ANDREW SCHLAF, оn behalf of plaintiffs and a class, et al., Plaintiffs-Appellants, v. SAFEGUARD PROPERTY, LLC, Defendant-Appellee.
No. 17-2811
United States Court of Appeals For the Seventh Circuit
ARGUED FEBRUARY 21, 2018 – DECIDED AUGUST 10, 2018
Before RIPPLE, KANNE, and HAMILTON, Circuit Judges.
Appeal from the United States District Court for the Northern District of Illinois, Western Division. No. 3:15-cv-50113 — Frederick J. Kapala, Judge.
RIPPLE,
I
BACKGROUND
A.
Andrew and Wendy Schlaf own property in Illinois. The property is subject to an FHA-insured mortgage serviced by Green Tree Servicing, LLC.1 The Schlafs defaulted on the mortgage, and Green Tree was unsuccessful in its initial attempts to contact them about the delinquent payments and late fees.
Green Tree contracts with Safeguard, a “mortgage field sеrvicing company,”2 to perform a variety of services on properties with defaulted mortgages, including lawn maintenance and winterizing services. The relationship between Green Tree and Safeguard is governed by a Master Property Services Agreement.3 Exhibit A to the Agreement describes the various property preservation services that Safeguard will perform for Green Tree when Green Tree places an order; these include a variety of property inspections, lock changes, pool maintenance, and utility management.4 Most relevant here, Green Tree arranged with Safeguard to assist Greеn Tree in complying with certain Department of Housing and Urban Development (“HUD”) regulations to which any of its properties with FHA-insured mortgages are subject (including the Schlafs’ mortgage). As relevant here, the regulations require Green Tree to inspect those properties for occupancy:
Notes
When a mortgage is in default because a payment was not received within 45 calendar days of the due date of the missed payment, and efforts to reach the mortgagor by telephone or correspondence have proven unsuccessful, the mortgagee must make an inspection to determine if the property is vacant or abandoned.[5]
To comply with the HUD inspection obligation, Green Tree contracted with Safeguard to perform “contact attempt inspection[s]” on the properties.6 Green Tree’s “servicing system” automatically placed an order for a contact attempt inspection when an account was “45 or more days past due” and “efforts to reach the mortgagor by telephone or correspondence have proven unsuccessful.”7 The inspection order was sent automatically to Safeguard “through [a] system that is built between [Green Tree] and Safeguard.”8 The results of the inspеction were then sent back to Green Tree through the same automated system.
During the contact attempt inspections, a Safeguard representative visited the property to determine its occupancy status and placed a door hanger on an outside doorknob of the property. The door hanger it placed for Green Tree contained a piece of paper that gave instructions in English and Spanish for the property owner to contact Green Tree:
IMPORTANT
***
PLEASE CALL
***
GREEN TREE
800-666-1143
***
PLEASE BE READY TO GIVE YOUR ACCOUNT NUMBER
***
WE ARE EXPECTING YOUR CALL TODAY.9
The phone number listed on the door hanger was Green Tree’s phone number. The door hanger did not identify Safeguard in any way.
Safeguard’s representatives verified occupancy for Green Tree by visually inspecting the property for indicators such as “whether grass is cut, personal property is visible, glass is intact and utilities are on.”10 The door hanger was to be left only after the Safeguard representative verified through such an inspection that the property was occupied. Further, Safeguard representatives were instructed to leave the door hanger even if they spoke personally to the homeowner while conducting the inspection. However, they were not to identify themselves as Safeguard representatives if they encountered the homeowners or others on the property and were instructed “to avoid talking about why they are on the property.”11
Safeguard admits that contact attempt inspections are performed “because HUD guidelines require them to be performed when a mortgage is in default.”12 It maintains that the purpose of the inspection, as required by the guidelines, is “to determine if a property is being maintained and whether it is occupied.”13 However, Safeguаrd acknowledges that “one of the purposes of leaving the door hanger is to attempt to contact the mortgagor in an effort to have the mortgagor . . . contact the client.”14
When Green Tree was unsuccessful in its initial attempts to contact the Schlafs about their delinquent payments, it arranged with Safeguard to perform a series of contact attempt inspections at the Schlafs’ property.15 During each of the inspections,16 a Safeguard representative left Green Tree’s door hanger on the Schlafs’ door. On at least one occasion, Mr. Schlaf encountered the Safeguard representative while the represеntative was hanging the door hanger. Mr. Schlaf testified that the representative did not identify himself as being employed with Safeguard or with any company and that the representative told Mr. Schlaf he was “[j]ust doing [his] job.”17 On other occasions, Mr. Schlaf encountered the Safeguard representatives as they were leaving his property, and he was unable to identify them or speak with them.
Mr. Schlaf called the number on the door hanger at least once and testified that it “took [him] right to Green Tree.”18 He testified that, to his knowledge, Safeguard is “property preservation,” and he did not know if Safeguard collected debt.19 Further, he testified that he never “receive[d] anything” or “ha[d] a conversation with anybody from Safeguard Properties attempting to collect” on the delinquent mortgage debt.20
B.
The Schlafs filed this action21 on May 14, 2015, alleging that Safeguard had violated the FDCPA by not including certain disclosures on the door hangers. Specifically, they alleged that Safeguard had failed to comply with the initial disclosure requirements of
Safeguard moved to dismiss the complaint under
The case proceeded through discovery, and the parties filed cross-motions for summary judgment. Safeguard renewed its argument that it is not a debt collector, and the Schlafs contended that the undisputed facts proved both that Safeguard was a debt collector and that the door hangers violated the FDCPA. Based on the record evidence, the district court held that Safeguard is not a debt collector and therefore not subject to the FDCPA’s disclosure requirements.
In explaining its ruling, the district court noted that an entity can be a debt collector under the FDCPA under either the “principal purpose” definition or the “regularly collects” definition.22 Under the “principal purpose” definition, an entity is a debt collector if it “uses any instrumentality of interstate commerce or the mails in any business the principal purpose of which is the collection of any debts.”
First, the district court held that Safeguard is not a debt collector under the principal purpose definition because Safeguard performs “numerous other sеrvices to Green Tree such as grass cutting, winterizing pipes and utilities, and providing security and a lockbox.”23 Therefore, Safeguard’s “principal purpose” is not debt collection.
As to whether Safeguard “regularly collects or attempts to collect, directly or indirectly, debts owed or due or asserted to be owed or due another,” id., the district court held that Safeguard’s role in Green Tree’s debt-collection process was too remote and incidental even to be considered “indirect” debt collection. The district court emphasized that the Safeguard representative did not make any contact with thе Schlafs other than to deliver the door hanger and did not communicate with the Schlafs about their debt. In fact, the Safeguard representatives were given no information about the Schlafs’ debt. The court likened Safeguard’s role to that of a “messenger.”24 The court noted that the door hangers did not identify Safeguard in any way and that Safeguard’s compensation from Green Tree in no way depended on whether the Schlafs repaid their debt.
Because the district court concluded that Safeguard is not a debt collector and thus not subject to the strictures of the FDCPA, the district court granted Safeguard’s motion for summary judgment and denied that of the Schlafs.
II
DISCUSSION
The Schlafs now appeal the district court’s grant of summary judgment to Safeguard. They contend that the district court erred in interpreting the FDCPA to exclude entities like Safeguard from its definition of “debt collector.” For the reasons stated in the following discussion, we agree with the district court that Safeguard is not a debt collector and therefore affirm its judgment.
A.
Our review of the district court’s summary judgment decision is de novo. Hendricks-Robinson v. Excel Corp., 154 F.3d 685, 692 (7th Cir. 1998). Summary judgment is appropriate only if there are no disputed questions of material fact and the moving party is entitled to judgment as a matter of law. Id.;
The task before us is twofold. First, we must interpret the language of the statute; secondly, we must determine whether the statute is applicable to Safeguard’s activity.
The first task is one of statutory construction. We must interpret the plain language of the statute in light of its placement in the overall text of the statute. See Univ. of Chi. v. United States, 547 F.3d 773, 777 (7th Cir. 2008). Here, the language of the FDCPA tells us explicitly and succinctly that the statute’s principal purpose is “to eliminate abusive debt collection practices by debt collectors.”
The protections of the statute are, however, subject to two limitations. First, the statute’s substantive provisions apply only to debt collectors. E.g.,
The plain language of the statute provides a formidable anchor for our analysis. The FDCPA defines “debt collector” as “any pеrson who uses any instrumentality of interstate commerce or the mails in any business the principal purpose of which is the collection of any debts, or who regularly collects or attempts to collect, directly or indirectly, debts owed or due or asserted to be owed or due another.”
Limiting our analysis to the language of the statute, we cannot say that Safeguard engages in indirect debt collection simply by leaving a door hanger that asks the homeowner to call Green Tree. In a very broad, theoretical sense, it is possible to characterize facilitating the reestablishment of communication between the homeowner and Green Tree as a preliminary step in Green Tree’s own debt-collection process. It is difficult to say, however, that such specific and very limited action even indirectly implicates the specific statutory concerns set forth in the statute’s languagе. The FDCPA treats creditors and debt collectors differently precisely because creditors have an “ongoing relationship with the debtor” and thus have “incentive to engender good will by treating the debtor with honesty and respect.” Ruth v. Triumph P’ships, 577 F.3d 790, 797 (7th Cir. 2009). Here, the outward appearance of the inspection gives every indication that it is coming from Green Tree. The door hanger does not identify Safeguard in any way, and the phone number connects the homeowner directly to Green Tree. Safeguard does not discuss the debt with the homeowners and has no other contact with the homeowners other than to leave the door hanger. Thе door hanger itself does not give any details about the homeowners’ debt or demand payment. The district court’s characterization of Safeguard’s role as more akin to that of a messenger than as an indirect facilitator of debt collection was therefore apt.
Our conclusion that Safeguard is not an indirect debt collector is consistent with our interpretation of a separate, threshold requirement repeated throughout the FDCPA: that the communication being challenged was made “in connection with” debt collection. Whether a communication was sent “in connection with the collection of any debt” is an objective question of fact. Ruth, 577 F.3d at 798. We therefore have not established a “bright-line rule” for determining whether a communication was made in connection with debt collection; rather, we have described it as a “commonsense inquiry” consisting of several factors, none of which is dispositive. Gburek, 614 F.3d at 384–85. Whether the communication includes a “demand for payment” is one such factor. Id. at 385. Another factor is the “nature of the parties’ relationship”; specifically, whether the relationship arose only out of the defaulted debt. Id. Finally, we consider “the purpose and context of the communication[],” judged by an objeсtive standard. Id. For example, a communication that is sent in the same setting as a collection notice or made “to threaten and harass the debtor into settling her debt” or “to encourage [the debtor] to contact [the creditor] to discuss debt-settlement options” is more likely to be made in connection with debt collection. Id. at 386.
Here, the door hangers contain no demand for payment and, indeed, make no reference to the Schlafs’ debt whatsoever, other than to give Green Tree’s name and phone number. The relationship between Safeguard and the Schlafs “arose out of the plaintiffs’ defaulted debt,” id. at 385 (quoting Ruth, 577 F.3d at 799), only in the sense that Safeguard performs contact attempt inspections only at properties where mortgagors have defaulted on their payments. The door hangers contain no offers of debt settlement or repayment options, and Safeguard leaves the door hanger to encourage, on behalf of Green Tree, the owner to contact Green Tree.27 However, given that the door hangers are left as part of an occupancy inspection and not left in the context of a collection letter or notice of default, the door hangers are left in connection with property preservation, not debt collection.
Congress’s use of the terms “directly or indirectly” certainly evinces an intent that the statute cover a wide range of activity that is inimical to the purpose of the statute. At the same time, however, the context in which those terms are employed does indicate that there are some limitations to the statute’s reach and to what activity constitutes “indirect” debt collection. The entity at issue must “collect[] or attempt[] to collect . . . debts.”
Safeguard’s actions on behalf of Green Tree, by contrast, do not rise to the level of the debt-collection efforts we described in White. Green Tree’s servicing system automatically generates a list of properties on which it orders Safeguard to perform cоntact attempt inspections and gives Safeguard no other information about the debts associated with those properties. Safeguard does not have discretion to evaluate the likelihood of repayment and then focus its efforts on the mortgagors most likely to make payment to Green Tree; rather, Safeguard must perform the inspections on all properties on which the inspection is ordered. Safeguard makes no attempt to collect payments from the mortgagors and, in fact, instructs its representatives not to discuss the reason for its visit with any mortgagors it encounters.28 Further, there is no evidence that Safeguard is compensated based on the number of mortgagors who contact Green Tree after the contact attempt inspection or begin to repay their debt to Green Tree.
The decisions of our colleagues in the Third and Ninth Circuits also provide a significant and helpful contrast to the present case. In Romine v. Diversified Collection Services, Inc., 155 F.3d 1142 (9th Cir. 1998), the Ninth Circuit held that Western Union was a debt collector when it advertised “Talking Telegrams” that would aid collection agencies in reaching debtors for whom they had been unable to obtain telephone numbers. Id. at 1144. Specifically, Western Union would deliver a “Talking Telegram” to the debtor’s address, instructing the debtоr that Western Union had a telegram that it could not deliver because it did not have the debtor’s phone number and that the debtor should call Western Union immediately. Id. When the debtor called Western Union, his phone number was captured by Western Union’s caller ID system, and the operator also manually recorded the debtor’s name, address, and phone number, all of which it transmitted to the collection agency. Id. Western Union also transmitted the “Talking Telegram,” which the court described as a “debt collection message,” and followed up with a mailed written telegram. Id.
The Ninth Circuit concluded that Western Union’s efforts could amount to indirect debt collection under
Safeguard’s actions here bear little resemblance to those оf Western Union in Romine. The gimmick of the “Talking Telegram” was aimed specifically at debt collection and was confrontational, indeed sensational. By contrast, Safeguard is so far removed from Green Tree’s actual debt-collection process that it cannot be said to have engaged in debt collection, even indirectly, under
Likewise, the Third Circuit’s decision in Siwulec v. J.M. Adjustment Services, LLC, 465 F. App’x 200 (3d Cir. 2012) (unpublished), provides a helpful contrast. The Schlafs’ reliance on Siwulec therefore is not persuasive. Siwulec involved a third-party agency that visited homeowners with past-due mortgage payments to deliver letters from their lenders seeking “information” from the homeowners to help the lenders resolve “past due” payments. Id. at 201. The third party also instructed its representatives “to urge alleged debtors, in person, to call the creditor while they watched” and “to gather contact information from the debtors directly, to speak with their neighbors, and to conduct a visual assessment of their properties.” Id. at 204. The Third Circuit concluded that under the facts as pleaded by the plaintiff, the agency’s involvement “br[ought the agency] out of any messenger exception and into the coverage of the FDCPA” and that the plaintiffs had plausibly pleaded that the agency was a debt collector. Id. Unlike the agency in Siwulec, Safeguard does not deliver any communications that contain information about the debt or past due payments, does not collect homeowners’ contact information, and does not “urge alleged debtors, in person, to call the creditor while they watched.” Id.
We readily acknowledge that the extant case law is not dispositive of our decision, which rests, as it should, on our analysis of the plain wording of the statute. To be sure, what constitutes “indirect” debt collection will have to be determined on a case-by-case basis until thе case law produces a more robust understanding of that concept. Congress certainly must have foreseen that such a term would require such fact-specific adjudication. Our holding today is limited to the situation before us, a situation that implicates none of the concerns articulated by Congress in enacting the statute.
Conclusion
For the reasons stated above, the district court did not err in concluding that Safeguard is not an indirect debt collector. We therefore affirm the judgment of the district court.
AFFIRMED