District Court Finds Mortgage Originator is Not a Debt Collector Under FDCPA and Dismisses FDCPA Claims with Prejudice

On January 23, the Middle District of Florida issued an order dismissing a Fair Debt Collection Practices Act and Florida Consumer Collection Practices Act (“FCCPA”) putative class action because the defendant, Wells Fargo Bank, N.A., did not qualify as a debt collector under the FDCPA.

The case is Rose Mary Rawls, et al. v. Wells Fargo Bank, N.A., 8:18-cv-2571 (M.D. Fla.).

Plaintiffs Rose and John Rawls and Carmela Fornier filed the putative class action on October 19, 2018, asserting violations of the FDCPA and FCCPA. At issue were a pair of letters the Rawlses and Fornier received from Wells Fargo in October 2017 that stated the lender would not report any negative information regarding the plaintiffs’ loans or charge any late fees for a period of 90 days due to the plaintiffs’ residence in a FEMA-declared disaster area. The genesis of the letter for the Rawlses was a 2005 home mortgage loan and subsequent home-equity line the Rawlses originally obtained from Wachovia Bank. Wells Fargo later acquired the loan following its merger with Wachovia. Fornier also had two home mortgage loans with Wells Fargo, unrelated to the Rawlses’ loans. Both the Rawlses and Fornier defaulted on their obligations to Wells Fargo but all loans were satisfied from the proceeds of related short sales of the plaintiffs’ homes. The plaintiffs alleged Wells Fargo’s letters illegally attempted to collect on the loans via misrepresentations regarding the status and enforceability of the loans.

On December 17, 2018, Wells Fargo filed a motion to dismiss and motion for judicial notice in response to the plaintiffs’ complaint. The motion for judicial notice requested the Court to consider the Rawlses’ mortgage agreements with Wachovia as well as documentation evidencing Wachovia’s merger with Wells Fargo. The motion to dismiss argued that the FDCPA claims against Wells Fargo should be dismissed because Wells Fargo, as originator and owner of the Rawlses’ loan by virtue of the merger with Wachovia and as outright owner of Fornier’s loan, is not a debt collector under the FDCPA. Further, the complaint did not contain any allegations that would support Wells Fargo’s alleged status as a debt collector under the FDCPA. Wells Fargo also argued for dismissal based on the fact that the letters at issue were sent for purely informational purposes and did not, therefore, constitute an attempt to collect a debt under the FDCPA or FCCPA.

The district court agreed with both of Wells Fargo’s arguments and dismissed the FDCPA claims with prejudice. Relying on the Eleventh Circuit’s recent decision in Helman v. Bank of America, 685 F. App’x 723, 726 (2017), the district court found that Wells Fargo was “exempt from the definition of a debt collector” due to its status as the originator of the Rawls and Fornier loans. With respect to the FCCPA claims, the district court found it lacked jurisdiction to adjudicate these claims because of the plaintiffs’ failure to comply with the local rules of the Middle District of Florida, which requires the filing of a motion for class certification within 90 days of the filing of the complaint. Since the FCCPA claims were based on diversity jurisdiction under the Class Action Fairness Act, the district court found it lacked original jurisdiction due to the plaintiffs’ failure to comply with the local rules pertaining to class actions and dismissed the FCCPA claims without prejudice.

This decision aligns with the Supreme Court’s recent proclamation in Henson v. Santander Consumer USA Inc., 137 S.Ct. 1718 (2017), that a person who collects or attempts to collect a debt that it owns is not a debt collector under the FDCPA. Troutman Sanders will continue to monitor and report on developments in this area of the law.