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Can Spokeo Give Debt Collectors a New FDCPA Defense?

Many debt collectors have struggled with the question of whether a failure to send a timely validation notice pursuant to the Fair Debt Collection Practices Act is curable.  The Act itself provides no mechanism to cure or repair a violation, and a debt collector that fails to send a timely validation notice as required by 15 U.S.C. § 1692g(a) appears to face two choices:

  1. send the notice late, thereby calling attention to the violation and inviting a suit; or

  1. do nothing, and hope that the statute of limitations expires before the violation is recognized.

The recent decision in Yeager v. Ocwen Loan Servicing, No. 1:14-cv-00117, 2017 U.S. Dist. LEXIS 24269 (M.D. Ala. Feb. 22, 2017) appears to give debt collectors a third option.

In Yeager, Ocwen acquired the Yeagers’ mortgage lender, and thereby acquired the servicing of the Yeagers’ mortgage loan.  The loan was in default at the time of acquisition, rendering Ocwen subject to the FDCPA as a “debt collector.”

On March 13, 2014, Ocwen sent the Yeagers a notice of servicing transfer as required by the Real Estate Settlement Procedures Act.  The letter, which informed them that servicing would transfer as of April 1, 2014, was intended to satisfy the RESPA requirement that a mortgage loan servicer notify the borrower in writing of a sale of the loan servicing “not less than 15 days before the effective date of transfer of the servicing of the mortgage loan.” 12 U.S.C. § 2605(b)(2)(A).  On April 2, 2014, Ocwen sent the Yeagers a validation notice containing the information required by 15 U.S.C. § 1692g(a).  The Yeagers sued, alleging that Ocwen had violated Section 1692g by failing to send the validation notice within five days of its initial communication to them.  In seeking judgment on the pleadings, Ocwen argued that “it was stuck between a rock and a hard place.” RESPA required Ocwen to send the March 15, 2013, communication 15 days prior to the effective date of transfer.  However, ending a validation notice before it had a legal right to collect the debt risked FDCPA liability for false or misleading representations in violation of 15 U.S.C. § 1692e.

The district court sustained Ocwen’s objections to the magistrate’s report recommending a decision in the Yeagers’ favor.  In doing so, the court considered the plaintiffs’ standing to sue in light of the decision in Spokeo, Inc. v. Robins, 136 S. Ct. 1540 (2016), which requires a plaintiff to show that (s)he “suffered ‘an invasion of a legally protected interest’ that is ‘concrete and particularized’ and ‘actual or imminent, not conjectural or hypothetical.’”

The district court recognized that, in some instances, “violation of a procedural right” can satisfy the requirement of concreteness.  However, the Yeagers were not deprived of the notice and rights mandated by Section 1692g. At most, they suffered a 13-day delay in the sending of the notice, and the court concluded that this delay did not satisfy the concrete injury requirement that Spokeo imposes for a plaintiff to have standing.

The Yeager decision would not necessarily save a defendant that wholly failed to send a validation notice or sent one that is defective.  However, it provides both an incentive to try to cure a violation and some measure of hope that a cure might be effective to bar a suit.