KOWALSKI v. SETERUS INC

Filing 18

ORDER denying 13 Defendant's Motion to Dismiss for Failure to State a Claim. By JUDGE JOHN A. WOODCOCK, JR. (MFS)

UNITED STATES DISTRICT COURT
DISTRICT OF MAINE
HENRY KOWALSKI,
Plaintiff,
v.
SETERUS, INC.,
Defendant.

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2:16-cv-00160-JAW

ORDER DENYING MOTION TO DISMISS
This case arises out of a series of communications regarding mortgage loan
payments and insurance for property located in Maine that a debt collector sent to a
mortgagor both after a judgment of foreclosure had been entered on the property and
after the statutory redemption period had expired. The debt collector moves to
dismiss the action, arguing that all of the communications were lawful and accurate.
Because the Court concludes that the mortgagor has pleaded sufficient facts to
establish that the debt collector violated several provisions of federal and state debt
collection acts by attempting to collect money not owed by the mortgagor, the Court
denies the motion to dismiss in its entirety.
I.

BACKGROUND
A.

Procedural Background

On March 11, 2016, Henry Kowalski filed a complaint against Seterus, Inc.
(Seterus) alleging violations of the Fair Debt Collection Practices Act (FDCPA), 15
U.S.C. §§ 1692 et seq., the Maine Fair Debt Collection Practices Act (MFDCPA), 32

M.R.S. §§ 11001 et seq., and the Maine Consumer Credit Code (MCCC), 9-A M.R.S.
§§ 1-101 et seq. Compl. (ECF No. 1). On April 28, 2016, Seterus moved to dismiss
the complaint under Federal Rule of Civil Procedure 12(b)(6) for failure to state a
claim. Def.’s Mot. to Dismiss for Failure to State a Claim Upon Which Relief May be
Granted (ECF No. 8). Mr. Kowalski subsequently amended his complaint on May 18,
2016, removing his claim that a violation of the MCCC is a per se violation of the
Maine Unfair Trade Practices Act (UTPA), 5 M.R.S. §§ 205-A et seq. Pl.’s First Am.
Compl. (ECF No. 9) (Am. Compl.). He objected to Seterus’ motion to dismiss the
original complaint on the same day. Pl.’s Obj. to Def.’s Mot. to Dismiss (ECF No. 10).
Seterus then moved to dismiss the amended complaint on May 27, 2016 and withdrew
its initial motion to dismiss four days later. Def.’s Mot. to Dismiss Pl.’s Am. Compl.
for Failure to State a Claim Upon Which Relief May be Granted (ECF No. 13) (Def.’s
Mot.); Notice of Withdrawal of Doc. (ECF No. 14). On June 16, 2016, Mr. Kowalski
objected to the motion to dismiss the amended complaint. Pl.’s Obj. to Def.’s Mot. to
Dismiss Pl.’s Am. Compl. for Failure to State a Claim Upon Which Relief May be
Granted (ECF No. 15) (Pl.’s Opp’n). Seterus replied on July 1, 2016. Def. Seterus
Inc.’s Reply Mem. in Further Supp. of its Mot. to Dismiss Pl.’s Am. Compl. for Failure
to State a Claim Upon Which Relief May be Granted (ECF No. 17) (Def.’s Reply).
B.

Factual Allegations1

In considering a motion to dismiss, a court is required to “accept as true all the factual
allegations in the complaint and construe all reasonable inferences in favor of the plaintiff [ ].” Sanchez
v. Pereira-Castillo, 590 F.3d 31, 41 (1st Cir. 2009) (quoting Alt. Energy, Inc. v. St. Paul Fire & Marine
Ins. Co., 267 F.3d 30, 33 (1st Cir. 2001)).
1

2

Henry Kowalski is an 84-year-old retired military veteran who lives in New
Jersey with his wife Lois. Am. Compl. ¶ 12. Seterus, formerly known as Kyanite
Financial Business Services, Inc., is a loan servicing entity incorporated in Delaware
with a principal place of business in North Carolina. Id. ¶ 4.
On or about March 9, 2007, Mr. Kowalski executed and delivered to Aegis
Wholesale Corporation (Aegis) a promissory note in the original principal amount of
$408,750.00. Id. ¶ 13. To secure this note, Mr. Kowalski and his two sons, John C.
Weber and Brad J. Kowalski, executed and delivered to Mortgage Electronic
Registration Systems, Inc., acting as nominee for Aegis, a mortgage on Mr. Kowalski’s
real property located in Bryant Pond, Oxford County, Maine. Id. ¶ 14. The mortgage
was assigned to OneWest Bank FSB (OneWest). Id. ¶ 16.
Mr. Kowalski originally bought the Bryant Pond property to move into after
retirement. Id. ¶ 17. He and his wife began living in the property for several months
each year. Id. ¶ 18. In or around 2009, Mr. Kowalski fell on difficult financial times
and entered into a forbearance plan on the loan. Id. ¶ 19. He believed that he was
still on the forbearance plan when OneWest initiated a foreclosure action on the
property in October 2009; the action was later dismissed. Id. ¶ 20.
In June of 2013, OneWest filed a second foreclosure action against Mr.
Kowalski and his two sons in the Maine District Court in South Paris. Id. ¶ 21. After
failed attempts to resolve the foreclosure through the Foreclosure Diversion Program,
Mr. Kowalski and his sons entered into a Stipulated Judgment of Foreclosure
(Stipulated Judgment) on May 26, 2015. Id. ¶¶ 22, 23; id. Attach. 1 Stip. J. of

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Foreclosure and Order of Sale (Stip. J.). The Stipulated Judgment provided for a
waiver of any deficiency on the loan and a release of personal liability on the note.
Am. Compl. ¶ 22; Stip. J. at 2. The Kowalskis had 90 days to redeem the mortgage.
Am. Compl. ¶ 25; Stip. J. at 2. They vacated the property in August 2015. Am.
Compl. ¶ 26.

On August 24, 2015, the 90-day redemption period expired; the

Kowalskis did not redeem the property. Id. ¶¶ 27-28.
After the Judgment, Mr. Kowalski and his wife were under the impression that
everything was taken care of with respect to the mortgage debt and Bryant Pond
property. Id. ¶ 29. Then, in or around May 2015, Seterus began delivering to Mr.
Kowalski monthly account statements alleging over $200,000 due on the loan. Id. ¶
32. The notices that Seterus sent Mr. Kowalski differ from the types of notices
Seterus typically sends customers advising them of reinstatement figures. Id. ¶ 68;
id. Attach. 14 Sample Reinstatement Notice (Sample Notice).

Seterus sent Mr.

Kowalski statements dated July 16, 2015, August 17, 2015, September 16, 2015 and
November 16, 2015. Am. Compl. ¶¶ 33, 36-38. Seterus sent the account statements
to Mr. Kowalski’s P.O. Box in Sumner, Maine and Mr. Kowalski’s son Brad notified
him of the statements each month. Id. ¶¶ 34, 39.
Additionally, on or around November 20, 2015, a representative from Seterus
called Mr. Kowalski at his home in New Jersey in an attempt to collect on the
mortgage loan debt. Id. ¶ 40. Mr. Kowalski explained that he believed the debt had
been taken care of in court and that he had an attorney, but the Seterus
representative claimed there was no attorney on record.

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Id. ¶¶ 41-42.

The

representative explained that “if Mr. Kowalski did not pay the over $200,000 he owed
on the loan, Seterus would foreclose on his home”; Mr. Kowalski feared this meant
that Seterus could take his New Jersey home. Id. ¶¶ 43-44.
In severe distress over the potential loss of his New Jersey home and Seterus’
continued attempts to collect on over $200,000, Mr. Kowalski contacted his son Brad.
Id. ¶ 45. Brad attempted to contact Seterus to understand what was happening, but
Seterus refused to speak with him. Id. ¶ 46. Mr. Kowalski and his sons were worried
that something had gone wrong at court and the Stipulated Judgment had not gone
through. Id. ¶ 47. Brad contacted their foreclosure attorney, Andrew Kull, and
retained him again to deal with Seterus’ attempts to collect on the mortgage loan. Id.
¶ 48. Attorney Kull delivered a cease and desist letter to Seterus on November 20,
2015 by facsimile and included a copy of the Stipulated Judgment; Seterus
acknowledged receipt of the facsimile on the same day. Id. ¶¶ 49, 51. Mr. Kowalski
was relieved and hoped that Attorney Kull’s actions would stop Seterus from trying
to collect on the mortgage loan. Id. ¶ 52.
However, Seterus sent Mr. Kowalski another account statement dated
December 16, 2015, and Mr. Kowalski again feared that Seterus “would not stop until
the debt was paid, either by him or by taking his New Jersey home.” Id. ¶¶ 53-54.
In a letter dated January 4, 2016 to Attorney Kull, Seterus stated that it would no
longer call Mr. Kowalski or his sons, or send correspondence to them, except for those
“legally required.” Id. ¶ 56. Seterus asserted in the letter that Mr. Kowalski and his
sons “remain the owners of record for the collateral property . . . until the foreclosure

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is complete. As a result, we will continue to mail certain legal notices until the
foreclosure action is completed.” Id. Seterus sent another account statement dated
January 18, 2016 and a statement dated January 22, 2016 providing a principal and
escrow reconciliation directly to Mr. Kowalski. Id. ¶¶ 58, 59.
In February 2016, Mr. Kowalski retained Andrea Bopp Stark, his current
counsel.

Id. ¶ 60.

Attorney Stark delivered a demand letter to Seterus dated

February 3, 2016 alleging violations of UTPA, the FDCPA, and the MFDCPA. Id. ¶
61. Seterus received the letter on February 8, 2016 but did not reply. Id. ¶¶ 62-63.
Seterus sent another account statement to Mr. Kowalski, c/o Attorney Stark, dated
February 16, 2016, and has continued to send communications regarding the
mortgage loan to Mr. Kowalski, both directly and via his attorney, since March 11,
2016, the date Mr. Kowalski filed the complaint in this Court. Id. ¶¶ 64-67.
In addition to the account statements, Seterus sent a notice to Mr. Kowalski,
c/o Attorney Stark, dated March 17, 2016 regarding lender placed insurance on the
property that stated “SETERUS IS ATTEMPTING TO COLLECT A DEBT” and that
the cost of the policy, $2,850.60, was assessed to Mr. Kowalski. Id. ¶ 69. The property
sold at a foreclosure auction on March 29, 2016. Id. ¶ 70. On April 26, 2016, Seterus
sent two separate notices directly to Mr. Kowalski regarding the lender placed
insurance stating that the premium for the policy, $2,772.71, was charged to Mr.
Kowalski. Id. ¶ 71.
As a result of Seterus’ continued attempts to collect on the mortgage loan, Mr.
Kowalski has become severely distressed. Id. ¶ 72. He and his wife believed that

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their New Jersey home was in jeopardy of being lost to foreclosure and became afraid
to answer the door for fear it was the sheriff telling them to leave. Id. Mr. Kowalski
became very agitated and has a heart condition that causes his heart to race when he
is distressed. Id. ¶ 75. He also became very moody and reserved and stopped going
out as much to eat or do yard work. Id. ¶ 76. He shut down and would sit inside
quietly.

Id.

He was frustrated, anxious, and confused about why Seterus was

continuing to try to collect the mortgage loan. Id. Mr. Kowalski and his wife wanted
to move to a smaller, more affordable home in Maine using equity in their New Jersey
home and started making plans to sell the New Jersey house when the Stipulated
Judgment was entered. Id. ¶¶ 30-31, 73. However, when the notices started, these
plans were put on hold. Id. ¶ 74.
II.

THE PARTIES’ POSITIONS
A.

The Amended Complaint

In Counts I and II of the amended complaint, Mr. Kowalski alleges violations
of identical provisions of the FDCPA and MFDCPA. Am. Compl. ¶¶ 78-88. Mr.
Kowalski claims that Seterus violated 15 U.S.C. § 1692c(2) and 32 M.R.S. §
11012(1)(B) by communicating with him in connection with the collection of the
mortgage debt when Seterus knew that he was represented by an attorney and had
knowledge of the attorney’s name and address. Id. ¶¶ 79(a), 85(a). Additionally, Mr.
Kowalski claims that by delivering the notices and calling him to seek payment of
money not owed by him, Seterus (1) engaged in conduct, the natural consequence of
which was to harass, oppress, or abuse him, in violation of 15 U.S.C. § 1692d and 32

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M.R.S. § 11013(1), id. ¶¶ 79(b), 85(b); (2) used false, deceptive, or misleading
representations and falsely represented the character, amount, or legal status of the
mortgage debt, in violation of 15 U.S.C. § 1692e and 32 M.R.S. § 11013(2), id. ¶¶ 79(c)(d), 85(c)-(d); and (3) used unfair or unconscionable means to collect or attempt to
collect the mortgage debt, in violation of 15 U.S.C. § 1692f and 32 M.R.S. § 11013(3),
id. ¶¶ 79(e), 85(e). Mr. Kowalski claims that Seterus did these acts intentionally,
with the purpose of coercing him to pay the alleged debt, and that the conduct
constitutes a pattern and practice of violations. Id. ¶¶ 80-81, 86. As a result of these
alleged violations, Mr. Kowalski states that Seterus is liable for declaratory judgment
and actual damages, which include damages for emotional distress, statutory
damages, costs, and attorney’s fees. Id. ¶¶ 83, 88.
In Count III, Mr. Kowalski alleges a violation of the MCCC. Id. ¶¶ 89-92. Mr.
Kowalski claims that by attempting to collect on the mortgage debt through its
communications, Seterus attempted to enforce a right that it had relinquished
pursuant to the Stipulated Judgment. Id. ¶¶ 90-91. As a result of this alleged
violation, Mr. Kowalski states that he is entitled to actual damages, including
emotional distress. Id. ¶ 92.
B.

Seterus’ Motion to Dismiss

Seterus’ first argument in support of its motion to dismiss is that it did not
violate the FDCPA or the MFDCPA because it sent the communications in accordance
with Maine law. Def.’s Mot. at 5. According to Seterus, “[a]lthough a stipulated
judgment of foreclosure had entered, [Mr. Kowalski] retained title to the [Bryant

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Pond] Property because the redemption period was extended pursuant to 14 M.R.S.
§ 6323.” Id. Citing caselaw, Seterus explains that after the redemption period
expires, a mortgagor’s interest in the property is extinguished and title is vested in
the mortgagee.

Id. at 5-6.

It argues that although the redemption period is

traditionally 90 days, Maine law permits a mortgagee to “extend unilaterally the
redemption period” before a public sale. Id. at 6.
It then claims that “every complained-of communication (save the April 26,
2016 insurance letter) occurred during the extended redemption period” and that
“each of the seven account statements set forth an amount to redeem the mortgage
and reinstate the loan in order to avoid a foreclosure sale.” Id. It argues that “rather
than being the ‘unfair’ letters alleged, the letters provided notice to [Mr. Kowalski]
that Seterus was extending his redemption period and that he could reinstate the
loan and retain title to the Property if he were to make the reinstatement payment.”
Id. at 6-7. Seterus adds that the phone call similarly concerned the reinstatement
amount. Id. at 7 n.5. Seterus claims that because it is a servicer acting on behalf of
the mortgagee, it has the authority to send these notices. Id. at 7. Seterus also claims
that the Stipulated Judgment contemplated the extension by incorporating section
6323 and that the Stipulated Judgment conditioned the release of the debt on the
foreclosure sale. Id.
Stating that its analysis under the FDCPA applies equally to the MFDCPA
claims, id. at 7 n.6, Seterus argues that it did not engage in “conduct the natural
consequence of which is to harass, oppress, or abuse any person in connection with

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the collection of a debt” because the natural consequence of extending the redemption
period is to “temporarily benefit the [borrower] by providing an opportunity to
preserve his equity of redemption . . . and avoid a foreclosure sale.” Id. at 8-9. Seterus
also argues that it did not mischaracterize the debt or use false, deceptive, and
unconscionable means to collect on the debt because it was sending notice of the
option to redeem, not seeking monthly payments. Id. at 9. Additionally, Seterus
argues that the phone call did not violate the FDCPA because Mr. Kowalski’s claim
that he feared Seterus would foreclose on his New Jersey home “does not pass the
[FDCPA’s] hypothetical unsophisticated consumer test.” Id. at 11 n.8.
Further, Seterus claims that the account statements cannot violate the FDCPA
because Regulation Z of the Truth in Lending Act (TILA), 12 C.F.R. §§ 226.1 et seq.,
requires Seterus to send periodic statements as long as Mr. Kowalski retains title.
Id. at 10-11. It maintains that Mr. Kowalski did retain title when Seterus extended
the redemption period under section 6323 through the equity of redemption upon the
loan. Id. at 10.
Next, Seterus acknowledges that the FDCPA generally “prohibits direct
communications with a debtor if the debt collector knows the debtor is represented
by an attorney” but claims that the Consumer Financial Protection Bureau (CFPB)
exempts from the FDCPA’s scope any communications sent pursuant to 12 C.F.R. §
1026.41, which, it claims, includes the account statements. Id. at 12-13. Seterus also
argues that Mr. Kowalski’s claims based on the two insurance letters must fail
because neither letter attempted to collect a debt and “the FDCPA applies only to

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communications that are intended to collect a payment.” Id. at 13-15 (collecting
cases). It argues that the FDCPA disclaimer at the bottom of the letters stating
“SETERUS, INC. IS ATTEMPTING TO COLLECT A DEBT” is legally irrelevant. Id.
at 15-16.
With regard to the MCCC claim, Seterus argues that because Maine law
permits Seterus to extend the redemption period, it did not attempt to enforce a debt
“that has been barred by law or a final order of the Supreme Judicial Court or a court
of the United States.” Id. at 16 (citing 9-A M.R.S. § 9-403(G)). Further, Seterus
acknowledges that violation of the MCCC is a per se violation of UTPA, but claims
that to plead a violation of UTPA, a plaintiff must allege “loss of money or property”
and Mr. Kowalski only alleges emotional harm. Id. at 16-17.
C.

Henry Kowalski’s Opposition

According to Mr. Kowalski, all three of his claims for relief state plausible legal
claims. Pl.’s Opp’n at 3. First, Mr. Kowalski argues that Seterus misinterprets Maine
law. Id. at 4. Mr. Kowalski claims that 14 M.R.S. § 6323 allows a mortgagee, such
as Seterus, to permit a mortgage loan to be reinstated or redeemed after the
redemption period expires, provided that the foreclosure sale has yet to occur, but
that unless the mortgagor does reinstate or redeem the mortgage, title remains with
the mortgagee having automatically vested upon expiration of the mandated 90-day
redemption period. Id. at 5. He asserts that “[t]he redemption period is never
extended.” Id. Mr. Kowalski then indicates that the Stipulated Judgment was
entered on May 26, 2015, so the 90-day redemption period expired on August 24,

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2015, and therefore, as of that date, any interest Mr. Kowalski had in the property
was extinguished. Id. at 6.
Mr. Kowalski then turns to Seterus’ arguments that the account statements
and call were not abusive, misleading, or unfair. Id. at 7-11. He compares his case
to a recent case in the United States Bankruptcy Court for the District of Maine, In
re Collins, 474 B.R. 317 (Bankr. D. Me. 2012), in which the court concluded that
notices sent to debtors when the debtor no longer had personal liability or ownership
interests constituted harassment. Id. at 7-8. Further, Mr. Kowalski argues that even
if the intent behind the communications was in fact to provide reinstatement quotes,
the notices served to mislead and deceive Mr. Kowalski. Id. at 8-9, 13-14. He points
to language in the notices including “Amount Due,” “DELIQUENCY NOTICE,” “WE
ARE ATTEMPTING TO COLLECT A DEBT,” and “You are late on your mortgage
payments.” Id. at 8-9. He asserts that the “small-font sized explanation regarding
the reinstatement amount does little to clarify and reassure a consumer in Mr.
Kowalski’s situation that no monies are actually owed or due, now or ever, unless he
wants to re-obtain the property.” Id. at 9. Mr. Kowalski also argues that it was
reasonable for him to believe that Seterus might attempt to foreclose on his New
Jersey home, especially considering the fact that he received the telephone call at his
New Jersey home, the only home he owned at the time. Id. at 10.
Next, Mr. Kowalski argues that the monthly account statements and telephone
call were not protected or required by Regulation Z of TILA. Id. at 11. He explains
that the relevant provision of Regulation Z provides that the periodic statements shall

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be transmitted “to the obligor” and that he ceased to be an obligor upon the entry of
the Stipulated Judgment, expiration of the redemption period, and the agreement to
waive the obligation. Id. Mr. Kowalski further argues that because Regulation Z is
inapplicable, Seterus cannot use it as an excuse for communicating directly him
despite its knowledge that he was represented by counsel. Id. at 12-13.
Mr. Kowalski then argues that the insurance notices were attempts to collect
money related to the mortgage and were neither required nor allowed. Id. at 14. He
points out that the insurance notices contained the language in all caps on the first
page “SETERUS, INC. IS ATTEMPTING TO COLLECT A DEBT” and that the
notices discussed charges to Mr. Kowalski for the cost of the insurance. Id. at 14-15.
He asserts that a reasonable interpretation of the notices is that Seterus was
attempting to collect a debt and that the true nature of the letters was aimed at
collecting a debt. Id. at 15 (collecting cases). Mr. Kowalski maintains that because
his interest was extinguished, there was no obligation to purchase insurance and so
the notices were unnecessary, false, deceptive, and misleading. Id. at 15-16.
As to the MCCC claim, Mr. Kowalski argues that the fact that “loss of money
or property are not alleged is immaterial to [his] entitlement to damages for [Seterus’]
violation of the [MCCC].” Id. at 17. He explains that he withdrew his UTPA claim
in the amended complaint and that the MCCC “has its own forms of relief available
for consumers including statutory damages which is unique from the Maine UTPA.”
Id.
D.

Seterus’ Reply

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In reply, Seterus states the Mr. Kowalski concedes that the communications
received before August 24, 2015, before the 90-day redemption period had expired,
are not actionable. Def.’s Reply at 2. Seterus then states that Mr. Kowalski’s new
claim that only the communications received after the redemption period expired are
actionable is “analytically flawed and should be rejected for at least three reasons.”
Id. at 3.
First, Seterus maintains that even after the expiration period expires, a
mortgagor can redeem at any point until the date of sale under 14 M.R.S. § 6323, the
only difference being that the mortgagee must agree to it. Id. Seterus argues that if
the communications during the redemption-period are not illegal, neither are the
communications after the redemption period but before the sale. Id. Second, Seterus
argues that Mr. Kowalski’s claim is “irreconcilable with the plain language of
[section] 6323” which provides that if a mortgagor does redeem after the redemption
period but before the sale, “all other rights of all other parties remain as if no
foreclosure had been commenced.” Id. (emphasis by Seterus). It claims that because
one of those rights is the right to redeem, it never really expires until the sale. Id.
Third, it says that Mr. Kowalski’s argument is irreconcilable with the Stipulated
Judgment, which says that Seterus waives his right to collect any deficiency balance
“after the sale of the mortgaged real estate.” Id. at 4.
Next, Seterus distinguishes this case from In re Collins because the latter is a
bankruptcy case and does not concern section 6323. Id. at 4-5. Seterus also argues
that the single letter Mr. Kowalski received after the foreclosure sale is not actionable

14

because the standard disclaimer at the bottom of the letter is legally irrelevant and
the insurance letter in this case was far shorter and different from the insurance
letters in the bankruptcy cases cited by Mr. Kowalski. Id. at 5.
Finally, Seterus maintain that Mr. Kowalski’s MCCC claim fails as a matter
of law because “the only ‘order’ that [Mr. Kowalski] identifies is the Stipulated
Judgment” and under this Judgment “Seterus did not relinquish its rights until the
date of sale.” Id. at 6. Seterus also says that because Mr. Kowalski did not respond
to its argument that emotional distress is not actionable under the MCCC, it waived
any objection to the Court’s dismissal of the claim. Id. It adds that Mr. Kowalski did
not “put any flesh on his skeletal allegations seeking emotional distress damages in
connection with his other claims” and so they too must be dismissed. Id.
III.

LEGAL STANDARD
Rule 12(b)(6) requires dismissal of a complaint that “fail[s] to state a claim

upon which relief can be granted.” FED. R. CIV. P. 12(b)(6). Under the general
pleading standards, a complaint must contain “a short and plain statement of the
claim showing that the pleader is entitled to relief.” FED. R. CIV. P. 8(a)(2). In
Ashcroft v. Iqbal, 556 U.S. 662 (2009), the United States Supreme Court elaborated
on this pleading standard in the context of a motion to dismiss: “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.’” 556 U.S. at 678 (quoting Bell Atl.
Corp. v. Twombly, 550 U.S. 544, 570 (2007)).

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The First Circuit explained that “[t]he plausibility inquiry necessitates a twostep pavane.” García-Catalán v. United States, 734 F.3d 100, 103 (1st Cir. 2013)
(citing Rodríguez-Reyes v. Molina-Rodríguez, 711 F.3d 49, 53 (1st Cir. 2013)). “First,
the court must distinguish ‘the complaint’s factual allegations (which must be
accepted as true) from its conclusory legal allegations (which need not be credited).’”
Id. (quoting Morales-Cruz v. Univ. of P.R., 676 F.3d 220, 224 (1st Cir. 2012)). “Second,
the court must determine whether the factual allegations are sufficient to support
‘the reasonable inference that the defendant is liable for the misconduct alleged.’” Id.
(quoting Haley v. City of Boston, 657 F.3d 39, 46 (1st Cir. 2011) (quoting Iqbal, 556
U.S. at 678)).
IV.

DISCUSSION
A.

Timing

The legal significance of the relationship between Mr. Kowalski and Seterus
depends on timing.

In general, the relationship is defined by the terms of the

agreements Mr. Kowalski and OneWest entered into and the laws applicable to those
agreements. There are three significant periods: (1) from March 9, 2007 to May 26,
2015, (2) from May 26, 2015 to August 24, 2015, and (3) from August 24, 2015 forward.
From March 9, 2007, the date on which Mr. Kowalski took out the loan from
Aegis (later OneWest) secured by the mortgage on the Bryant Pond property, until
May 26, 2015, the date of the state court judgment, Mr. Kowalski was a mortgagor
and obligor to Aegis and then OneWest, which were mortgagee and lender. During

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this period, the legal relationship between Mr. Kowalski and OneWest was standard
and unremarkable.
From May 26, 2015 to August 24, 2015, however, the relationship changed. On
May 26, 2015, when the state court entered the Stipulated Judgment, Mr. Kowalski’s
statutory rights to the Bryant Pond property were reduced to the right to redeem the
mortgage under 14 M.R.S. § 6322 within the 90-day redemption period. But the
Stipulated Judgment dated May 26, 2015 contained a number of provisions that
affected the rights and obligations of the parties; the Stipulated Judgment confirmed
that (1) “the amounts due under the terms of [the] Note and Mortgage” were
$612,786.47, (2) the prejudgment interest rate was 6.875% per annum, the per diem
rate was $11.5414666, and the post-judgment interest rate was the higher of the note
or statutory rate, (3) [OneWest] was awarded attorney’s fees in the amount of
$3,005.00 and attorney’s disbursements in the amount of $928.71, (4) “if the
[Kowalskis did] not pay [OneWest] the amount due, together with accrued interest
and late charges as set forth above, within ninety days of the date hereof, [OneWest]
shall sell the mortgaged real estate . . . and disburse the proceeds,” and (5) [OneWest]
was granted “exclusive possession of the real estate mortgaged to it upon expiration
of the statutory ninety (90) day redemption period.” Stip. J. at 1-2. Most importantly,
the Stipulated Judgment provided:
In consideration of [the Kowalskis] stipulating to this Judgment,
[OneWest] has waived any and all right to collect any deficiency balance
remaining due to [OneWest] after the sale of the mortgaged real estate
and application of the proceeds of sale to the balance set forth above.
Accordingly, it is ORDERED that [the Kowalskis] are released from any
and all personal liability on the Note.
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Id. at 2 (emphasis added).
The way the Court reads the present tense language of the Stipulated
Judgment, as of May 26, 2015, Mr. Kowalski was no longer indebted to OneWest on
the $612,786.47 loan. Id. (“Defendants are released”). Mr. Kowalski retained the
right to redeem the mortgage by paying all of the amounts listed in the Stipulated
Judgment plus accruing interest. But he did not have to do so and he was no longer
obligated to pay OneWest anything.
Finally, once the 90-day redemption period for Mr. Kowalski’s mortgage with
OneWest lapsed by operation of law on August 24, 2015, OneWest became the sole
owner of the Bryant Pond real estate, and Mr. Kowalski was not a debtor, a mortgagor
to OneWest, or an owner of any interest in the Bryant Pond property.
For the period before May 26, 2015, OneWest (or Seterus) had the rights and
obligations under the FDCPA, MFDCPA and MCCC. Once the state court entered
the Stipulated Judgment releasing the Kowalskis from all personal liability on the
note and OneWest waived the right to collect any deficiency balance from Mr.
Kowalski, OneWest had no ongoing right to demand that Mr. Kowalski make
payments on a note on which he had no personal liability. Because Mr. Kowalski
retained the right to redeem until August 24, 2015, OneWest2 had the right to
periodically inform Mr. Kowalski of the pay-off amount, should he elect to exercise

Mr. Kowalski states that upon information and belief the mortgage loan was originally
assigned to OneWest, then assigned to Ocwen Loan Servicing LLC on July 30, 2015 and then Federal
National Mortgage Association on September 16, 2015. Am. Compl. ¶ 16. To avoid confusion, the
Court refers to OneWest as the lender, but the analysis equally applies to the subsequent lenders.
2

18

his right to redeem. After August 24, 2015, OneWest was no longer a lender to Mr.
Kowalski and was the sole owner of the property. It could have inquired periodically
up to the point of the public sale whether Mr. Kowalski had any interest in
purchasing the property either before or at the public sale, but its inquiry would have
to be limited to its acknowledgement that Mr. Kowalski had no legal obligations of
any kind to OneWest.
With these timeframes in mind, the Court turns to Mr. Kowalski’s claims.
B.

Counts I & II: FDCPA & MFDCPA Claims3

The FDCPA was enacted “to protect debtors from abusive debt collection
practices.” Chiang v. Verizon New England Inc., 595 F.3d 26, 41 (1st Cir. 2010). To
prevail on an FDCPA claim, “a plaintiff must prove that (1) he was the object of
collection activity arising from consumer debt, (2) the defendant is a debt collector
within the meaning of the statute, and (3) the defendant engaged in a prohibited act
or omission under the FDCPA.” Poulin v. The Thomas Agency, 760 F. Supp. 2d 151,
158 (D. Me. 2011).
The parties do not dispute the Mr. Kowalski was the object of collection activity
arising from consumer debt and that Seterus is a debt collector as defined by the
FDCPA. The dispute is whether Seterus engaged in any prohibited acts when it sent

Mr. Kowalski brings claims under several provisions of the FDCPA in Count I and repeats
those claims under identical provisions of the MFDCPA in Count II, so the Court will analyze these
counts together. Because the MFDCPA’s language almost exactly tracks the FDCPA, the Court refers
only to the FDCPA, but the analysis applies equally to both claims. See Shapiro v. Haenn, 222 F.
Supp. 2d 29, 44 (D. Me. 2002); Hamilton v. Fed. Home Loan Mortg. Corp., No. 2:13-cv-00414-JAW,
2014 WL 4594733, at *18 (D. Me. Sept. 15, 2014) (analyzing federal and state statutes together); In re
Martel, 539 B.R. 192, 194 n.4 (Bankr. D. Me. 2015) (“The Maine FDCPA mirrors the federal Act, and
therefore, my analysis applies equally to each”).
3

19

account statements and insurance letters to Mr. Kowalski and when it called Mr.
Kowalski about paying on his loan. Before the Court turns to the particular sections
of the FDCPA that Seterus purportedly violated, it will address two overarching
arguments that Seterus makes: 1) that its actions were legal and required by state
law under 14 M.R.S. § 6323 and federal law under Regulation Z of TILA, and 2) that
it cannot be liable under the FDCPA for any claims based on the insurance letters
because these letters were not made in connection with an attempt to collect a debt.
1.

Communications Allowed by State and Federal Law
a.

14 M.R.S. § 6323

Seterus’ main argument in its motion to dismiss is that it did not violate the
FDCPA because it communicated with Mr. Kowalski in accordance with Maine law,
specifically 14 M.R.S. § 6323. Def.’s Mot. at 5. Seterus claims that section 6323 allows
it to extend Mr. Kowalski’s redemption period, thereby preserving Mr. Kowalski’s
title to the property, and that the account statements and telephone call were merely
invitations to reinstate or redeem the mortgage loan during the extended redemption
period. Id. at 5-6.
The Court is dubious. Seterus’ position runs headlong into the language of the
statute, which provides that “[u]pon expiration of the period of redemption, if the
mortgagor . . . [has] not redeemed the mortgage, any remaining rights of the
mortgagor to possession terminate.” 14 M.R.S. § 6323(1). Furthermore, “Maine is a
‘title theory’ state–a mortgagee holds legal title to the property, and the mortgagor
retains only the ‘right to possess the premises and the equity right of redemption.’”

20

In re Cormier, 147 B.R. 285, 290 (Bankr. D. Me. 1992) (quoting Duprey v. Eagle Lake
Water & Sewer Dist., 615 A.2d 600, 602 (Me. 1992)). Thus, “the accepted doctrine in
Maine is that a mortgage is regarded as a conditional conveyance vesting the legal
title in the mortgagee.” Smith v. Varney, 309 A.2d 229, 232 (Me. 1973) (citing First
Auburn Tr. Co. v. Buck & Wellman, 16 A.2d 258, 260 (Me. 1940)). Indeed, “[s]uch has
been the accepted doctrine in this state since it became a separate commonwealth.”
First Auburn, 16 A.2d at 260 (citing Blaney v. Bearce, 2 Me. 132 (1822)).

The

mortgagor retains “the equity of redemption, i.e., the right to redeem the property by
payment of the indebtedness for which the real estate was conveyed as security. This
is known as the equitable title.” Smith, 309 A.2d at 232.
The Maine Supreme Judicial Court has used especially clear language in
describing what happens to the mortgagor’s equity of redemption once the period of
redemption expires: it is “cut off.” Id. (“[T]he mortgagor’s interest as such in the real
estate was cut off by the foreclosure and the expiration of the period of redemption”).
Once a foreclosure judgment is entered, the debtor has a statutory 90-day period in
which to redeem the property. 14 M.R.S. § 6322. After the statutory redemption
period expires, the mortgagor’s interests in the real property, including the equitable
right of redemption, are “forever extinguished.” In re Cormier, 147 B.R. at 290; see
also Bankr. Estate of Everest v. Bank of Am., N.A., 2015 ME 19, ¶ 20, 111 A.3d 655
(quoting Duprey, 615 A.2d at 604) ("When that equity of redemption has been lost by
the expiration of the statutory period, nothing remains in the mortgagor except the
contingency that exceptional circumstances may exist which will entitle him to

21

equitable relief”). Indeed, the “right of redemption, once extinguished, cannot be
revived by any court, nor can the period of redemption be abridged or enlarged by
operation of law.”4 Keybank Nat’l Ass’n v. Sargent, 2000 ME 153, ¶ 11, 758 A.2d 528.
Seterus hangs its legal hat on two statutory sentences:
The mortgagee, in its sole discretion, may allow the mortgagor to redeem
or reinstate the loan after the expiration of the period of redemption but
before the public sale. The mortgagee may convey the property to the
mortgagor or execute a waiver of foreclosure, and all other rights of all
other parties remain as if no foreclosure had been commenced.
14 M.R.S. § 6323(1). The first sentence just says that a mortgagee may permit a
mortgagor to redeem or reinstate the loan “after the expiration of the period of
redemption.” Id. It expressly says that the period of redemption is over, meaning
that the mortgagor no longer has a right of redemption. Nevertheless, the mortgagee
may allow the mortgagor to redeem. The first clause of the second sentence goes on
to explain how to effectuate the redemption during this time–the mortgagee can
either convey the property or execute a waiver of foreclosure. Significantly, the
second clause of the second sentence establishes that if the mortgagee and the

The Keybank Court suggested that there are “exceptional circumstances . . . where a court of
equity may provide relief, even after the 90-day redemption period has expired.” Keybank, 2000 ME
153, ¶ 11; see Duprey, 615 A.2d at 604. The Maine Law Court has not described what those
“exceptional circumstances” might be. However, in Carll v. Kerr, 89 A. 150 (Me. 1914), the Maine
Supreme Judicial Court discussed Cameron v. Adams, 31 Mich. 426 (1875), a Supreme Court of
Michigan case, and observed that “[w]here a valid legislative act has determined the conditions on
which rights shall vest or be forfeited, and there has been no fraud in conducting the legal measures,
no court can interpose conditions or qualifications in violation of the statute.” Carll, 89 A. at 151
(emphasis supplied). Assuming theoretically that a court could act in equity in derogation of the
statute to cure a fraud, there have been no exceptional circumstances alleged here, and the provision
of the statute upon which Seterus relies does not call upon the exercise of the equity jurisdiction of the
court.
4

22

mortgagor resolve their dispute during this period “all other rights of all other parties
remain as if no foreclosure had been commenced.” Id.
Contrary to Seterus’ position, the statute does not grant or revive in the
mortgagor any right of redemption after the redemption period has expired. Id. (“The
mortgagee, in its sole discretion”) (emphasis supplied).

It merely recognizes a

practicality, namely that after the redemption period has expired and before the
public sale, if the lender is able to come to an accommodation with the debtor, it may
do so, but in doing so, may not affect the legal rights of third parties.
Nor is the Court impressed with Seterus’ second argument that the second
clause of the second sentence (“and all other rights of all other parties remain as if no
foreclosure had been commenced”) means that Mr. Kowalski retains his equitable
right of redemption. Seterus’ argument attempts to squeeze the mortgagor into the
term “other parties” and is not supported by the plain language of the statute. In the
context of this statute, all “other” parties plainly means parties other than the
mortgagee and mortgagor and has nothing to do with Mr. Kowalski’s rights. Mr.
Kowalski did not retain any title or interest in the property after August 24, 2015
when the statutory redemption period expired.
It strikes the Court that Seterus is trying to prove too much. A mortgagor does
not have to retain a right of redemption for a mortgagee to have legitimate reason to
contact its debtor during the period between the extinguishment of the equity of
redemption and the public sale. The mortgagee may wish to avoid the additional cost
and trouble of a public sale by negotiating a compromise with the mortgagor, and

23

there is no reason for the law to discourage, much less forbid, such contact. Whether
the lender’s contacts with the debtor violate the FDCPA depends on a straightforward
application of the terms of the statute. The issue is whether these communications—
in light of the status of the loan at the time of the contact—were abusive, misleading,
or unfair, which the Court discusses below. See infra Section IV.B.3.
b.

Regulation Z of TILA

Seterus also justifies the account statements by relying on Regulation Z of
TILA, arguing that the federal law requires it to send periodic statements. Def.’s Mot.
at 10-11. Under Regulation Z of TILA, a servicer or mortgagee is required to send
periodic statements each billing cycle for any “closed-end consumer credit transaction
secured by a dwelling,” such as a mortgage loan. 12 C.F.R. § 1026.41(a). However,
as Mr. Kowalski points out, this regulation comes from section 1420 of the DoddFrank Wall Street Reform and Consumer Protection Act, Pub. L. No. 111-203, § 1420,
124 Stat. 1376 (2010) (codified as amended at 15 U.S.C. § 1638(f)), which provides
that the periodic statements should be transmitted to the “obligor.”
The problem for Seterus is that at the time the account statements were sent,
Mr. Kowalski was no longer an obligor. On May 26, 2015, the state of Maine District
Court issued a judgment expressly providing that “it is ORDERED that [the
Kowalskis] are released from any and all personal liability on the Note.” Stip. J. at
2. The Stipulated Judgment went on to provide that OneWest (or Seterus) “waived
any and all right to collect any deficiency balance remaining due to [OneWest] after
the sale of the mortgaged real estate and application of the proceeds of sale to the

24

balance set forth above.” Id. To state the obvious, as of May 26, 2015, Mr. Kowalski
was no longer an obligor on a loan that he was no longer obligated to pay. Therefore,
the Court does not agree with Seterus’ argument that it was required to send Mr.
Kowalski these monthly account statements.
The Court’s conclusion is supported by the CFPB’s interpretation of the
periodic statement requirement. See Consumer Fin. Prot. Bureau, Bulletin 2013-12,
Implementation Guidance for Certain Mortg. Servicing Rules at 7 n.23 (Oct. 15, 2013)
(CFPB Bulletin) (“Servicers are not required to provide periodic statements to
borrowers in bankruptcy”). It is also supported by the federal bankruptcy court’s
decision in In re Collins. In that case, a loan servicer, Marix, sent a series of letters
with information about payments, property insurance, and alternatives to foreclosure
after a foreclosure judgment was entered and the redemption period expired. In re
Collins, 474 B.R. at 319. Like Seterus, Marix argued that the letters were required
by state and federal law. See id. at 321. However, the court held that “[c]onsidering
the utter absence of an obligation owed to Marix by the post-bankruptcy, postredemption Collins’ it would seem a waste of time and resources to enact and enforce
legislation requiring unnecessary notices to non-obligors and non-owners.” Id. at 32122. Similarly here, after August 24, 2015, Mr. Kowalski was a non-obligor on the
note and a non-owner of the Bryant Pond property, so it makes little sense that the
law would require Seterus to send him monthly account statements.
2.

Insurance Letters

25

As a final threshold matter, Seterus argues that it cannot be liable for sending
the two insurance letters because neither attempted to collect a debt. Def.’s Mot. at
13-16.

“‘The basic premise of the statutory scheme’ of the FDCPA is that its

protection ‘applies in connection with the collection of debts.’” McDermott v. Marcus,
Errico, Emmer & Brooks, P.C., 911 F. Supp. 2d 1, 48 (D. Mass. 2012) (quoting Arruda
v. Sears, Roebuck & Co., 310 F.3d 13, 23 (1st Cir. 2002)). A debt is “any obligation or
alleged obligation of a consumer to pay money arising out of a transaction in which
the money, property, insurance, or services which are the subject of the transaction
are primarily for personal, family, or household purposes.” 15 U.S.C. § 1692a(5).
The First Circuit has not elaborated on this requirement; however, other
circuit courts have held that the communication “need not itself be a collection
attempt; it need only be connect[ed] with one.” See, e.g., Grden v. Leikin Ingber &
Winters PC, 643 F.3d 169, 173 (6th Cir. 2011) (internal quotations omitted). Courts
look to a number of factors, including the nature of the parties’ relationships, whether
the communication included a demand for payment, and the purpose and context of
the communications. Krechner v. Nationstar Mortg. LLC, No. 15-5054, 2015 WL
9260055, at *3 (E.D. Pa. Dec. 18, 2015) (citing Gburek v. Litton Loan Servicing LP,
614 F.3d 380, 385-86 (7th Cir. 2010)). The issue at the pleading stage is whether the
allegations, considered alongside the letter, “plausibly state a claim that one of the
animating purposes of the letter was to induce payment by the plaintiff.” Id.
Seterus sent Mr. Kowalski two types of insurance letters. The first insurance
letter dated March 17, 2016 states:

26

Because we did not have evidence that you had hazard insurance on
your property, we bought hazard insurance on the property and added
the cost to your mortgage loan account. The policy that we bought is
expiring.
Because hazard insurance is required on your
property, we intend to maintain insurance on your property by
renewing or replacing the insurance we bought. The insurance
we buy . . . [c]osts $2,850.60 annually.
Am. Compl. Attach. 15 Insurance Letter at 2 (Mar. 17, 2016) (emphasis in original).
The letter further says that the cost of the policy purchased last year was assessed to
Mr. Kowalski and that it has directed an insurance agency to purchase new coverage
when that policy expires on May 1, 2016. Id. at 4. It then states: “You will be
charged for the cost of this insurance if we do not receive adequate proof of
coverage within 45 days from the date of this letter.” Id. (emphasis in original).
The second insurance letter dated April 26, 2016 states that the hazard insurance
was cancelled, effective April 22, 2016, but that “our records show an earned
premium” for the time period of May 1, 2015 to April 22, 2016 in the amount of
$2,772.71, and that “[t]his premium has been charged to you for the time the coverage
was in force.” Am. Compl. Attach. 16 Insurance Letter at 4 (Apr. 26, 2016).
In support of his argument that the insurance notices were made in connection
with an attempt to collect a debt, Mr. Kowalski points to the disclaimer at the bottom
of the letters that states: “SETERUS, INC. IS ATTEMPTING TO COLLECT A
DEBT.” However, as Seterus notes, the FDCPA disclaimer “does not automatically
trigger the protections of the FDCPA.” See Gburek, 614 F.3d at 386 n.3; Maynard v.
Cannon, 401 F. App’x 389, 395 (10th Cir. 2010) (“[T]he inclusion of the FDCPA notice
is legally irrelevant”).

27

Still, the Court concludes that based on the alleged facts and the substance of
these insurance letters, Mr. Kowalski has plausibly stated a claim that “one of the
animating purposes of the letter was to induce payment.” See Krechner, No. 15-5054,
2015 WL 9260055, at *3. Both letters discuss an amount owed by Mr. Kowalski for
insurance on his formerly mortgaged Bryant Pond property. The first letter informs
Mr. Kowalski that QBE FIRST, an insurance agency, bought insurance on the Bryant
Pond property, added the cost of the policy to the mortgage loan, and plans to renew
the policy at a cost of $2,850.60 annually if Mr. Kowalski does not provide proof of
insurance by the policy’s expiration date. The second letter cancels the insurance,
but charges Mr. Kowalski a premium of $2,772.71. Although the letters do not
explicitly demand payment, they tell Mr. Kowalski that he is required to maintain
insurance on the property and then tell him that although the insurance company
cancelled the insurance, he still owes a premium for the time period from May 1, 2015
until April 22, 2016. By leading Mr. Kowalski to believe he had to pay for insurance
on property he no longer owned or had any legal interest in, Mr. Kowalski could be
induced to make a payment for a premium he never owed.
Additionally, given the nature of the parties’ relationship at the time of the
communications, it is reasonable to infer that the true intent behind the letters was
to induce payment. In general, the purpose behind these types of letters may be to
notify the borrower of the servicer’s intent to renew or cancel force-placed insurance,
as required by federal regulations. See 12 C.F.R. § 1024.37(e), (g); see also Preuher v.
Seterus, LLC, No. 14 C 6140, 2014 WL 7005095, at *3 (N.D. Ill. Dec. 11, 2014).

28

However, in this case, Mr. Kowalski had no obligation to maintain or purchase any
insurance on the property. As of May 26, 2015, Mr. Kowalski had no personal
obligation on the loan, and as of August 24, 2015, he no longer owned the property.
OneWest was the sole owner until March 29, 2016 when Fannie Mae bought the
property at the public sale. Seterus, therefore, was not required to provide any
notices to Mr. Kowalski regarding insurance on the property after August 24, 2015.
One can reasonably infer from these facts and the other alleged attempts to collect on
the loan that the true purpose of the insurance letters was not to comply with federal
regulations, but to induce payment on the loan for the cost of an insurance policy that
Mr. Kowalski was not required to have. Therefore, the Court concludes that Mr.
Kowalski has pleaded sufficient facts to establish that the insurance letters were
made in connection with an attempt to collect a debt and fall within the purview of
the FDCPA.
3.

Alleged Violations

The Court turns to the purported violations. Mr. Kowalski alleges that Seterus
violated the FDCPA by calling him and sending the account statements and
insurance letters in an attempt to collect on the mortgage loan after the Stipulated
Judgment was entered and the redemption period had expired. In particular, Mr.
Kowalski argues that these acts violated the following provisions of the FDCPA:
communicating with a debtor when he is known to be represented by an attorney, in
violation of § 1692c(2); engaging in harassing, oppressive, or abusive debt collection,
in violation of § 1692d; using false representation or deceptive means to collect or

29

attempt to collect a debt, in violation of § 1692e; falsely representing the character,
amount or legal status of a debt, in violation of § 1692e(2)(A); and engaging in unfair
and unconscionable means, in violation of § 1692f. Seterus claims that it was merely
informing Mr. Kowalski of his options under section 6323–that he could redeem or
reinstate the loan before the public sale even though the statutory redemption period
had expired by paying the stated amounts. It argues that these communications were
intended to benefit Mr. Kowalski, not harass him, and that they were lawful and
accurate.
In determining whether a communication has violated a provision of the
FDCPA, the communication “is to be viewed from the perspective of the hypothetical
unsophisticated consumer.” Pollard v. Law Office of Mandy L. Spaulding, 766 F.3d
98, 103 (1st Cir. 2014).

This standard protects “all consumers, including the

inexperienced, the untrained and the credulous.”

Id. at 103 (citations omitted).

However, the standard is an objective one, which preserves an element of
reasonableness. Id. at 104. “A debt collector will not be held liable based on an
individual consumer’s chimerical or farfetched reading of a collection letter.” Id.; see
also Pernod Ricard USA, LLC v. Bacardi U.S.A., Inc., 653 F.3d 241, 251 (3rd Cir.
2011) (“[W]e preserv[e] a quotient of reasonableness and presum[e] a basic level of
understanding and willingness to read with care”) (internal quotations omitted);
Pettit v. Retrieval Masters Creditors Bureau, Inc., 211 F.3d 1057, 1060 (7th Cir. 2000)
(“[O]ur uneducated debtor possesses rudimentary knowledge about the financial
world . . . and is capable of making basic logical deductions and inferences”).

30

a.

15 U.S.C. § 1692c

Mr. Kowalski first claims that Seterus violated § 1692c by communicating with
him when Seterus knew he was represented by an attorney. The relevant provision
states that “a debt collector may not communicate with a consumer in connection with
the collection of any debt if the debt collector knows the consumer is represented by
an attorney with respect to such debt and has knowledge of, or can readily ascertain,
such attorney’s name and address.” 15 U.S.C. § 1692c(a)(2). Both Attorney Kull and
Attorney Stark communicated with Seterus about their representation of Mr.
Kowalski, and Seterus was aware of this representation, as well as counsel’s contact
information. See Am. Compl. ¶¶ 49, 51, 56, 60, 61, 62, 64. Based on these facts,
Seterus appears to have violated § 1692c of the FDCPA.
However, Seterus excuses its direct communication with Mr. Kowalski by
again relying on Regulation Z of TILA. Seterus explains that the CFPB exempts
certain communications sent pursuant to Regulation Z of TILA from the FDCPA’s
scope. Seterus refers to a bulletin issued by the CFPB which states, in part:
The CFPB concludes that the FDCPA “cease communication” option
does not generally make servicers that are debt collectors liable under
the FDCPA if they comply with certain provisions of . . . Regulation Z
(12 CFR . . . 1026.41 (periodic statement)).
CFPB Bulletin at 6. However, as the Court already pointed out, Regulation Z of TILA
only applies if Mr. Kowalski is an obligor and at the time of the account statements,
he was not an obligor. Thus, Seterus was not required to send the periodic statements
and cannot rely on the exemption as justification for his direct communications with
Mr. Kowalski. The same goes for the insurance letters. The CFPB also exempts
31

communications sent pursuant to Regulation X, including those that comply with 12
C.F.R. § 1024.37 (force-placed insurance). Id. However, this provision deals with
“borrowers” and at the time of the letters, Mr. Kowalski was no longer a borrower.
He was also no longer the owner of the property and had no obligation to maintain
insurance for it. Therefore, Regulation X does not require Seterus to provide notice
to Mr. Kowalski about insurance and does not justify Seterus’ direct communication
with Mr. Kowalski.
Moreover, even if Regulation X and Z of TILA did apply, the CFPB Bulletin is
not relevant to the issue in this case.

The bulletin deals with the “cease

communication” option under 15 U.S.C. § 1692c(c), which is not the provision Mr.
Kowalski is alleging that Seterus violated. Mr. Kowalski argues that Seterus violated
15 U.S.C. § 1692c(a)(2) by failing to send all communications to his attorney instead
of directly to him. Mr. Kowalski is not arguing that Seterus should have ceased
communications period. If that were the case, Seterus’ argument that it was required
by law to send the statements might make more sense. However, in this case, Seterus
could have still complied with the regulations, if they applied, by sending the periodic
statements and insurance letters to Mr. Kowalski’s attorney. Neither Regulation X
nor Regulation Z exempts Seterus from liability under the FDCPA for communicating
directly with Mr. Kowalski.
Because Seterus makes no other objections to Mr. Kowalski’s claim that
Seterus communicated with him despite knowledge of his representation by a lawyer,

32

the Court denies the motion to dismiss Mr. Kowalski’s claim in Count I under § 1692c
of the FDCPA.5
b.

15 U.S.C. § 1692d

Additionally, Mr. Kowalski alleges that Seterus violated § 1692d by delivering
notices and calling to seek payment of monies not owed by him. Under § 1692d, “[a]
debt collector may not engage in any conduct the natural consequence of which is to
harass, oppress, or abuse any person in connection with the collection of a debt.” 15
U.S.C. § 1692d. The FDCPA provides a non-exhaustive list of examples of the type
of conduct that would violate this provision, such as the use or threat of use of
violence, the use of obscene or profane language, or the causing of a telephone to ring
or the engaging of any person in telephone conversation repeatedly or continuously
with intent to annoy, abuse, or harass. Id.
The timing of the relevant communications is significant to this claim. Seterus
sent the account statements at issue beginning in or around May 2015 up until March
15, 2016. As the Court already discussed, after May 26, 2015, when the state court
entered the Stipulated Judgment, OneWest had no ongoing right to demand payment
on the note. It could, however, up until August 24, 2015 when the redemption period
expired, periodically inform Mr. Kowalski of the pay-off amount should he elect to
exercise his right to redeem. After that point, up until the foreclosure sale on March
26, 2015, it could have inquired whether Mr. Kowalski had any interest in purchasing
the property. However, these communications could not have been demands for

The Court also denies the motion to dismiss Mr. Kowalski’s claim in Count II under the
identical provision of the MFDCPA, section 11012(1)(B). See supra note 3.
5

33

payment since Mr. Kowalski did not owe OneWest anything; they could only be
inquiries of interest.

Communications limited to this information would not be

harassing, oppressive, or abusive.
However, Mr. Kowalski has pleaded sufficient facts that the communications
in this case went beyond these limits and were not merely invitations to redeem. As
Mr. Kowalski points out, the “Account Statements” include an “Amount Due” with a
payment coupon. They include language such as “Payment Due Date,” “You are late
on your mortgage payments,” “DELINQUENCY NOTICE,” and “Payment
Outstanding.” It is reasonable for a consumer like Mr. Kowalski to believe, based on
the language contained in these statements, that he owed payments when, in fact, he
owed nothing on the loan. Although sending letters on a repeated basis may not
generally be considered harassing or abusive since it is a natural inconvenience of
debt collection, see, e.g., McDermott, 911 F. Supp. 2d at 76-77, sending letters on a
repeated basis suggesting an obligation to pay money when none is present could rise
to the level of harassing or abusive conduct.
The account statements do include a footnote explaining the amount due is to
reinstate the loan, but that footnote is not clear. It states:
Our records indicate that the maturity date of the loan was accelerated
and the entire amount of the loan is due. However, this statement
provides the amount to bring the loan current and reinstate the loan as
of the next payment due date based on the payment terms of the loan
stated in the note. If you do not reinstate the loan, the entire
amount of the loan is due. Please note that you will no longer be able
to reinstate the loan after the foreclosure sale occurs.

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See, e.g., Am. Compl. Attach. 5 Account Statement at 1 n.3 (Nov. 16, 2015) (emphasis
added). This same message is repeated at the bottom of the Delinquency Notice
included with the account statement and includes the phrase “[t]he total amount due
to reinstate the loan as of November 16, 2015 is $228,863.88.” Id. at 3. This footnote
does not explain Mr. Kowalski’s lack of personal liability for these, or any amounts
alleged owed on the note. It does not explain that redemption is just an option that
Mr. Kowalski may choose to exercise. In fact, the footnote says “[i]f you do not
reinstate the loan, the entire amount of the loan is due.” Id. at 1 n.3. Viewing this
language from the perspective of a hypothetical unsophisticated consumer, the Court
interprets the statement to mean that Mr. Kowalski must either pay the
reinstatement amount or pay the entire amount of the loan, neither of which Mr.
Kowalski is required to do. This statement differs from the reinstatement notice that
Mr. Kowalski alleges is typically sent to consumer. Am. Compl. ¶ 68; Sample Notice.
By repeatedly sending statements suggesting a payment was due, when in actuality
no payments were due, on a loan for which Mr. Kowalski no longer had any personal
liability, one can reasonably infer that Seterus was engaging in conduct, the natural
conduct of which was to harass, oppress or abuse Mr. Kowalski.
The Court’s conclusion is further supported by Seterus’ other communications
with Mr. Kowalski during this period. On top of the monthly account statements, a
representative of Seterus called Mr. Kowalski and told him that they would foreclose
on his home if he did not pay the over $200,000 due on the loan, something Seterus
had no power to do considering the prior entry of the Stipulated Judgment. This call

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caused Mr. Kowalski to fear that Seterus could foreclose on his New Jersey home.
The Court disagrees with Seterus that this fear was unreasonable.

The

representative’s alleged statements during the call, which was made to Mr.
Kowalski’s New Jersey home, were vague, and the New Jersey home was the only
one that Mr. Kowalski owned at the time. Moreover, in addition to the phone call
and account statements, Seterus sent Mr. Kowalski insurance letters, even after the
property had been sold at the foreclosure sale, charging Mr. Kowalski for the cost of
insurance on property he did not own and in which he lacked any interest. When
viewing all of the communications together, it is reasonable to infer that the
statements were not merely notices of the option to redeem the loan, but an attempt
to harass Mr. Kowalski into paying on a debt that he did not owe. See In re Collins,
474 B.R. at 321 (debiting a consumer’s discharged account with insurance obligations
that were the responsibility of the mortgagee constitutes harassment proscribed by a
discharge injunction). Therefore, Mr. Kowalski has pled sufficient facts to survive a
motion to dismiss his claim under § 1692d.6
c.

15 U.S.C. § 1692e, e(2)(A)

Mr. Kowalski also alleges that Seterus’ communications violated § 1692e of the
FDCPA. Under this provision, “[a] debt collector may not use any false, deceptive, or
misleading representation or means in connection with the collection of any debt.” 15
U.S.C. § 1692e. Specifically, the act prohibits a debt collector from providing a “false
representation of the character, amount, or legal status of any debt.”

Id. §

The Court also denies the motion to dismiss Mr. Kowalski’s claim in Count II under the
identical provision of the MFDCPA, section 11013(1). See supra note 3.
6

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1692e(2)(A). A representation is deceptive “when it can be reasonably read to have
two or more different meanings, one of which is inaccurate.” Waters v. Kream, 770 F.
Supp. 2d 434, 436 (D. Mass. 2011) (quoting Russell v. Equifax A.R.S., 74 F.3d 30, 35
(2d Cir. 1996)).
The Court concludes that Mr. Kowalski has pleaded sufficient facts that
Seterus

used

false,

deceptive,

or

misleading

representations

through

its

communications. The account statements use language such as “You are late on your
mortgage payments” and “Failure to bring your loan up-to-date may result in fees,
foreclosure, and the loss of your home,” which are false statements given the fact that
at the time they were sent, the Stipulated Judgment had been entered and Mr.
Kowalski had been discharged from all personal liability on the loan. Additionally,
nowhere do the statements explain that Mr. Kowalski had no personal liability on
the loan or legal obligations to OneWest. In fact, they suggest the opposite by stating
“If you do not reinstate the loan, the entire amount of the loan is due.” Again, this
language can be reasonably read to mean that Mr. Kowalski had an obligation to
make a payment on his loan, which is inaccurate. See Waters, 770 F. Supp. 2d at 436;
see also Turner v. J.V.D.B. & Assocs., Inc., 330 F.3d 991, 995 (7th Cir. 2003) (“In short,
by asserting [plaintiff] owed a debt that no longer existed, on its face the letter was
false”). Even after a careful reading of the statements, it is easy to see how a
hypothetical unsophisticated consumer could be misled by these statements into
believing that he still owed on the loan.

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Moreover, according to Mr. Kowalski, a Seterus representative called him on
or around November 20, 2015 and told him he had to make payments on his mortgage
loan or they would foreclose on his home. This statement, accepted as true for the
purposes of this motion, is false. At the time of the telephone call, the Stipulated
Judgment had already been entered on the Bryant Pond property and the statutory
redemption period had expired.

Mr. Kowalski was not required to make any

payments on his loan. He no longer owned the property. He could have attempted
to purchase the property up until or at the foreclosure sale. However, based on the
alleged facts, the representative never explained this option to Mr. Kowalski.
Instead, the Seterus representative falsely implied that if Mr. Kowalski did not make
a loan payment, it could foreclose on his home. By doing so, the representative
misrepresented the legal status of the loan.

See Turner, 330 F.3d at 995.

Furthermore, as pointed out earlier, the only home Mr. Kowalski owned as of
November 20, 2015 was his home in New Jersey, and Mr. Kowalski reasonably could
have taken the Seterus representative to be referring to his New Jersey home.
Similarly, Mr. Kowalski has pled sufficient facts that the insurance letters
were false or misleading.

As already explained, at the time Seterus sent the

insurance letters, Mr. Kowalski was a non-owner and non-obligor and had no
obligation to purchase or pay for insurance on the Bryant Pond property. In fact, part
of the premium assessed to Mr. Kowalski was for a period of time after the property
had been sold at the foreclosure sale. Because Mr. Kowalski did not owe any money
on the loan or for insurance, the insurance letters appear to misrepresent the legal

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status of the loan and the amount of debt owed by Mr. Kowalski. See id.; see also In
re Perviz, 302 B.R. 357, 372 (Bankr. N.D. Ohio 2003) (“[T]hose letters informing the
Debtors that they were liable for the payment of insurance on a house that they had
both abandoned in bankruptcy and physically vacated, would undoubtedly have been
met with some degree of consternation by a similarly situated debtor”).
In sum, the Court concludes that Mr. Kowalski has pled sufficient facts to
establish his claim under § 1692e of the FDCPA.7
d.

15 U.S.C. § 1692f

Mr. Kowalski also alleges a violation of § 1692f of the FDCPA, which provides
that “[a] debt collector may not use unfair or unconscionable means to collect or
attempt to collect any debt.” 15 U.S.C. § 1692f. The FDCPA does not define “unfair
or unconscionable means,” but it does provide examples of conduct that could violate
the provision. Id. For example, it is a violation to collect any amount unless such
amount is expressly authorized, or to take or threaten to take any non-judicial action
to effect dispossession or disablement of property if there is no present right to
possession. Id. § 1692f(1), (6). Other courts have defined “unfair or unconscionable
means” by relying on the plain meaning of the terms. The meaning of “unfair” is
“marked by injustice, partiality, or deception.” See LeBlanc v. Unifund CCR Partners,
601 F.3d 1185, 1200 (11th Cir. 2010) (quoting Merriam-Webster Online Dictionary
(2010)). The meaning of “unconscionable” is “having no conscience,” unscrupulous,”

The Court also denies the motion to dismiss Mr. Kowalski’s claim in Count II under the
identical provision of the MFDCPA, section 11013(2). See supra note 3.
7

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“showing no regard for conscience,” or “affronting the sense of justice, decency, or
reasonableness.” See id. (quoting BLACK’S LAW DICTIONARY 1526 (7th ed. 1999)).
For the same reasons as discussed with respect to Mr. Kowalski’s other claims
under the FDCPA, the Court concludes that Mr. Kowalski has pleaded sufficient facts
to survive a motion to dismiss on this claim. Based on the alleged facts, which the
Court assumes are true for purposes of this motion, Seterus sent Mr. Kowalski
monthly statements that suggest he owes money for a loan on which he had no
personal liability. On top of these monthly statements, a representative called Mr.
Kowalski and told him they could foreclose on his home if he did not pay the amount
due, even though Mr. Kowalski did not owe any amount on the loan and his property
had already been foreclosed, leading Mr. Kowalski to believe that he could lose his
current home. Furthermore, Seterus charged Mr. Kowalski over $2,000 for insurance
on a property for which he was a non-obligor and non-owner. Taking these facts as
true, it is reasonable to infer that Seterus was attempting to deceive Mr. Kowalski
into making payments on a loan for which he was no longer liable, and thus using
unfair or unconscionable means to collect a debt. Therefore the Court denies Seterus’
motion to dismiss Mr. Kowalski’s claim under § 1692f.8
C.

Count III: MCCC Claim

In Count III of the amended complaint, Mr. Kowalski alleges that Seterus
violated the MCCC. Under the MCCC, a person cannot, in attempting to collect an
alleged debt arising from a consumer credit transaction, “claim, attempt, or threaten

The Court also denies the motion to dismiss Mr. Kowalski’s claim in Count II under the
identical provision of the MFDCPA, section 11013(3). See supra note 3.
8

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to enforce a right that has been barred by law or a final order of the Supreme Judicial
Court or a court of the United States.” 9-A M.R.S. § 9-403(1)(G). An aggrieved
consumer has the right to recover actual damages from any person who violates
section 9-403. Id. § 9-405.
Seterus first argues that it did not violate the MCCC because section 6323
permits Seterus to extend the redemption period to benefit Mr. Kowalski and the
account statements were merely invitations for Mr. Kowalski to redeem during the
extended period. The Court has already addressed this argument. First of all, section
6323 does not extend the redemption period. Secondly, the language and structure
of the account statements suggest that they were more than mere invitations to
redeem; they were attempts to collect on a debt no longer owed by Mr. Kowalski. This
interpretation is reinforced by the phone call in which Mr. Kowalski alleges the
Seterus representative said that Seterus would foreclose on his home if he did not
pay the over $200,000 owed on the loan. At the time of these communications, the
state court had entered a Stipulated Judgment releasing Mr. Kowalski from all
personal liability on the note. Therefore, these facts, taken as true, support the
reasonable inference that Seterus was trying to collect on a debt that was barred by
law.
Seterus also argues that the MCCC does not permit emotional damage awards
and because Mr. Kowalski has not shown any actual damages, the claim should be
dismissed. Seterus premises its argument on the fact that an individual cannot
recover for emotional distress under Maine’s UTPA. However, as Mr. Kowalski

41

points out, he removed his claim under UTPA. Additionally, Maine’s UTPA expressly
states that a plaintiff must suffer “loss of money or property,” 5 M.R.S. § 213, and
courts have interpreted UTPA to exclude emotional distress. In re Hannaford Bros.
Co. Customer Data Sec. Breach Litig., 613 F. Supp. 2d 108, 132 n.130 (D. Me. 2009),
rev’d on other grounds, 659 F.3d 151 (1st Cir. 2011).
By contrast, nothing in the MCCC requires loss of money or property; it just
says “actual damages.” See 9-A M.R.S. § 9-405. Courts have interpreted actual
damages to include compensation for emotional distress under similar acts. See, e.g.,
French v. Corp. Receivables, Inc., 489 F.3d 402, 404 (1st Cir. 2007) (FDCPA); Moore
v. Mortg. Elec. Registration Sys., Inc., 848 F. Supp. 2d 107, 122 (D. N.H. 2012)
(RESPA). Therefore, the Court does not interpret the MCCC to exclude emotional
distress damages. The Court concludes that Mr. Kowalski has pleaded sufficient
facts to sustain a plausible claim for relief under the MCCC.
V.

CONCLUSION
The Court hereby DENIES the Defendant’s Motion to Dismiss Plaintiff’s

Amended Complaint (ECF No. 13).
SO ORDERED.

/s/ John A. Woodcock, Jr.
JOHN A. WOODCOCK, JR.
UNITED STATES DISTRICT JUDGE
Dated this 9th day of January, 2017

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