Azari v. Seterus, Inc.
MEMORANDUM Opinion and Order Signed by the Honorable John W. Darrah on 10/17/2016. Mailed notice (nsf, )
UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF ILLINOIS
Case No. 16-cv-3929
Judge John W. Darrah
MEMORANDUM OPINION AND ORDER
Plaintiff Helya Azari filed a Complaint, alleging violations of the Fair Debt Collection
Practices Act (“FDCPA”), a Bankruptcy Discharge Injunction, and the Illinois Consumer Fraud
and Deceptive Practices Act (“ICFA”). Defendant subsequently filed a Motion to Dismiss the
Complaint pursuant to Federal Rules of Civil Procedure 12(b)(6) and 12(b)(1). For the reasons
discussed below, Defendant’s Motion to Dismiss  is granted in part and denied in part.
On March 11, 2013, Plaintiff executed a first mortgage in favor of Ocwen Loan Servicing
(“Ocwen”) and secured the loan with the subject property. (Compl., ¶ 7.) On
September 30, 2014, Plaintiff filed a Chapter 13 bankruptcy petition in the United States
Bankruptcy Court, Northern District of Illinois. (Id. ¶ 8.) Plaintiff subsequently filed a Modified
Plan, which provided:
Debtor is surrendering the real property located at 804 Mansfield Court,
Schaumburg, Illinois[,] to Ocwen Loan Servicing, JP Morgan Chase and Sheffeild
Towne Association in full satisfaction of their claims. Pursuant to 11 U.S.C
1311(b)(9), legal title to the aforementioned property shall vest in
Ocwen Loan Servicing upon confirmation of the Debtor’s Chapter 13 Plan.
(Compl. Ex. C.) On January 20, 2015, the Modified Plan was confirmed by the Bankruptcy
Court, and a discharge order was entered on June 8, 2015. (Compl., ¶¶ 14, 17.) The order
included all dischargeable debts, including the mortgage. The order stated:
The discharge prohibits any attempt to collect from the debtor a debt that has been
discharged. For example, a creditor is not permitted to contact a debtor by mail,
phone, or otherwise, to file or continue a lawsuit, to attach wages or other
property, or to take any other action to collect a discharged debt from the debtor.
(Compl., Ex. E.) On September 2, 2015, the Plaintiff’s bankruptcy case was closed. (Compl.,
On or around December 7, 2015, Defendant acquired the servicing rights to the mortgage.
(Id. ¶ 23.) Defendant sent a Notice of Default to the Plaintiff on March 9, 2016, which stated, in
Your loan is in default, due to non-payment of the following amount: Amount
Due: $27,843.20; Amount Due By: April 13, 2016.
If full payment of the default amount is not received by us on or before
April 13, 2016, we will accelerate the maturity date of your loan and upon such
acceleration the ENTIRE balance of the loan, including principal, accrued
interest, and all other sums due thereunder, shall, at once and without further
notice, become immediately due and payable.
(Compl., Ex. F.) The letter contained a disclosure that stated, in relevant part:
If you are in bankruptcy or received a bankruptcy discharge of this debt, this letter
is not an attempt to collect the debt. This notice is being furnished for your
information and to comply with applicable laws and regulations . . . .
(Id.) On March 16, 2016, Defendant sent a statement to Plaintiff, which indicated: “As of
March 16, 2016, you are delinquent on your mortgage by 836 days. Failure to bring your loan
up-to-date may result in fees, foreclosure, and loss of your income.” (Compl., Ex. G). The
statement also included a payment coupon. (Id.)
Plaintiff filed her Complaint on March 31, 2016.
Rule 12(b)(6) permits a defendant to move to dismiss a complaint for “failure to state a
claim upon which relief can be granted.” Fed. R. Civ. P. 12(b)(6). To survive a motion to
dismiss, a complaint must allege “enough facts to state a claim to relief that is plausible on its
face.” Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007). “Threadbare recitals of the
elements of a cause of action, supported by mere conclusory statements, do not suffice.”
Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (citing Twombly, 550 U.S. at 555). However,
plaintiffs are not required to “plead the elements of a cause of action along with facts supporting
each element.” Runnion ex rel. Runnion v. Girl Scouts of Greater Chicago & Nw. Indiana, 786
F.3d 510, 517 (7th Cir. 2015). Rather, the complaint must provide a defendant “with ‘fair
notice’ of the claim and its basis.” Tamayo v. Blagojevich, 526 F.3d 1074, 1081 (7th Cir. 2008)
(quoting Fed. R. Civ. P. 8(a)(2) and Twombly, 550 U.S. at 555). When evaluating a Rule
12(b)(6) motion, the court accepts the complaint’s well-pleaded factual allegations as true and
draws all reasonable inferences in the plaintiff’s favor. Twombly, 550 U.S. at 555-56.
Count I – FDCPA
In Count I, Plaintiff alleges that Defendant violated §§1692e(2), e(10), f, f(1), and (g) of
the FDCPA by sending collection letters after the bankruptcy discharge. To state a claim under
the FDCPA, Plaintiff must allege that: (1) Defendant qualifies as a debt collector as defined in
§ 1692a(6); (2) Defendant’s actions were related to collection of any debt; and (3) the actions
violated one of the FDCPA’s substantive provisions. See Gburek v. Litton Loan
Servicing LP, 614 F.3d 380, 384 (7th Cir. 2010). Defendant does not deny its status as a debt
collector under the FDCPA. Rather, Defendant argues that Plaintiff did not satisfy her mortgage
through bankruptcy, that the Notice of Default was not an attempt to collect a debt, and that the
periodic statement was required by federal law.
Defendant first argues that its right to collect on the lien against the subject property was
not extinguished through the Plaintiff’s bankruptcy proceedings. A lien passes through
bankruptcy unaffected and does not extinguish a creditor’s right against the property. Johnson v.
Home State Bank, 501 U.S. 78, 84 (1991). However, the Complaint alleges that Defendant
attempted to collect from Plaintiff herself; and the Defendant has rights only against the
property, in rem, and not against the Plaintiff, in personam. Id. at 79.
Plaintiff alleges that the letter and the Account Statement violate the FDCPA. Defendant
argues that the communications were not an attempt to collect a debt and that they had an
explicit disclaimer. In deciding whether communications count as collection letters under the
FDCPA, courts must view them “through the eyes of the unsophisticated consumer.” Wahl v.
Midland Credit Mgmt., Inc., 556 F.3d 643, 645 (7th Cir. 2009) (internal quotations omitted). An
unsophisticated consumer is “uninformed, naive, [and] trusting” but has “rudimentary knowledge
about the financial world” and is “capable of making basic logical deductions and inferences.”
Id. at 645. If a statement would not mislead an unsophisticated consumer, it does not violate the
FDCPA, even if it is technically false. Id. at 645-46. There is no “bright-line rule for
determining whether a communication from a debt collector was made in connection with the
collection of any debt.” Gburek, 614 F.3d at 385. A court must analyze the nature of the parties’
relationship, the presence or absence of a demand for payment, and the purpose and context of
the communications. Id. at 385.
The relationship between the parties is based solely on Defendant’s ownership of
Plaintiff’s defaulted debt. The Notice of Default states that the loan is in default, lists an amount
owed, and demands that Plaintiff bring the loan up to date. (Compl., Ex. F.) The Notice of
Default also states that Defendant will accelerate the maturity of the loan and cause the entire
balance to become immediately due and payable. (Id.) The March 16, 2016 account statement
lists a total amount due and contains a payment coupon. (Compl., Ex. G.) It also lists several
outstanding payments and states that Plaintiff is late on her mortgage payments. (Id.) Plaintiff
has alleged sufficient facts to show that, when combined with the communications, an
unsophisticated consumer would understand the letters as sent in connection with the collection
of debt. 1
Defendant also claims the communications sent to Plaintiff were required under the Truth
in Lending Act (“TILA”) and Illinois state law. TILA requires that:
A servicer of a transaction subject to this section shall provide the consumer, for
each billing cycle, a periodic statement meeting the requirements of
paragraphs (b), (c), and (d) of this section. If a mortgage loan has a billing
cycle shorter than a period of 31 days (for example, a bi-weekly billing cycle), a
periodic statement covering an entire month may be used. For the purposes of this
section, servicer includes the creditor, assignee, or servicer, as applicable.
A creditor or assignee that does not currently own the mortgage loan or the
mortgage servicing rights is not subject to the requirement in this section to
provide a periodic statement.
Nor does the bankruptcy disclaimer, set out above, negate that understanding. At this
stage, it cannot be said that the boilerplate disclaimer, as a matter of law, is sufficient to negate
the overall impression that the communications are connected to the collection of a debt. See
Price v. Seterus, Inc., 2016 WL 1392331 at *7 (N.D. Ill. April 8, 2016).
12 C.F.R. § 1026.41(a)(2). Under this requirement, Defendant had a duty to send a statement
such as the March 16, 2016. However, that section does not require a coupon for payment.
Defendant also argues that the Notice of Default was required by Illinois in order to begin a
foreclosure proceeding. See 735 Ill. Comp. Stat. 5/15-1504(c)(9) (“The statements contained in
a complaint in the form set forth in subsection (a) of Section 15-1504 are deemed and construed
to include allegations as follows: . . . (9) that any and all notices of default or election to declare
the indebtedness due and payable or other notices required to be given have been duly and
properly given.”). However, the notice is not required to demand payment as the Notice of
Default does in this case. An unsophisticated consumer could have believed that the letters were
sent to collect on a debt; Plaintiff has presented sufficient facts to support her claim under the
Section 1692(g) requires a debt collector to provide written notice to a consumer within
five days after initial communication with a consumer in connection with the collection of any
debt. Defendant contends that since none of the communications referenced herein were sent in
connection with the collection of a debt, the claim should be dismissed. As discussed above,
Plaintiff has adequately pled that the communications sent by Defendant were mailed in
connection with the collection of a debt and imposed a duty on Defendant to send a debt
Defendant’s Motion to Dismiss is denied as to Count I.
Count II – Bankruptcy Discharge Injunction
In Count II, Plaintiff alleges that Defendant violated 11 U.S.C. §524(a)(2) by ignoring the
bankruptcy court’s discharge injunction. Defendant argues that any claims under § 524 must be
brought in bankruptcy court. “[T]he creditor who attempts to collect a discharged debt is
violating not only a statute but also an injunction and is therefore in contempt of the bankruptcy
court that issued the order of discharge.” Cox v. Zale Delaware, Inc., 239 F.3d 910, 915 (7th Cir.
2001). While district courts have “original but not exclusive jurisdiction in all civil proceedings
arising under title 11, or arising in or related to case under title 11,” 28 U.S.C. § 1334(b), district
courts “may provide that any [such cases] shall be referred to the bankruptcy judges for the
district.” 28 U.S.C. § 157(a). Local Rules provide that all such cases “are referred to bankruptcy
judges of this District.” N.D. Ill. L.R. 40.3.1(a). A debtor’s remedy under § 524 is to ask the
bankruptcy court to hold the creditor in contempt. Cox, 239 F.3d at 916-17. Additionally,
Plaintiff has failed to respond to Defendant’s argument, which results in waiver. See Bonte v.
U.S. Bank, N.A., 624 F.3d 461, 466 (7th Cir. 2010) (“failure to respond to an argument . . .
results in waiver”). Defendant’s Motion to Dismiss is granted without prejudice as to Count II.
Count III – ICFA
In Count III, Plaintiff alleges that Defendant violated the ICFA by unfairly and
deceptively inducing Plaintiff to make payments on an uncollectible debt. Defendant argues that
Plaintiff does not allege any actual damages and that Plaintiff fails to allege facts supporting any
deceptive or unlawful business practices.
The ICFA is a “regulatory and remedial statute intended to protect consumers, borrowers,
and business persons against fraud, unfair methods of competition, and other unfair and
deceptive business practices.” Hill v. Wells Fargo Bank, N.A., 946 F. Supp. 2d 817, 825-26
(N.D. Ill. 2013) (citing Robinson v. Toyota Motor Credit Corp., 201 Ill.2d 403, 266 (2002). An
ICFA deceptive conduct claim requires: (1) a deceptive act or practice by the defendant, (2) that
the deception occurred in the course of conduct involving trade or commerce, (3) the defendant’s
intent that the plaintiff rely on the deception, and (4) actual damage to the plaintiff caused by the
deception. Oshana v. Coca-Cola Co., 472 F.3d 506, 513 (7th Cir. 2006).
Plaintiff has not pled actual damages. “To prove damages, a ‘plaintiff must allege that
she has been harmed in a concrete, ascertainable way.’” Jamison v. Summer Infant (USA), Inc.,
778 F. Supp. 2d 900, 911 (N.D. Ill. 2011) (citing Frye v. L'Oreal USA, Inc. 583 F.Supp.2d 954,
957 (N.D. Ill. 2008)). Plaintiff argues that she incurred actual damages in the form of time and
costs in bringing this suit.
Time and costs associated with defending a debt-collection lawsuit can be an actual
injury under the ICFA. Armbrister, v. Pushpin Holdings, LLC, 896 F. Supp. 2d 746, 756 (N.D.
Ill. 2012). However, the time and costs associated with bringing an ICFA claim are not an actual
injury under the ICFA. See Garcia v. Receivables Performance Mgmt., LLC, No. 14 C 5367,
2014 WL 5543885, at *2 (N.D. Ill. Nov. 3, 2014) (dismissing ICFA claim and noting that
attorney’s fees are separately recoverable under the ICFA). Plaintiff has not alleged an actual
injury for the purposes of the ICFA.
Defendant’s Motion to Dismiss is granted without prejudice as to Count III.
For reasons set forth above, Defendant’s Motion to Dismiss  is denied as to Count I
and granted without prejudice as to Counts II and III.
October 17, 2016
JOHN W. DARRAH
United States District Court Judge
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