Bridge v. Ocwen Fed. Bank, FSB

• Decision Date: 30 April 2012
• Docket Number: No. 09–4220.,09–4220.
• Citation: 681 F.3d 355
• Parties: Lisa BRIDGE; William W. Bridge, III, Plaintiffs–Appellants, v. OCWEN FEDERAL BANK, FSB; Ocwen Financial Corporation; Ocwen Loan Servicing, LLC; Aames Capital Corporation; Firstar Bank, nka U.S. Bancorp; Ocwen Federal Loan Servicing Company; Deutsche Bank National Trust Co., fka Bankers Trust Company of California, Defendants–Appellees.
• Court: U.S. Court of Appeals — Sixth Circuit

681 F.3d 355

Lisa BRIDGE; William W. Bridge, III, Plaintiffs–Appellants,

v.OCWEN FEDERAL BANK, FSB; Ocwen Financial Corporation; Ocwen Loan Servicing, LLC; Aames Capital Corporation; Firstar Bank, nka U.S. Bancorp; Ocwen Federal Loan Servicing Company; Deutsche Bank National Trust Co., fka Bankers Trust Company of California, Defendants–Appellees.

No. 09–4220.

United States Court of Appeals,Sixth Circuit.

April 30, 2012.

ON BRIEF:Charles E. Ticknor, III, Martha Van Hoy Asseff, Dinsmore & Shohl, LLP, Columbus, Ohio, for Appellees. Lisa Bridge, William W. Bridge, III, Novelty, Ohio, pro se.

Before: CLAY and STRANCH, Circuit Judges; BARRETT, District Judge. ^*

STRANCH, J., delivered the opinion of the court, in which BARRETT, D.J., joined. CLAY, J. (pp. 364–67) delivered a separate opinion concurring in part.

OPINION

JANE B. STRANCH, Circuit Judge.

The Fair Debt Collection Practices Act was passed to protect consumers against both abusive and mistaken collection activity. This case reveals why. It began with seemingly innocuous accounting errors on the part of a bank that were corrected. Despite repeated proof of that correction, unremitting collection activity was undertaken, foreclosure proceedings were instituted, and the credit of two consumers was seriously impaired. This litigation resulted.

Lisa Bridge and William W. Bridge, III ¹ sued the mortgagee and related parties under the Fair Debt Collection Practices Act (“FDCPA”), 15 U.S.C. § 1692, et seq. They now appeal a district court judgment dismissing their Complaint. For the reasons explained herein, we hold the Bridges have stated a claim under the FDCPA, we REVERSE the dismissal of their Complaint, and we remand for furtherproceedings consistent with this opinion.

I. FACTS AND PROCEEDINGS

Because this appeal arises from dismissal of the Second Amended Complaint (“SAC”), we begin review by accepting as true the facts alleged therein by the Bridges, as follows. Bridge's bank, Firstar, erroneously dishonored her check for her April 2002 monthly mortgage payment to Aames Capital Corporation. Bridge then had Firstar issue an “official check” to Aames on April 8, 2002 but Firstar also failed to honor that check. Aames notified Bridge of the default on April 20 and assessed a late fee. Bridge had Firstar send a second official check. Firstar ultimately honored her personal check as well as one of the official checks, resulting in two mortgage payments received for the month of April. As a result, Bridge did not submit a payment for May.

While Aames was alleging default in the April payment due, it sent notice to Bridge on April 15, that it had assigned her mortgage to Ocwen.² The Bridges contend that Ocwen is a division of Deutsche Bank National Trust Co. and that no actual assignment of the mortgage is of record with the county. Ocwen subsequently began dunning Bridge and her husband, who is not a co-borrower on the mortgage loan, for the May payment claimed to be overdue, despite proof of the double payment submitted by Bridge to Ocwen and Aames. Since then Ocwen has: made endless collection calls by phone to Mr. and Mrs. Bridge, despite cease and desist requests and registry on the federal “Do Not Call” directory; threatened foreclosure; assessed monthly late fees; and reported derogatory information to the credit reporting agencies. Additionally, the law firm of Moss, Collis, Stawiarski, Morris, Schneider and Prior, LLC, allegedly retained by Ocwen, sent a collection letter to Bridge threatening foreclosure.

The Bridges filed suit in federal court, alleging that Defendants violated the FDCPA, 15 U.S.C. §§ 1692c, 1692d, and 1692e, by making false representations in connection with the debt, threatening to take impermissible actions, making false representations that Bridge had committed a crime or other wrongful conduct, seeking payment from Mr. Bridge, and continuing to call both after repeated requests to stop. The Bridges further asserted that Ocwen and Deutsche violated the FDCPA by making false representations as to their standing to foreclose, falsely representing that the mortgage was in default, falsely representing that the debt was owed to Ocwen or Deutsche, and threatening to take action impermissible due to Deutsche's failure to comply with state law as a trustee. The Bridges alleged other state and federal law claims as well, but have not raised them on appeal.

Ocwen and Deutsche separately moved to dismiss the Complaint. Ocwen argued that it was exempt from the FDCPA because it is not a debt collector, based on its status as a loan servicer and, in the alternative, because the loan actually was not in default at the time of assignment. See15 U.S.C. § 1692a(6)(F). Deutsche argued that it was exempt from the FDCPA because, as the purchaser of the debt, it is a creditor and not a debt collector, or it is neither. Ocwen filed a counterclaim for foreclosure as well.

For purposes of review under Rule 12(b)(6) of the Federal Rules of Civil Procedure, the district court assumed the truth of the allegations that Ocwen was not a loan servicer and that Deutsche was not a creditor. Nonetheless, the district court dismissed the Complaint, concluding that neither Defendant was covered under the Act as neither was a debt collector as defined therein.

In their timely appeal, the Bridges argue that the district court erred by dismissing their claims, that the district court erroneously considered facts outside of the complaint, and that the district court applied an inappropriate, heightened pleading standard. The Bridges state they are not reasserting claims other than those under the FDCPA and, thus, we review the district court's decision only to the extent it deals with the FDCPA. See Dixon v. Ashcroft, 392 F.3d 212, 217 (6th Cir.2004).

II. STANDARD OF REVIEW

This Court reviews de novo a district court order dismissing a complaint pursuant to Rule 12(b)(6). Booth Family Trust v. Jeffries, 640 F.3d 134, 139 (6th Cir.2011). In determining whether a complaint states a claim, a court must accept as true all the factual allegations in the complaint and determine whether the complaint contains “enough facts to state a claim to relief that is plausible on its face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007); see also Gunasekera v. Irwin, 551 F.3d 461, 466 (6th Cir.2009). Rule 8(a)(2) requires only a “short and plain statement of the claim showing that the pleader is entitled to relief.” Fed.R.Civ.P. 8(a)(2); Gunasekera, 551 F.3d at 466 (quoting Erickson v. Pardus, 551 U.S. 89, 93–94, 127 S.Ct. 2197, 167 L.Ed.2d 1081 (2007)). We are ever mindful that pro se complaints are liberally construed and are held to less stringent standards than the formal pleadings prepared by attorneys. Williams v. Curtin, 631 F.3d 380, 383 (6th Cir.2011).

III. ANALYSIS

A. Coverage Under the Fair Debt Collection Practices Act

“If [the Fair Debt Collection Practices Act] is not enacted, Congress will then be classifying as ‘deadbeats' those individuals who through no fault or action of their own are being harassed, hounded, threatened and intimidated by debt collectors.” H.R.Rep. No. 131, 95th Cong. 1st Sess. 9 (1977). Congress did enact the FDCPA, however, effectuating its intention to prohibit precisely this kind of misclassification and harassment. We conclude that the district court's judgment must be vacated because the Bridges have sufficiently alleged that the Defendants are debt collectors within the coverage of the FDCPA.

Under the FDCPA, a “debt collector” is defined 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. Notwithstanding the exclusion provided by clause (F) of the last sentence of this paragraph, the term includes any creditor who, in the process of collecting his own debts, uses any name other than his own which would indicate that a third person is collecting or attempting to collect such debts.... The term does not include—

...

(F) any person collecting or attempting to collect any debt owed or due or 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; ... [or] (iii) concerns a debt which was not in default at the time it was obtained by such person....

15 U.S.C. § 1692a(6).

We note, as other circuits have, that “as to a specific debt, one cannot be both a ‘creditor’ and a ‘debt collector,’ as defined in the FDCPA, because those terms are mutually exclusive.” FTC v. Check Investors, Inc., 502 F.3d 159, 173 (3d Cir.2007) (citing Schlosser v. Fairbanks Capital Corp., 323 F.3d 534, 536 (7th Cir.2003)); cf. Montgomery v. Huntington Bank, 346 F.3d 693, 698 (6th Cir.2003) (holding the definition of debt collector “does not include the consumer's creditors”). If an entity which acquires a debt and seeks to collect it cannot be both a creditor and a debt collector, can it be neither? We answer no. To allow such an entity to define itself out of either category would mean that the intended protection of the FDCPA is unavailable. Both the statutory language and legislative history of the FDCPA establish that such an entity is either a creditor or a debt collector and its collection activities are covered under the FDCPA accordingly.

The distinction between a creditor and a debt collector lies precisely in the language of § 1692a(6)(F)(iii). For an entity that did not originate the debt in question but acquired it and attempts to collect on it, that entity is either a creditor or a debt collector depending on the default status of the debt at the time it was acquired.³ The same is true of a loan servicer, which can either stand in the shoes of a creditor or become a debt collector,...