Sixth Circuit Examines Who is a Debt Collector for Purposes of FDCPA Section 1692(f)(6)

By Anna Claire Turpin

The Sixth Circuit Court of Appeals recently explored the limitations of Section 1692(f)(6) and held that a property preservation and maintenance company was not a debt collector for purposes of that section.  The opinion highlights the importance that principal purpose and timing have on this limited provision of the FDCPA. Thompson v. Five Bros. Mortg. Co., 2020 U.S. App. LEXIS 2881  (6^th Cir. Jan. 27, 2020).

In Thompson, the consumer alleged that Defendant, a property preservation and maintenance company, violated 15 U.S.C. §1692f(6) by dispossessing her of her personal property when there was no legal right to possession.  Central to the court’s determination was whether the defendant was a debt collector for the limited purposes set forth in Section 1692(f)(6).  More specifically, the “central inquiry … is whether the principal purpose of Five Brothers’ business is the enforcement of security interests.”  Thompson, 2020 U.S. App. LEXIS, 2881 at *5.

The facts, as pleaded by the plaintiff, became integral to the Court’s reasoning and emphasize the importance that careful pleading and timing can play in FDCPA cases. Plaintiff, a consumer, defaulted on the mortgage for her home. The mortgagee, the bank, pursued a nonjudicial foreclosure of the property. Pursuant to state law, the bank held a sheriff’s sale at which it purchased the property, leaving a deficiency. The plaintiff failed to redeem the property during the statutory redemption period. After the redemption period ended and title passed to the bank, the defendant, a property-preservation and maintenance company that was hired by the bank, entered the property for the first time.  The defendant attempted to contact the plaintiff to post notices on the property that the bank had foreclosed the property and advising her of certain rights available. After no contact from the plaintiff, the defendant informed the bank that the property was vacant, and began to secure the property by performing maintenance and clearing the property, including removing belongings and changing the locks. The plaintiff alleged that the defendant violated 15 U.S.C. §1692f(6) by dispossessing her of her property when there was no legal right to possession.

PRINCIPAL PURPOSE.  Under the FDCPA, for the limited purposes set forth in §1692f(6), a “debt collector includes any person who uses any instrumentality of interstate commerce or the mails in any business the principal purpose of which is the enforcement of security interests.” 15 U.S.C. §1692(a)(6) (emphasis added).   While the parties disputed “whether, in the abstract, a property-preservation company that secures and maintains properties on behalf of a mortgagee during non-judicial foreclosure proceedings can be said to the in the business of enforcing security interests,” the Court did not reach that issue because the Plaintiff did not allege nor offer evidence as to Defendant’s general practices.

TIMING IS EVERYTHING.  Instead, the Court considered the defendant’s practices as they specifically related to its  actions in this case: Defendant entered the property and began to clear and secure the property after the foreclosure proceedings had ended and title had passed to the bank. Because the redemption period had ended prior to defendant’s involvement, the plaintiff’s rights in property had already been extinguished. Furthermore, the Court reasoned that the fact that the bank was entitled to a deficiency judgment did not change the result because there was no evidence that Defendant would take part in that action, nor was there evidence that Defendant’s “principal purpose” was to do so. The Court was further persuaded by the fact that the right to seek a deficiency judgment stems from the promissory note and does not relate to the enforcement of a security interest.

Based on that reasoning, the Court held that the defendant, did not meet the definition under 15 U.S.C. §1692f(6) and affirmed the district court's judgment in favor of the defendant.

Anna Claire Turpin is a member of Smith Debnam’s Consumer Financial Services Litigation and Compliance team.