Point of View: FC Lawyers Are Subject To FDCPA in 4th Circuit.(Foreclosure)(Fair Debt Collection Practices Act)(Draper & Goldberg law firms)(Viewpoint essay)

Mr. Hutchens and Ms. Miranda are from the law firm of Hutchens, Senter and Britton. This article is adapted from one that originally appeared in the January 2007 USFN e-update. USFN - America's Mortgage Banking Attorneys, is a resource network serving the mortgage industry. Formerly known as the U.S. Foreclosure Network, it is the largest not-for-profit association of law firms and trustee companies in the nation.

The Fourth Circuit (covering North Carolina, South Carolina, Virginia, West Virginia and Maryland) recently held that substitute trustees, including attorneys acting in connection with a foreclosure, can be debt collectors under the Fair Debt Collection Practices Act, and are therefore potentially liable for FDCPA violations.

In Wilson v. Draper & Goldberg, 443 F.3d 376 (4th Circuit 2006), the borrower sued a law firm and the individual firm member who had initiated foreclosure proceedings on the lender's behalf, specifically alleging that the law firm failed to verify the debt, continued collection efforts after the debt was disputed, and communicated directly with the borrower when the law firm had been advised that the borrower was represented by counsel.

The defendants moved for summary judgment alleging that the FDCPA did not apply to the firm or its members as they were acting as substitute trustees foreclosing on a deed of trust and any actions taken in connection with the foreclosure could not be challenged under the act. The District Court agreed, concluding that substitute trustees foreclosing on a deed of trust could not be "debt collectors" under the act. The Court of Appeals reversed, and found that defendants' initial demand letter and subsequent reinstatement quote to the borrower were attempts to collect the debt on behalf of the lender.

Further, the Court opined that the defendants were not excluded from the definition of "debt collectors" just because they were acting as the trustees foreclosing pursuant to a deed of trust, nor was it relevant that defendants were attorneys, as attorneys ...