SHELLEY et al v. OCWEN LOAN SERVICING, LLC
ENTRY granting Ocwen's 13 Motion to Dismiss for Failure to State a Claim (see Entry). Signed by Judge Richard L. Young on 8/28/2013. (PG)
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF INDIANA
JAMIE SHELLEY and RHIANNON
SHELLEY, individually and on behalf of
all others similarly situated,
OCWEN LOAN SERVICING, LLC,
ENTRY ON DEFENDANT’S MOTION TO DISMISS
Plaintiffs, Jamie Shelley and Rhiannon Shelley, filed this proposed class action
under the Fair Debt Collection Practices Act (“FDCPA”), 15 U.S.C. § 1692, et seq.,
alleging that Defendant, Ocwen Loan Servicing, LLC, sent them a form letter which
violated various provisions of the FDCPA. Ocwen moves to dismiss all claims pursuant
to Federal Rule of Civil Procedure 12(b)(6). For the reasons set forth below, the court
GRANTS the motion.
In 2011, Plaintiffs faced financial hardship and were forced to surrender their
home to their mortgage lender, CitiMortgage. (Compl. ¶ 7). On October 14, 2011,
Plaintiffs filed a Chapter 13 bankruptcy petition. (Id.). In Schedule D of this petition,
Plaintiffs listed a debt allegedly owed to GMAC Mortgage for the second mortgage on
their former home. (Id.). On October 19, 2011, GMAC filed an appearance in Plaintiffs’
bankruptcy proceeding. (Id. at ¶ 8). Additionally, the bankruptcy court sent GMAC
notice of the bankruptcy via U.S. Mail. (Id. at ¶ 9).
During Plaintiffs’ bankruptcy, Ocwen obtained from GMAC the right to
collect upon Plaintiffs’ loan. (Id. at ¶ 10). Ocwen neither filed an appearance in
Plaintiffs’ bankruptcy case nor received any notices from the bankruptcy court
regarding Plaintiffs’ case.
On February 7, 2013, Ocwen sent Plaintiffs a letter (“Letter”) which, among other
things, alerted them that the servicing of their loan would be transferred to Ocwen.
(Compl., Ex. F). In particular, the Letter stated:
The servicing of your mortgage loan, that is, the right to collect payments
from you, is transferring from your current servicer, GMAC Mortgage
(“GMACM”) to your new servicer, Ocwen Loan Servicing, LLC
(“Ocwen”) effective February 16, 2013.
The Letter further explained when and how this transition would occur:
GMACM will stop accepting payments on February 15, 2013. Ocwen will
begin to accept payments on February 16, 2013. Send all payments due on
or after that date to Ocwen. A temporary coupon is provided below for
your convenience. Any account notices prepared prior to February 16,
2013 will reflect GMACM; all notices prepared on or after February 16,
2013 will reflect Ocwen.
In addition, the Letter provided contact information for reaching and paying Ocwen,
while also listing the Transfer Date, Principal Balance, Loan Rate, and the due date for
the next payment. Specifically, the Letter included the heading “Next Payment Due” in a
column next to the body of the Letter and the title “Due Date” in the temporary payment
coupon; for these categories, each listed August 28, 2011 – a date almost seventeen
months prior to the Letter. The amount due, however, was not included in the body of
the Letter or anywhere else. In fact, the column next to the body of the Letter referenced
“Payment Amount” but stated “Please refer to your mortgage account statement.”
Similarly, below “Mortgage Payment” in the payment coupon, it read “See above.” The
text of the Letter neither demanded Plaintiffs make a payment nor referenced Plaintiffs
being delinquent in their payments.
The second page of the Letter listed various notices and disclosures. First, it noted
consumer rights the borrower is entitled to under the Real Estate Settlement Procedures
Act (“RESPA”). Additionally, the Letter provided the following notices:
Notice Regarding Debt Collection: This is an attempt to collect a
debt and any information obtained will be used for that purpose,
provided if you have an active bankruptcy case or have received a
discharge, the following Notice Regarding Bankruptcy applies.
Notice Regarding Bankruptcy: If you are a debtor in an active
bankruptcy case, this letter is not an attempt to collect either a prepetition, post-petition, or discharged debt, and no action will be
taken in willful violation of the Automatic Stay that may be in effect
in your bankruptcy case. . . .
On March 26, 2013, Plaintiffs filed this class action complaint alleging the
following violations of the FDCPA: (1) failing to send a follow-up debt validation notice
within five days of the Letter, as required by 15 U.S.C. § 1692g(a); (2) communicating
with Plaintiffs after allegedly being alerted that they refused to pay the debt, in violation
of 15 U.S.C. § 1692c(c); (3) communicating with consumers who were represented by
counsel, in violation of 15 U.S.C. § 1692c(a)(2); and (4) attempting to collect a debt no
longer due, in violation of 15 U.S.C. 1692e. (Compl. ¶¶ 14-30) (counts I-IV,
respectively). Ocwen now moves to dismiss all claims.
Federal Rule of Civil Procedure 12(b)(6) permits the district court to dismiss a
complaint for failure to state a claim for which relief can be granted. The purpose of the
motion is to test the legal sufficiency of the complaint, not to resolve the case on the
merits. Gibson v. City of Chicago, 910 F.2d 1510, 1520 (7th Cir. 1990) (citation
omitted). In deciding this motion, the court must “construe the complaint in the light
most favorable to the plaintiff, accepting as true all well-pleaded facts alleged, and
drawing all possible inferences in her favor.” Tamayo v. Blagojevich, 526 F.3d 1074,
1081 (7th Cir. 2008) (citations omitted). To survive a motion to dismiss, a complaint
“must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is
plausible on its face.’” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl.
Corp. v. Twombly, 550 U.S. 544, 570 (2007)). “A claim has facial plausibility when the
pleaded factual content allows the court to draw the reasonable inference that the
defendant is liable for the misconduct alleged.” Id. Determining whether a complaint
states a plausible claim is context-specific, requiring the reviewing court to draw on its
judicial experience and common sense. Id. at 679.
A complaint need only provide “a short and plain statement of the claim” showing
that the plaintiff is entitled to relief and be sufficient to provide the defendant with fair
notice of the claim and its basis. Tamayo, 526 F.3d at 1081. Although “detailed factual
allegations” are not required, the plaintiff must allege facts that raise the possibility of
relief above the “speculative level.” Twombly, 550 U.S. at 555; see also Swanson v.
Citibank, N.A., 614 F.3d 400, 404 (7th Cir. 2010) (“[P]laintiff must give enough details
about the subject-matter of the case to present a story that holds together.”). As a result,
“[t]hreadbare recitals of the elements of a cause of action, supported by mere conclusory
statements, do not suffice.” Iqbal, 556 U.S. at 678.
A. The FDCPA
The purpose of FDCPA is “to eliminate abusive debt collection practices by debt
collectors, to insure that those debt collectors who refrain from using abusive debt
collection practices are not competitively disadvantaged, and to promote consistent State
action to protect consumers against debt collection abuses.” 15 U.S.C. §1692. Among
other things, the FDCPA requires a written validation of debts, id. § 1692g; restricts
when a collector may communicate with a consumer, id. § 1692c; and bans the use of
false, misleading, unfair, or unconscionable means of collecting a debt, id. §§ 1692e,
1. “In Connection with the Collection of Any Debt”
For most restrictions under the FDCPA to apply (including those in counts I, III,
and IV), two threshold criteria must be met. First, the defendant must qualify as a “debt
collector.” Id. § 1692a(6). Here, the parties do not dispute that Ocwen is a “debt
collector” under the statute. Second, the communication by the debt collector that forms
the basis of the suit must have been made “in connection with the collection of any debt.”
Id. §§ 1692c(a)-(b), 1692e, 1692g. If communications are not “in connection with the
collection of any debt,” then the FDCPA does not apply. See Bailey v. Security Nat.
Servicing Corp., 154 F.3d 384, 388 (7th Cir. 1989).
The FDCPA does not define the phrase “in connection with collection of any
debt.” Whether a communication from a debt collector was made “in connection with the
collection of any debt” is a “question of objective fact, to be proven like any other fact.”
Ruth v. Triumph Partnerships, 577 F.3d 790, 798 (7th Cir. 2009). Because this area of
law is highly fact-specific, the court will provide a brief synopsis of the key cases in this
area before addressing the merits of the motion.
In Gburek v. Litton Loan Servicing LP – a case principally relied on by Plaintiffs –
the Seventh Circuit examined three separate communications concerning a borrower who
had defaulted on her mortgage loan. 614 F.3d 380 (7th Cir. 2010). Two of these
communications involved letters to the borrower from (1) the loan servicer and (2) a firm
representing the loan servicer. Id. at 383. Although the communications did not contain
any specific demands for payment, the Court held that this was just one of several factors
that “come[s] into play in the commonsense inquiry of whether a communication from a
debt collector is made in connection with the collection of any debt.” Id. at 385. The
Court held that the letter between the loan servicer and borrower fell within the scope of
the FDCPA because it offered to discuss “foreclosure alternatives” and asked for
financial information to initiate the process. Id. at 386. To that end, the Court found this
opened up communications as to the defaulted loan, and thus, it was an offer to discuss
repayment options, qualifying it as an attempt to collect a debt. Id. Similarly, the Court
held that the letter between the debt collector’s agent and the borrower was within the
scope of the statute because the purpose of the letter was to induce the debtor to settle a
In Ruth, the Seventh Circuit examined a privacy notice which a debt collector sent
to a debtor along with a collection letter. 577 F.3d 790. Though the parties agreed that
the collection letter fell within the ambit of the FDCPA, the debt collector argued the
privacy notice should be outside the scope. Id. at 798-99. The Court rejected this
argument on two grounds: (1) the privacy notice was in the same envelope as the
collection letter, which constituted an attempt to collect a debt; and (2) the only
relationship between the parties arose out of the defaulted debt, so the materials would
not have been sent unless defendants had been attempting to collect a debt. Id.
In Bailey, a loan servicer sent the borrower a letter listing the next four payments
due per the debtor’s forbearance agreement. 154 F.3d at 386. The letter also expressed a
desire to “work with” the debtor in making payments, but warned that failure to send full
payment may render the forbearance agreement null and void and thus requiring
immediate payment in full. Id. The Seventh Circuit held this did not qualify as a
communication in connection with a debt because it “does not ‘demand’ any payment
whatsoever, but merely informs the Baileys about ‘the current status’ of their account.”
Id. at 388-89. Moreover, the Court noted that all the due dates were prospective and
nothing under the forbearance agreement was overdue. Id. at 389.
Lastly, Defendants heavily rely on Thompson v. BAC Home Loans Servicing, L.P.,
No. 2:09-cv-311, 2010 WL 1286747 (N.D. Ind. 2010). This case is most analogous to
the communication at issue here. There, defendant acquired plaintiff’s home mortgage
loan from the previous servicer and sent plaintiff a notice of this transfer (“Notice”). Id.
at *3. This six-page Notice informed plaintiff that the servicing of the loan was being
transferred to defendant and that the law required notice of this transfer. Id. The Notice
also provided the payment remittance address of the defendant, payment instructions, a
payment coupon with the amount due, and information about optional insurance. Id. On
the bottom of the first page, the Notice stated “this communication is from a debt
collector attempting to collect a debt,” but later stated that the purpose of the Notice was
to advise of the servicing transfer and was an “informational statement only.” Id.
(emphasis in original). The court noted the Notice did not mention default, delinquency,
or foreclosure and thus concluded there was “no indication that the Defendants [were]
undertaking collection efforts for missing or late payments. Rather, they [were]
providing information about the new servicer, including its payment remittance address,
so that the consumer [could] avoid missing payments or making late payments – which
might necessitate the sending of a real dun.” Id. at *4. Put another way, the court stated
the materials “would demonstrate to the objective recipient that the Defendant was not
taking any position regarding the different scenarios that could apply to the status of the
Plaintiff’s loan.” Id.
Within this framework, the court now looks at the Letter at issue here. The
Seventh Circuit has set forth factors to consider in making this “commonsense inquiry”:
(1) the absence of a demand for payment; (2) the nature of the parties’ relationship; and
(3) the purpose and context of the communications, viewed objectively. Gburek, 614
F.3d at 385.
a. Demand for Payment
Plaintiffs and Ocwen dispute whether a demand for payment has been made here.
Plaintiffs argue that because the due date occurred almost seventeen months prior to the
date of the Letter, this implied that a payment was due immediately. Moreover, Plaintiffs
point to the notice on the second page which states, “This is an attempt to collect a debt
and any information obtained will be used for that purpose.” Ocwen, on the other hand,
argues that the lack of either an amount due or a demand within the text of the letter for
any payment due favors a finding that no demand existed.
As an initial matter, the Notice Regarding Debt Collection on the second page of
the Letter is not controlling. First, a disclaimer identifying a communication as an
attempt to collect a debt “does not automatically trigger the protections of the FDCPA,
just as the absence of such language does not have dispositive significance.” Gburek,
614 F.3d at 386 n.3 (citing Lewis v. ACB Bus. Servs., Inc., 135 F.3d 389, 400 (6th Cir.
1998)); see also Thompson, 2010 WL 1286747, at *5 (finding the inclusion of a FDCPA
debt collection disclaimer in the letter “did not alter the nature of the communication or
the information provided in the letter”); Gillespie v. Chase Home Fin., LLC, No. 3:09-cv191-TS, 2009 WL 4061428, at *6 (N.D. Ind. Nov. 20, 2009) (same). Second, the Notice
Regarding Bankruptcy amends this very language, stating, “If you are a debtor in an
active bankruptcy case, this letter is not an attempt to collect either a pre-petition, postpetition, or discharged debt.” Thus, at best, these two notices cancel each other out as to
their significance in attempting to collect a debt.
Next, Plaintiffs’ reliance on a payment due date in the past cannot alone be
sufficient to transform a letter informing the borrower of a service transfer into a demand
for payment. Indeed, if this alone were sufficient, it would create the oddity of these
letters only being under the scope of the FDCPA when the borrower was late on her
payments. To be sure, Bailey considered the listing of prospective due dates a factor in
finding no demand in place. 154 F.3d at 389. The inverse of this, without any support in
the text of the letter or otherwise, should not alter the nature of the communication. See
Thompson, 2010 WL 1286747, at *4 (finding the fact that mortgage at issue was in
default unlike Bailey did not change the nature of communication into one that was in
connection with the collection of a debt). The Letter informs the borrower a new party is
servicing the loan; the happenstance that Plaintiffs’ next payment due occurred in the past
should not transform this into a demand for payment.
But most importantly, it is axiomatic that for a demand of money to be made, the
recipient of the demand must be informed what amount is owed. At no point in the text
of the Letter does Ocwen discuss payment options; rather, it only provides where future
payments should be sent and how they will be processed. There is no mention of default,
delinquency, or foreclosure. Even when viewing the Letter with all reasonable inferences
in the Plaintiffs’ favor, the court does not find that a demand for payment has been made
Of course, the absence of a demand for payment is only one factor examined here.
See Gburek, 614 F.3d at 385. Indeed, “a communication made specifically to induce the
debtor to settle her debt will be sufficient to trigger the protections of the FDCPA.” Id.
Thus, the court now examines the other factors to determine if the Letter induces a debtor
to settle her debt.
b. Nature of Parties’ Relationship
The Seventh Circuit has examined the nature of the parties’ relationship in several
cases. In Ruth, the Court found it important that the “only relationship the defendants
had with the plaintiffs arose out of [defendants’] ownership of the plaintiffs’ defaulted
debt.” 577 F.3d at 799. As a result, the Court held the communications fell under the
FDCPA because defendants would not have otherwise sent plaintiffs those materials
unless it was attempting to collect a debt. Id. Similarly, in Gburek, the debtor was in
default on her mortgage claim, a factor the Court found supported holding that the
communication attempted to collect a debt. 614 F.3d at 386. Conversely, in Bailey, the
Court found that the communications at issue were not under the ambit of the Act,
because, among other things, the parties had a relationship under a superseding
forbearance agreement in addition to the original defaulted note. 154 F.3d at 388-89.
Here, the parties did not have any relationship prior to the Letter. In fact, that is
the very purpose of the letter – to alert Plaintiffs of Ocwen’s new role in their mortgage.
Based on Ocwen’s description of its new relationship with Plaintiffs and explanation of
how future transactions would transpire, it is not apparent that Ocwen is attempting to
collect a debt; rather, Ocwen is introducing itself and providing information of how the
relationship should be handled in the future, not about how the mortgage was handled in
the past. Thus, this factor supports a conclusion that Ocwen’s letter was not a
communication in connection with the collection of any debt.
c. Purpose and Context of Communications
Ocwen contends that the Letter was sent pursuant to its obligations under RESPA.
See 12 U.S.C. § 2605(c)(1) (“Each transferee servicer to whom the servicing of any
federally related mortgage loan is assigned, sold, or transferred shall notify the borrower
of any such assignment, sale, or transfer.”); compare with Thompson, 2010 WL 1286747,
at *3 (where defendants stated the transfer notice was sent pursuant to obligations under
RESPA). The debt collector’s subjective purpose of the communication, however, does
not control this issue. See Ruth, 577 F.3d at 798 (finding that a reasonable person would
conclude that privacy notice was sent in attempt to collect a debt even though debt
collector claimed it sent the notice solely to comply with obligations of a federal statute).
Rather, the purpose and context of the communications should be viewed objectively. Id.
When viewed objectively, the Letter is most similar to the communications in
Thompson and Bailey. As in Bailey, the Letter does not demand anything; rather, it
informs Plaintiffs about the status of their account. Just as plaintiffs in Bailey were
updated as to the prospective due dates for their forbearance agreement, so too here
Plaintiffs are notified as to the contact information of the new loan servicer. Similarly,
Thompson provides an almost identical letter to the one at issue here. To be sure, minor
discrepancies exist, such as Thompson’s Notice not containing a due date and including
the phrase that it was an “informational statement only.” Thompson, 2010 WL 1286747,
at *3-4. But these are minor and do not differentiate it from the same purpose as the
Letter here: that is, to provide information to the borrower.
Plaintiffs nonetheless argue that Gburek controls here, but they miss the mark, as
communications in Gburek are in sharp contrast to the communication here. Gburek
went beyond informing plaintiff of the status of her loan – it offered “foreclosure
alternatives” and sought financial information to start that process. 614 F.3d at 386. The
Letter neither mentioned foreclosure or delinquency of the debt, nor discussed any
repayment options for the debt. Indeed, without a payment demand of any kind,
Plaintiffs would have no idea what payment would even be required. Thus, Gburek is not
on point here.
In light of the factors discussed above, the court concludes that the Letter is not a
communication in connection with debt collection under the FDCPA. On its face, it is
clearly informational – it alerts Plaintiffs that their account has been transferred to Ocwen
and provides Ocwen’s contact information. The Letter did not demand a specific
payment or discuss the delinquency of the underlying debt. Although it does include the
principal amount of the loan and notes a prior date for payment due, a reasonable person
would not believe the Letter was a debt collection demand when the terms of the payment
are not even listed. This does not constitute the “abusive debt practices” the FDCPA was
created to prevent. Indeed, if this communication were sufficient to fall under the
FDCPA, then it would open the floodgates for litigation even more in an area of the law
already susceptible to abuse. See Bailey, 154 F.3d at 388 (stating that the FDCPA “can
be abused just as easily by attorneys who use debtors to allege and test the most minute
violations of a concededly intricate statutory scheme”). Accordingly, the Letter was not a
communication that triggered the requirements of the FDCPA, and as a result Counts I,
III, and IV are dismissed.1
2. Notice of Ceasing Communication
Count II does not require the communication be “in connection with the collection
of a debt”; thus, the court must still assess the sufficiency of this claim. Section 1692c(c)
of the FDCPA states, in pertinent part:
If a consumer notifies a debt collector in writing that the consumer refuses
to pay a debt or that the consumer wishes the debt collector to cease further
communication with the consumer, the debt collector shall not
communicate further with the consumer with respect to such debt . . .
15 U.S.C. § 1692c(c).
Plaintiffs allege that “the bankruptcy and the notice issued by that court told
[Ocwen] to cease communications and cease collections.” (Compl. ¶ 20). As a result,
Plaintiffs contend that when Ocwen continued to communicate with Plaintiffs it violated
§ 1692c(c). (Id.). Defendants counter that the bankruptcy notice is not sufficient as it is
neither from Plaintiffs nor about ceasing communications, as required by the statute.
When interpreting a statute, the court must determine if the language Congress
wrote resolves the issue. Bailey, 154 F.3d at 387. That is, “[w]here the statute’s
language is plain, the court’s function is to enforce it according to its terms.” Kariotis v.
Navistar Int’l Trans. Corp., 131 F.3d 672, 680 (7th Cir. 1997). A simple reading of the
statute makes it clear that Plaintiffs have not stated a claim here.
Because the court has dismissed Count IV, it is not necessary to address Ocwen’s alternative
argument for dismissing this claim.
First, the plain language of § 1692c(c) states that it must be a consumer who
notifies the debt collector. A consumer is defined under the FDCPA to include the
“consumer’s spouse, parent (if the consumer is a minor), guardian, executor, or
administrator.” 15 U.S.C. § 1692c(d). Plaintiffs do not allege that they or anyone within
this definition ever sent written notice to Ocwen. Instead, Plaintiffs rely on a notice
issued by a bankruptcy court, which, by the plain language of the statute, is not sufficient
to provide notice.
Further, Plaintiffs have not even alleged that Ocwen had any knowledge of the
bankruptcy notice. Ocwen has not filed an appearance in Plaintiffs’ bankruptcy, nor have
Plaintiffs alleged that Ocwen received any type of notice from the bankruptcy court.
Indeed, the bankruptcy court sent this notice to the prior servicer of the account (GMAC)
approximately fifteen months prior to Ocwen even becoming Plaintiffs’ servicer. (See
Compl. ¶¶ 9-10). The FDCPA does not place the burden on a debt collector to scour the
public record to decode whether a consumer wishes to cease communications; rather, the
consumer has the duty to notify the debt collector of her wishes. That did not happen
Lastly, the notification must state that the consumer refuses to pay the debt or
wishes to cease further communications with the debt collector. The bankruptcy notice
does neither. Though it states certain actions creditors may not take, such as demanding
repayment or taking actions to collect money from the debtor, it does not provide a firm
prohibition against these activities. (Compl., Ex. E). Instead, the text is couched in
ambiguity, stating that “in most instances, the filing of the bankruptcy case automatically
stays certain collection . . . against the debtor” and “under certain circumstances, the stay
may be limited to 30 days or not exist at all . . . .” (Id.) (emphasis added). Neither of
these satisfy the notice required under § 1692c(c).
Plaintiffs nonetheless argue that any notice provided to GMAC is imputed on
Ocwen and the bankruptcy notice satisfies § 1692c(c) of the FDCPA. Plaintiffs,
however, fail to cite any authority for either proposition. But see Randolph v. IMBS, Inc.,
368 F.3d 726, 729 (7th Cir. 2004) (“Courts do not impute to debt collectors other
information that may be in creditors’ files”); Micare v. Foster & Garbus, 132 F. Supp. 2d
77, 81 (N.D.N.Y. 2001) (dismissing claim under § 1692c(c) where plaintiff failed to
allege that he ever communicated with defendant regarding the debt or that he ever
requested that defendant not communicate with him but instead only alleged
communication with a third party). This is not sufficient to survive a motion to dismiss.
See Sere v. Bd. of Trs. of Univ. of Ill., 852 F.2d 285, 287 (7th Cir. 1988) (“It is not the
obligation of the court to research and construct the legal arguments open to parties,
especially when they are represented by counsel.”). Accordingly, Count II should be
Defendants also argue that Count III should be dismissed on a similar theory. But it is not
necessary to address this argument since the claim has been dismissed on other grounds.
For the reasons set forth above, Ocwen’s motion to dismiss (Docket # 13) is
SO ORDERED this 28th day of August 2013.
RICHARD L. YOUNG, CHIEF JUDGE
RICHARD L. YOUNG, CHIEF JUDGE
United States District Court
United States District Court
Southern District of Indiana
Southern District of Indiana
Distributed Electronically to Registered Counsel of Record.