The US 6th Circuit Court of Appeals recently reviewed what it means to “cease” under the FDCPA. Scott v. Trott Law, P.C. defines the scope of collection activities and the obligation that a debt collector is bound by when it comes to non-judicial foreclosures. The definition that the Court creates of “cease” may also be applied to other types of debt collection. Under the FDCPA 15 U.S.C. §1692g (b), a “debt collector shall cease collection of the debt” if the consumer has notified the collector in writing that the debt is disputed.
A party seeking to execute a non-judicial foreclosure, in Michigan, must publish a detailed notice in a county newspaper for four consecutive weeks and post a notice on the property in a visible place. The collector must also send a letter to the debtor which contains detailed information about the debt that was owed under 15 U.S.C. 1692g (a).
On September 20, 2016, Trott sent Scott a letter in compliance with the FDCPA. In response, Scott sent a letter to Trott notifying him that the debt he owed was in dispute. As a result of this letter Trott was obligated to “cease collection of the debt”.
After receiving the dispute letter from Scott, Trott ceased all of its own action to move forward with the foreclosure sale, however it did not stop the newspaper from positing notice or stop the notice from being posted on the property. The Court ruled Trott had violated FDCPA 15 U.S.C. §1692g (b) because of the failure to stop the other parties actions.
Using the Black’s Law Dictionary’s which defines cease as “to stop,” “to come to an end,” and “to suspend or forfeit.” the Court concluded that the language in the FDCPA imposes an obligation on the debt collector to stop all collection of the debt and any activities by a third party on its behalf. This requirement continues until the debt is verified. These activities the court says at a minimum “must include any activities that attempt to satisfy the essential statutorily required elements of that process.” Because the actions that Trott had already taken were statutorily required under Michigan law to proceed with a non-judicial foreclosure, Trott was obligated to stop the newspaper from posting notices and stop the scheduled foreclosure sale until the debt was verified.
The Court also discussed that allowing the sale to continue even after receiving a dispute letter would frustrate the purpose of such a letter. Because it would not allow the party to actually dispute the debt. The Court does not extend this requirement to all foreclosure proceedings but instead only to judicial foreclosures.
See the full decision here.
** Many thanks to Jeremy Lifter for his contributions to this article. Jeremy is a law clerk with Slovin & Associates Co., L.P.A. and student at the University of Cincinnati College of Law. **