Lead Opinion
Reversed and remanded by published opinion. Judge TRAXLER wrote the majority opinion, in which Judge WILKINSON joined. Judge WIDENER wrote a dissenting opinion.
Karen Wilson brought this action against the law firm of Draper & Goldberg, P.L.L.C., and one of its lawyers, L. Darren Goldberg (collectively, “Defendants”), for violation of the Fair Debt Collection Practices Act (the “Act”) in connection with Defendants’ initiation of foreclosure proceedings against her. Defendants filed a motion to dismiss for failure to state a claim, arguing that they were not covered by the Act. The district court treated the motion as one for summary judgment, and granted it in favor of Defendants. The district court concluded that, because Defendants were acting as substitute trustees foreclosing on a deed of trust, they could not be “debt collectors” under the Act and that any actions they took in connection with the foreclosure could not be challenged as violations of the Act. Wilson appeals, and we reverse and remand.
I.
We review a district сourt’s grant of summary judgment de novo, viewing any facts and inferences drawn from them in the light most favorable to Wilson, the nonmoving party. See Evans v. Technologies Applications & Serv. Co.,
Chase Manhattan Mortgage Corporation (“Chase”) retained Defendants to foreclose on Wilson’s property due to her alleged failure to make mortgage payments. Defendants wrote Wilson on Septembеr 2, 2003, to announce that she was in default on her loan and that they were preparing foreclosure papers. Defendants’ letter stated that “[fjederal law requires us to advise you that this letter is written pursuant to the provisions of the Fair Debt Collection Practices Act.... [T]his letter is an attempt to collect a debt.” J.A. 43. Defendants also sent Wilson a “VALI
On September 11, 2003, Defendants commenced foreclosure proceedings. One week later, Wilson’s attorney advised Defendants that he represented Wilson and that Defendants should only cоmmunicate with him regarding the dispute. Nevertheless, on October 6, 2003, Defendants’ “Sales Department” wrote directly to Wilson, not her attorney, to inform her that the foreclosure sale of her home would go forward on October 17, 2003. The letter again stated that it was an attempt to collect a debt. J.A. 45.
On October 9, 2003, Wilson’s attorney requested a complete statement of Wilson’s account indicating all interest, late charges and other charges, the interest rate, and all payments since the inception of the mortgage. In what Defendants claim was a response to Wilson’s attorney, Defendants wrote directly to Wilson on October 15, 2003, providing the “amount to reinstate the above account,” a balance of payments due, and instructions that any funds paid should be by cashiers check made payable to Chase and sent to Defendants. J.A. 47. As with previous letters, the letter stated “This notice is an attempt to collect a debt.” J.A. 47. Prior to completing the foreclosurе, Chase and Wilson resolved their dispute.
In 2004, Wilson commenced this action, alleging that Defendants violated the Act by failing to verify the debt, by continuing collection efforts after she had contested the debt, and by communicating directly with her when they knew she was represented by counsel. Defendants moved to dismiss the complaint under Rule 12(b)(6) of the Federal Rules of Civil Procedure for failure to state a claim upon which relief could be granted, arguing that they were not acting in connection with a “dеbt” and that they were not “debt collectors” as those terms are defined by the Act.
The district court treated the motion as one for summary judgment because, in addition to the pleadings, it considered an affidavit and exhibit submitted by Defendants showing that the law firm was acting as a substitute trustee on a deed of trust when it communicated with Wilson. The district court granted summary judgment in favor of Defendants, ruling that “trustees foreclosing on a property pursuant to a deed of trust are not ‘debt collectors’ under the [Act],” J.A. 153, and that “actions taken by a trustee in foreclosing on a property pursuant to a deed of trust may not be challenged as [Act] violations,” J.A. 154.
II.
Because we believe the district court misinterpreted the scope of the Act, and conclude that trustees, including attorneys, acting in connection with a foreclosure can be “debt collectors” under the Act, we reverse and remand.
A.
To be a “debt collector,” there must first be a “debt.” The Act defines a “debt” as:
any obligation or alleged obligation of a consumer to pay money arising out of a transaction in which the money, property, insurance, or services which are the subject of the transaction aré primarily for personal, family, or household pur*376 poses, whether or not such obligation has been reduced to judgment.
15 U.S.C.A. § 1692a(5) (West 1998).
We disagree with Defendants’ argument that they were not acting in connection with a “debt.” Defendants notified Wilson that she was in “default in [her] Deed of Trust Note payable to the Lender ... [and] thаt the Lender [had] accelerated the debt.” J.A. 43 (emphasis added). Defendants informed Wilson that her failure to make mortgage payments entitled Chase to immediate payment of the balance of her loan, as well as fees, penalties, and interest due. These amounts are all “debts” under the Act, because they were “obligation[s] ... to pay money arising out of a transaction in which the ... property ... which [is] the subject of the transaction [is] primarily for personal, family, or household purposes.” 15 U.S.C.A. § 1692a(5).
Defendants contend that foreclosure by a trustee under a deed of trust is not the enforcement of an obligation to pay money or a “debt,” but is a termination of the debtor’s equity of redemption relating to the debtor’s property. In essence, Defendants argue that Wilson’s “debt” ceased to be a “debt” once foreclosure proceedings began. Defendants rely on reported and unreported district court decisions, including Hulse v. Ocwen Federal Bank, FSB,
We disagree. Wilson’s “debt” remаined a “debt” even after foreclosure proceedings commenced. See Piper v. Portnoff Law Assocs.,
Defendants’ argument, if accepted, would create an enormous loophole in the Act immunizing any debt from coverage if that debt happened to be secured by a real property interest and foreclosure proceedings were used to collect the debt. We see no reason to make an exсeption to the Act when the debt collector uses foreclosure instead of other methods. See Piper,
Furthermore, in this case, Defendants’ October 15 letter to Wilson contained a specific request for money to “reinstate the above account” even after the foreclo
Thus, Defendants attempted to collect a “debt.”
B.
We now turn to Defendants’ argument that, even if they were acting in connection with a debt, they fall under an exception frоm the general definition of “debt collector.” The Act generally defines a “debt collector” as
any person 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.
15 U.S.C.A. § 1692a(6) (West 1998).
Defendants argue they fall under the exception to “debt collector” that covers “any person collecting or attempting to collect any debt ... due another to the extent such activity ... is incidental to a bona fide fiduciary obligation.” 15 U.S.C.A. § 1692a(6)(F)(i) (West 1998). Defendants claim that, because they were acting as trustees foreclosing on a property pursuant to a deed of trust, they were fiduciaries benefitting from the exception of § 1692a(6)(F)(i).
We disagree. The fact that trustees foreclosing on a deed of trust are fiduciaries only partially answers the question. Rather, the critical inquiry is whether a trustee’s actions are “incidental to a bona fide fiduciary obligation.” Id. We conclude that a trustee’s actions to foreclose on a property pursuant to a deed of trust are not “incidental” to its fiduciary obligation. Rather, they are central to it. Thus, to the extent Defendants used the foreclosure process to collect Wilson’s alleged debt, they cannot benefit from the exemption contained in § 1692a(6)(F)(i). Cf FTC Official Staff Commentary On thе Fair Debt Collection Practices Act, 53 Fed.Reg. 50097, 50103 (Fed. Trade Comm’n Dec. 13, 1988) (“The exemption (i) for bona fide fiduciary obligations or escrow arrangements applies to entities such as trust departments of banks, and escrow companies. It does not include a party who is named as a debtor’s trustee solely for the purpose of conducting a foreclosure sale (i.e., exercising a power of sale in the event of default on a loan).”).
Nor is it relevant that Defendants were attorneys. Generally speaking, all lawyers are fiduciaries for their clients. As discussed above, however, the more impor
Thus, Defendants cannot benefit from § 1692a(6)(F)(i)’s exception tо the definition of “debt collector” merely because they were trustees foreclosing on a property pursuant to a deed of trust.
C.
Defendants also allege that they cannot be held liable as charged in the complaint because Wilson has only alleged violations of portions of the Act that do not apply to them. They refer to a portion of the definition of “debt collector” that states, “[f]or the purpose of section § 1692f(6) of this title, such term also includes any person who uses any instrumentality of interstate commerce or the mails in any business the principal purpose of which is the enforcement of security interests.” 15 U.S.C.A. § 1692a(6). According to Defendants, because they are engaged in a business “the principal purpose of which is the enforcement of security interests,” they can only be a “debt collector” under the one section expressly provided, 15 U.S.C.A. § 1692f(6). Because Wilson alleged no violation of § 1692f(6), Defendants argue that they cannot be liable under the Act.
We disagree. This provision applies to those whose only role in the debt collection process is the enforcement of a security interest. See Jordan v. Kent Recovery Servs., Inc.,
Thus, if Defendants meet the statutory definition of “debt collector,” they cаn be covered by all sections of the Act, not just § 1692f(6), regardless of whether they also enforce security interests.
III.
The district court incorrectly concluded that Defendants could not be held liable under the Act. We hold that Defendants’ foreclosure action was an attempt to collect a “debt,” Defendants are not excluded
On remand, Wilson can show that Defendants meet the definition of “debt collector” by demonstrating that they use “any instrumentality of interstate commerce or the mails in any business the principal purpose of which is the collection of any debts, or ... regularly collect[ ] or attemptf ] to collect, directly or indirectly, debts owed or due or asserted to be owed or due another.” 15 U.S.C.A. § 1692a(6); see also Heintz,
Our decision is not intended to bring every law firm engaging in foreclosure proceedings under the ambit of the Act. Nevertheless, it is well-established that the Act applies to lawyers “who ‘regularly’ engage in consumer-debt-collection activity, even when that activity consists of litigation.” Heintz,
Moreover, Defendants allegedly initiated over 2300 foreclosure actions in Maryland in 2003. There is no reason that a law firm handling this volume of foreclosures would be any more ill-equipped to comply with the Act than a more “traditional” debt collection agency. Defendants appear to hаve been aware that the Act could apply to their conduct, as their letters to Wilson contained clear references to the Act, including the notice “this is an attempt to collect a debt.” See 15 U.S.C.A. § 1692e(ll) (West 1998).
We reverse the district court’s grant of summary judgment to Defendants and remand for proceedings consistent with this opinion.
REVERSED AND REMANDED
Notes
. We cannot accept Defendants' argument that the letter was in response to a request by Wilson's lawyer. Defendants’ letter was sent to Wilson and not her attorney, made no reference to her attorney’s request, was not signed by anyone, and failed to provide much of the information her lawyer requested.
. Of course, whether a law firm or not, a company’s own efforts to collect overdue payments from its own delinquent clients would not ordinarily make it a "debt collector” under the Act, which specifically refers to those who collect debts "owed or due or asserted to be owed or due another.” 15 U.S.C.A. § 1692a(6) (emphasis added); see also Nielsen v. Dickerson,
Dissenting Opinion
dissenting:
I respectfully dissent.
I begin with the full text of the fiduciary exception to the statutory definition of “debt collector”:
The term [debt collector] does not include^—
(F) any person collecting or attempting to collect any debt owed or due or*380 asserted to be owed or due another to the extent such activity (I) is incidental to a bona fide fiduciary obligation or a bona fide escrow arrangement,
15 U.S.C. 1692a(6). It is undisputed that defendants were trustees on the deed of trust. (JA 22, 41.) This mеans that they were fiduciaries as a matter of law. See Bunn v. Kuta,
Such a construction of the statute is not logical, I suggest. “Incidental” means “occurring merely by chance or without intention or calculation” or “being likely to ensue as a chance or minor consequence.” MerriamWWebster Collegiate Dictionary 586 (10th ed.2000). And “cеntral” is defined as “of cardinal importance: essential, principal.” Id. at 185. Even assuming that a foreclosure is “central” to the defendants’ duties, the majority conclusion that a central task incident to the duty is not exempted does not follow from the premise. If the exception covers the minor unintended acts relating to incidental fiduciary duties, it must cover the principal acts as well. Otherwise the exception would accomplish very little, for the majority definition excludes “other bona fide fiduciaries” which are included in the Senate Report, infra.
The legislative history of the fiduciary exception further erodes -the majority reasoning. It shows that the original House version of the bill did not include the exception for fiduciaries. See H.R.Rep. No. 95-131, at 4, 11, 17-18 (Mar. 29, 1977). Only later did the Senate add it. See 123 Cong. Rec. at 27384 (Aug. 5, 1977) (text of Senate version); see also id. at 28109-13 (House adopting Senate amendments). So including the exception within the statute was a deliberate act. Moreover, the Senate committee report explained the purpose of the amendment:
[T]he committee does not intend the definition [of debt collector] to cover the activities of trust departments, escrow companies, or other bona fide fiduciaries. (Italics added.)
S.Rep. No. 95-382, at 3, reprinted at 1977 U.S.C.C.A.N. 1695, 1698; see also id. at 1701. This explanation is on point and unambiguous. We should not ignore such unambiguous text, especially when it is augmented by the balance of the legislative history referred to.
Yet the FTC Staff Commentary, which is the only authority particular to the fiduciary exception cited by the majority, does just that. The Commentary provides that the exception does not apply to trustees named “solely for the purpose of conducting a foreclosure sale.”
“[I]t is not clear whether the FTC has the authority to issue the Commentary [and] courts have little difficulty disregarding Commentary positions [viewed] as incorrect.” JA 129, see Heintz v. Jenkins,514 U.S. 291 ,115 S.Ct. 1489 ,131 L.Ed.2d 395 (1995).
Tellingly, even this self-abnegation over states the FTC’s authority under the Act which thе statute itself limits:
Neither the [Federal Trade] Commission nor any other agency referred to in subsection (b) of this section may promulgate trade regulation rules or other regulations with respect to the collection of debts by debt collectors as defined in this subchapter.
15 U.S.C. § 16921(d). This provision, like the fiduciary exception, is unambiguous. So is its legislative history:
“I want to make a special point: No Federal agency will write regulations for this legislation.” 123 Cong. Rec. 10241 (Apr. 4,1977) (statement of Rep. Annun-zio).
And § 16921(d) too, was itself an amendment. See id. at 10255 (statеment of Rep. Rousselot noting amendment); see also the Senate Report, 1977 U.S.C.C.A.N. at 1703, which describes making of the FTC regulations as “prohibited.” For various reasons given by courts which have cited the FTC Commentary, they decline to give it Chevron deference,
“... it is equally — and emphatically— the exclusive province of the Congress not only to formulate legislative policies and mandate programs and projects, but also to establish their relative priority for the Nation.” Tenn. Valley Authority v. Hill,437 U.S. 153 , 194,98 S.Ct. 2279 ,57 L.Ed.2d 117 (1978).
Even setting aside our duty to look first to Congress, I can think of no rationale fоr the agency’s position other than a Shakespearean distrust of lawyers. And the Commentary’s other policy flaws are plain: for instance, it fails to recognize that the duty of a lawyer-trustee under such a deed of trust runs to the property and, as well, to the borrower and the lender. See, e.g., White v. Simard,
Accordingly, I would affirm.
. The offices of Draper & Goldberg are in Virginia, the deed of trust in question is in Maryland.
. The appellate cases mentioning the exception do not bear upon this case. See Pelfrey v. Educ. Credit Mgmt. Corp.,
.Limiting by their appointment the duty of the trustees to be “solely for the purpose of conducting a foreclosure sale” is not shown in the record in this case. (Italics added.)
. Chevron USA v. Natural Resources Defense Council, Inc.,
. The trustee, for example, must publicly account for the distribution of the proceeds of the sale. See generally In re: Trustee’s Sale of the Property of Willie Brown, et al., 67 Va. Cir.204 (2005).