicing and Loan Modifications: 4.2.7.3 Timing of Disclosure Requirement

Section 1641(g) provides that the disclosures must be given “not later than 30 days after the date on which the mortgage loan is sold or otherwise transferred or assigned to a third party.”340 Regulation Z clarifies that the disclosures must be provided on or before the thirtieth day following the “date of transfer” which may be either the acquisition date recognized by the transferee, or the date recognized by the transferor.341 Similarly, either date may be stated on the disclosure as the date

Mortgage Servicing and Loan Modifications: 4.2.7.4 Persons Entitled to Receive Disclosure

The statute requires notification of the transfer to the borrower.342 Regulation Z, however, permits the covered person to deliver the disclosure to any consumer who is “primarily liable.” No definition of “primarily liable” is provided. Consumer groups initially asked the Federal Reserve Board to require that transfer notices be provided to all consumers obligated on the loan note, and to any consumer who would be entitled to a notice of rescission on the transaction. The Board declined to adopt this suggestion.

Mortgage Servicing and Loan Modifications: 4.2.7.5.1 Identification of the loan

The disclosure must identify the loan that was acquired or transferred.345 To provide flexibility, the official interpretations permit a covered person to use any information that would reasonably inform a consumer.346 Examples given include providing the property address along with the pre-transfer account number, the account number alone (if previously provided to the consumer such as on a monthly statement), or the date when the credit was extended and the original loan amount or credit line.

Mortgage Servicing and Loan Modifications: 4.2.7.5.2 New owner’s identity, address, and telephone number

The covered person acquiring the loan must disclose its name, address, and telephone number.347 This information must be provided even if there is another party who is servicing the loan.348 If a single disclosure is provided for more than one covered person, the information shall be provided for each of them.349 However, if one of the covered persons in that case has been authorized to receive the consumer’s notice of the right to rescind and to r

Mortgage Servicing and Loan Modifications: 4.2.7.5.4 Agent’s contact information

Regulation Z requires that the disclosure provide the name, address, and telephone number for the agent or other party having authority to receive a rescission notice and resolve issues concerning loan payments.356 It does not require contact information for an agent or other party if the consumer can use the covered person’s contact information for these purposes.