Baptiste v. Carrington Mortgage Services, LLC
ORDER granting in part and denying in part 12 Motion to Dismiss for Failure to State a Claim. Plaintiff's claims with respect to Exhibit B to the complaint are dismissed with prejudice. Ordered by Judge Allyne R. Ross on 7/5/2017. (Matsumura, Rebecca) (Main Document 16 replaced on 7/5/2017) (Guzzi, Roseann).
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF NEW YORK
--------------------------------------------------------------------RIGAL J. BAPTISTE, on behalf of himself and all others
-againstCARRINGTON MORTGAGE SERVICES, LLC,
NOT FOR ELECTRONIC
OR PRINT PUBLICATION
OPINION & ORDER
ROSS, United States District Judge:
Plaintiff, Rigal Baptiste, brings this putative class action alleging that certain collections
activities of defendant, Carrington Mortgage Services, LLC (“Carrington”), violated the Fair
Debt Collection Practices Act (“FDCPA”), 15 U.S.C. § 1692 et seq. Specifically, plaintiff
alleges that Carrington violated (1) Section 1692e(10) by failing to disclose in a servicing
transfer letter that his mortgage indebtedness was increasing due to interest, Compl. ¶ 56, ECF
No. 1, and (2) Section 1692e(11) by failing to state that a notice asking plaintiff to call his
mortgage servicer was a communication from a debt collector, id. ¶ 60. Before the court is
defendant’s motion to dismiss. 1 Because Avila v. Riexinger & Associates, LLC, 817 F.3d 72 (2d
Cir. 2016) requires debt collectors to disclose that a debt is increasing due to interest and fees, I
deny defendant’s motion with respect to the servicing transfer letter. I grant defendant’s motion
with respect to the notice asking plaintiff to call his mortgage servicer, because the least
sophisticated consumer would understand that this notice was a communication from a debt
See Mem. Law Supp. Def. Carrington Mortgage Services, LLC’s Mot. Dismiss (“Mot.”),
ECF No. 12-4; Pl.’s Resp. Brief Opposing Def.’s Mot. Dismissal, ECF No. 13; Reply Mem.
Supp. Def. Carrington Mortgage Services, LLC’s Mot. Dismiss, ECF No. 14.
The communications at issue in this case both relate to the mortgage secured by
plaintiff’s home. Compl. ¶ 14. At all relevant times, plaintiff’s mortgage was in default. Id.
¶ 16. The last monthly payment on the mortgage was made in November 2012. Id. ¶ 17.
A. The Letter
On September 12, 2016, Carrington sent a “Notice of Servicing Transfer” letter alerting
plaintiff that his mortgage would no longer be serviced by Wells Fargo, but by Carrington. Not.
of Servicing Transfer (the “Letter”) at 1, Compl. Ex. A, ECF No. 1-1. The Letter provided that,
going forward, all mortgage payments should be sent to Carrington, but that “[n]othing else
about [the] mortgage loan will change.” Id.
Attached to the letter was a document titled, “NOTICE Pursuant to Fair Debt Collection
Practices Act 15 U.S.C. Section 1692, et seq.” Id. at 3. It stated, “[t]his notice is to remind you
that you owe a debt. As of the date of this Notice, the amount of debt you owe is $412,078.34.”
Id. The attachment also included the debt validity notice required by Section 1692g. Id.; see 15
U.S.C. § 1692g. A second document, purporting to be a notice in compliance with New York
law, restates that the “[a]mount of the [d]ebt as of the date of this notice [was] $412,078.34” and
advises that “[Carrington] is deemed to be a debt collector attempting to collect a debt and any
information obtained will be used for that purpose.” Letter at 7. Finally, the letter encloses
instructions to make a payment by telephone or online. Id. at 9.
B. The Notice
On February 23, 2017, Carrington posted a notice on the door of plaintiff’s home.
Compl. ¶ 38. It read as follows:
Dear Borrower: Rego Baptiste
Please contact your mortgage servicer immediately at: (800) 561-4567.
Compl. Ex. B (the “Notice”), ECF No. 1-2, at *3.
A. Standard of Review
In considering a motion to dismiss made pursuant to Rule 12(b)(6), the court must accept
all factual allegations in the complaint as true and must also draw all reasonable inferences in
favor of the plaintiff. Lundy v. Catholic Health Sys. of Long Island Inc., 711 F.3d 106, 113 (2d
Cir. 2013). The complaint’s allegations, however, “must be enough to raise a right to relief
above the speculative level.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). Only “a
plausible claim for relief survives a motion to dismiss.” LaFaro v. N.Y. Cardiothoracic Grp.,
570 F.3d 471, 476 (2d Cir. 2009). Thus, courts “are not bound to accept as true a legal
conclusion couched as a factual allegation,” and “[t]hreadbare 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) (quoting Twombly, 550 U.S. at 555).
In assessing the legal sufficiency of a pleading, “[w]hile courts generally do not consider
matters outside the pleadings, they may consider documents attached to the pleadings,
documents referenced in the pleadings, or documents that are integral to the pleadings.” Smart v.
Goord, 441 F. Supp. 2d 631, 637 (S.D.N.Y. 2006); accord. L-7 Designs, Inc. v. Old Navy, LLC,
647 F.3d 419, 429 (2d Cir. 2011).
A. The FDCPA
Congress enacted the FDCPA “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(e). To ensure that the statute
protects the most vulnerable debtors, courts are to view debt collection communications from the
perspective of the “least sophisticated consumer.” Greco v. Trauner, Cohen & Thomas, L.L.P.,
412 F.3d 360, 363 (2d Cir. 2005) (quoting Clomon v. Jackson, 988 F.2d 1314, 1318-19 (2d Cir.
1993)). The “least sophisticated consumer” standard of review examines “how the least
sophisticated consumer—one not having the astuteness of a ‘Philadelphia lawyer’ or even the
sophistication of the average, everyday, common consumer—understands the notice he or she
receives.” Russell v. Equifax A.R.S., 74 F.3d 30, 34 (2d Cir. 1996). “[I]n crafting a norm that
protects the naïve and the credulous[,] the courts have carefully preserved the concept of
reasonableness.” Clomon, 988 F.2d at 1319. Thus, “FDCPA protection ‘does not extend to
every bizarre or idiosyncratic interpretation of a collection notice’ and courts should apply the
standard ‘in a manner that protects debt collectors against liability for unreasonable
misinterpretations of collection notices.’” Easterling v. Collecto, Inc., 692 F.3d 229, 233-34 (2d
Cir. 2012) (quoting Clomon, 988 F.2d at 1319). The least sophisticated consumer “is neither
irrational nor a dolt.” Ellis v. Solomon and Soloman, P.C., 591 F.3d 130, 135 (2d Cir. 2010)
(citing Russell, 74 F.3d at 34). “[B]ecause the least sophisticated consumer standard is
objective, the determination of how the least sophisticated consumer would view language in a
defendant’s collection letter is a question of law.” Quinteros v. MBI Assocs., Inc., 999 F. Supp.
2d 434, 437 (E.D.N.Y. 2014) (quoting Castro v. Green Tree Servicing LLC, 959 F. Supp. 2d
698, 707 (S.D.N.Y. 2013)).
The parties do not dispute that plaintiff is a consumer within the meaning of the FDCPA.
C. The Letter
Plaintiff alleges that the Letter violated Section 1692e(10) because it did not disclose that
his mortgage balance was increasing due to interest, as required under Avila v. Riexinger &
Associates, LLC, 817 F.3d 72 (2d Cir. 2016). Compl. ¶ 56. Section 1692e(10) is “a catch-all
provision that bars ‘[t]he use of any false representation or deceptive means to collect or attempt
to collect any debt. . . .’” Altman v. J.C. Christensen & Assocs., Inc., 786 F.3d 191, 194 (2d Cir.
2015) (quoting 15 U.S.C. § 1692e(10)). In Avila, plaintiffs claimed that collection notices that
included the current balance of their debt, but did not state “that the balance might increase due
to interest and fees” were misleading under Section 1692e. Avila, 817 F.3d at 74. The Second
Circuit agreed, deciding “that plaintiffs ha[d] stated a claim that the collection notices at
issue . . . [were] misleading within the meaning of Section 1692e” because “[a] reasonable
consumer could read the notice and be misled into believing that she could pay her debt in full by
paying the amount listed on the notice.” Id. at 76. The court further reasoned as follows:
In fact, however, if interest is accruing daily, or if there are undisclosed late fees,
a consumer who pays the “current balance” stated on the notice will not know
whether the debt has been paid in full. The debt collector could still seek the
interest and fees that accumulated after the notice was sent but before the balance
was paid, or sell the consumer’s debt to a third party, which itself could seek the
interest and fees from the consumer.
Id. In other words, “the statement of an amount due, without notice that the amount is already
increasing due to accruing interest or other charges, [could] mislead the least sophisticated
consumer into believing that payment of the amount stated will clear her account.” Id. The
Second Circuit thus held “that the FDCPA requires debt collectors, when they notify consumers
of their account balance, to disclose that the balance may increase due to interest and fees.” Id.
There is no dispute that interest was accruing on the mortgage. Compl. ¶ 32; Mot. at 2.
This fact was not disclosed on the Letter. Compl. ¶ 31; Letter. Therefore, the letter is
misleading for the same reasons explained in Avila. Defendant makes four arguments against
First, defendant argues that Avila is inapplicable because the Letter was not a collection
attempt, but only a notice required under Section 1692g. Mot. at 5-6. According to defendant,
because the Letter is not a collection attempt, it cannot be misleading under Section 1692e. The
Avila court rejected this argument, explaining the relationship between Sections 1692g and
1692e as follows:
Section 1692g concerns only the disclosures related to a consumer’s need to
verify a debt, not the more general disclosures that may be necessary under
Section 1692e to ensure that a collection notice is not misleading. The two
sections have different aims, and compliance with Section 1692g does not
guarantee compliance with Section 1692e, which always applies in connection
with the collection of any debt by a debt collector.
Avila, 817 F.3d at 76. In other words, Section 1692e applies regardless of whether the notice
sent complied with, or was intended to comply with, Section 1692g.
Thus, the crucial inquiry is whether the Letter was sent “in connection with the collection
of [a] debt.” See 15 U.S.C. § 1692e. Carrington argues that only “collection letters” meet this
standard. Mem. at 5-8. The Second Circuit rejected precisely this argument in Hart v. FCI
Lender Servs., Inc., 797 F.3d 219, 226-27 (2d Cir. 2015). In Hart, the plaintiff challenged a
notice sent by his mortgage servicer as required under the Real Estate Settlement Procedures Act
(“RESPA”). Id. at 220. The mortgage servicer argued that because the letter “was intended
merely to comply with RESPA by providing certain information[,] . . . it was not aimed at
collecting a debt and thus did not trigger the FDCPA.” Id. at 223 (alterations and quotation
omitted). The Second Circuit rejected this argument, finding that the letter was an attempt to
collect a debt. Id. at 226. The factors relevant to this conclusion are as follows:
The Letter references Hart’s particular debt, directs Hart to “mail [his]
payments . . . to FCI Lender Services, Inc.” at a specified address, and refers to
the FDCPA by name. More critically, it warns Hart that he must dispute the
debt’s validity within thirty days after receiving the Letter or his debt will “be
assumed to be valid.” Finally, and most importantly, the Letter, in its two-page
attachment . . . announces itself as an attempt at debt collection. . . . A reasonable
consumer would credit the Letter’s warning, its instruction to take action within
thirty days, and its statement that it represents an attempt to collect a debt.
Id. (citations omitted). Each of these observations also applies to the Letter at issue here.
Therefore, the Letter was sent in connection with the collection of a debt. Section 1692e and
case law interpreting that section, including Avila, apply.
Next, defendant argues that Avila does not apply to ongoing mortgage loans like
plaintiff’s debt because “[e]ven the least sophisticated mortgage borrower knows both that
interest continuously accrues on the unpaid mortgage balance and [that] fees will be incurred if
monthly payments are not timely made.” Mot. at 8-9.
Generally, mortgage servicers are exempted from the FDCPA. See 15 U.S.C.
§ 1692a(6)(F) (exempting from the definition of “debt collector” “any person collecting or
attempting to collect any debt owed or due . . . to the extent such activity . . . concerns a debt
which was not in default at the time it was obtained by such person.”). However, “[a] mortgage
servicer is a ‘debt collector’ within the meaning of the FDCPA if the mortgage was in default at
the time the servicer began servicing the debt.” Zirogiannis v. Seterus, Inc., 221 F. Supp. 3d
292, 302 (E.D.N.Y. 2016) (citing Kapsis v. Am. Home Mort. Servicing, Inc., 923 F. Supp. 2d
430, 442 (E.D.N.Y. 2013)). Here, plaintiff alleges that his loan was in default at the time
Carrington began servicing it. Compl. ¶ 20.
The court is aware of no authority holding that mortgage servicers collecting on a
mortgage in default are treated differently than any other debt collector subject to the FDCPA.
See generally Kilpakis v. JPMorgan Chase Fin. Co., LLC, -- F. Supp. 3d --, No. 16-cv-2690
(ADS) (AKT), 2017 WL 112518, at *6-9 (E.D.N.Y. Jan. 10, 2017) (discussing alleged FDCPA
violations by mortgage servicer without noting any different standard); ValleCastro v. Tobin,
No. 3:13-cv-1441, 2015 WL 6478412, at *4-10 (D. Conn. Oct. 27, 2015) (same); Scott v. Am.
Security Ins. Co. (In re Scott), No. 16-12045 (JLG), 2017 WL 2579033, at *24 n.59 (Bankr.
S.D.N.Y. June 14, 2017) (“‘Debt’ can include ‘[an] obligation to make mortgage payments, as
well as fees, penalties, and interest on that mortgage’ under the FDCPA.” (citing Yarney v.
Ocwen Loan Servs., LLC (In re Yarney), 929 F. Supp. 2d 569, 575 (W.D. Va. 2013))). I
therefore reject defendant’s argument that whether Avila’s requirements apply turns on the type
of debt being collected. 2
Third, defendant argues that, even if Avila applies, the Letter fits within Avila’s safeharbor language because it assures plaintiff that “[n]othing else about [his] mortgage loan will
change.” Mot. at 7-8; Letter at 1. In Avila, the Second Circuit provided that “a debt collector [is
not] subject to liability under Section 1692e for failing to disclose that the consumer’s balance
may increase due to interest and fees if the collection notice either accurately informs the
consumer that the amount of the debt stated in the letter will increase over time, or clearly states
that the holder of the debt will accept payment of the amount set forth in full satisfaction of the
debt if payment is made by a specified date.” 817 F.3d at 77. The Letter does neither, and
therefore does not fall within Avila’s safe harbor. 3
Nor does the fact that plaintiff’s mortgage disclosed that interest would accrue, and fees
be charged for late payments, affect this conclusion. See Mot. at 8-9. Presumably all credit card
agreements contain the same language, yet I am aware of no case – and defendant cites none –
charging the least sophisticated consumer with knowledge of the underlying contract creating the
debt now being collected.
Once again, the fact that interest and/or fees may be disclosed in the note creating the
underlying obligation that led to the debt is not relevant. See, supra, n.2.
Finally, defendant argues that any violation of its obligations under Avila is not material.
Mot. at 9-10. The Second Circuit has never explicitly imposed a materiality requirement on
FDCPA violations, but has indicated in a recent summary order that it would. See Fritz v.
Resurgent Capital Servs., LP, 955 F. Supp. 2d 163, 170 (E.D.N.Y. 2013) (citing Gabriele v. Am.
Home Mortg. Servicing, Inc., 503 F. App’x 89, 94 (2d Cir. 2012)). In that same summary order,
the Circuit defined a material violation as “communications and practices that could mislead a
putative-debtor as to the nature and legal status of the underlying debt, or that could impede a
consumer’s ability to respond to or dispute collection.” Gabriele, 503 F. App’x at 96. The Avila
court noted that, “if interest is accruing daily, or if there are undisclosed late fees, a consumer
who pays the ‘current balance’ stated on the notice will not know whether the debt has been paid
in full.” Avila, 817 F.3d at 76. Thus, a violation of Avila “could impede a consumer’s ability to
respond to . . . collection,” Gabriele, 503 F. App’x at 96, and such violation is material.
For all of these reasons, I deny defendant’s motion with respect to the Letter.
D. The Notice
Section 1692e(11) requires that debt collectors disclose in all communications in
connection with the collection of any debt that the communication is from a debt collector. 15
U.S.C. § 1692e(11). Defendant argues that Section 1692e does not apply to the Notice, because
it was not a communication made “in connection with the collection of any debt.” Mot. at 11
(quoting 15 U.S.C. § 1692e). Alternatively, defendant argues that the Notice adequately
discloses that it is from a debt collector. Id. at 12.
In the Second Circuit, “whether a communication is ‘in connection with the collection of
[a] debt’ is . . . to be determined by reference to an objective standard . . . [that] ask[s]
whether . . . a consumer receiving the communication could reasonably interpret it as being sent
‘in connection with the collection of [a] debt.’” Hart, 797 F.3d at 225. The “sender’s subjective
purpose” does not matter. Id. (citations omitted). “[I]f a consumer receiving a letter could
reasonably understand it to be a communication in connection with the collection of a debt, then
the consumer is entitled to the protections Congress has mandated for such communications.”
Here, “a consumer . . . could reasonably understand [the Notice] to be a communication
in connection with the collection of a debt.” Id. The Notice, affixed to plaintiff’s door, requests
that he contact his mortgage servicer immediately. The least sophisticated consumer would
surmise that such a request related to his mortgage servicer, whom he would know as a debt
collector. Few people would understand an “urgent” request to call a debt collector as anything
other than a communication in connection with a debt. See Cohen v. Ditech Fin. LLC, No. 15cv-7124 (NSR), 2017 WL 894429, at *5 (S.D.N.Y. Mar. 3, 2017) (“The [c]ourt finds the door
hanger to be a ‘communication’ under the FDCPA – at the very least, it is an indirect
communication concerning [p]laintiff’s debt; namely, that a mortgage servicer . . . is expecting
an immediate call from [p]laintiff . . . .”). Defendant’s arguments to the contrary relate to
Carrington’s intentions, see Mot. at 11-12, which are simply not relevant to the question of
whether or not the FDCPA applies, see Hart, 797 F.3d at 225.
As the foregoing analysis suggests, the Notice sufficiently disclosed that it was a
communication from a debt collector. The FDCPA requires no “‘magic words’ or specific
phrases” to be used. Shanker v. Fair Collection & Outsourcing, LLC, No. 3:09-cv-1759(FLW),
2009 WL 1767580, at *4 (D.N.J. June 19, 2009). The Tenth Circuit has noted that the Section
1692e(11) “does not place the required disclosure in quotation marks or set forth any specific
required wording for the disclosure.” Dikeman v. Nat’l Educators, Inc., 81 F.3d 949, 952 (10th
Cir. 1996). Once again, the test is whether the least sophisticated consumer would be aware that
the communication was disseminated by a debt collector. See Forman v. Academy Collection
Serv., Inc., 388 F. Supp. 2d 199, 205 (S.D.N.Y. 2005) (Language identifying a debt collector as
such “is not required to” “track the language of the statute verbatim” “as long as the warning
comes across.” (citing Gaetano v. Payco, 774 F. Supp. 1404, 1409 (D. Conn. 1990))). This is
essentially the same analysis as required to find that the FDCPA applies under Hart.
In plaintiff’s cases, the debt collector identified itself only by the name of the firm, a
practice which courts have found to be insufficient. See, e.g., Wong v. Green Tree Servicing,
LLC, No. 13-7887 (ES), 2014 WL 4418077, at *1 (D.N.J. Sept. 5, 2014); Foti v. NCO Fin. Sys.,
Inc., 424 F. Supp. 2d 643, 648 (S.D.N.Y. 2006). 4 Here, by contrast, defendant is identified by its
functional role, as plaintiff’s “mortgage servicer.” Once again, even the least sophisticated
consumer would know that a mortgage servicer is a debt collector. I therefore grant defendant’s
motion with respect to the Notice. 5
Other cases plaintiff cites were decided on default judgment and do not disclose the
content of the phone messages at issue. See, e.g., Hirsch v. ANI Mgmt. Grp., Inc., No. 12-CV3454 (ARR) (RML), 2013 WL 3093977, at *1 (E.D.N.Y. June 18, 2013); Dona v. Midland
Credit Mgmt., Inc., No. CV 10-0825 (JS) (WDW), 2011 WL 941204, at *1 (E.D.N.Y. Feb. 10,
2011), R. & R. adopted by 2011 WL 939724 (E.D.N.Y. Mar. 15, 2011).
I do not reach defendant’s remaining arguments regarding dismissal of this claim.
Defendant’s motion is granted in part and denied in part. Specifically, only claims with
respect to Exhibit B to the Complaint are dismissed.
Allyne R. Ross
United States District Judge
July 5, 2017
Brooklyn, New York
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