By Thomas G. Wolfe, J.D.
Recently, a Florida appellate court was called to review whether a note-holding bank that initiated a foreclosure action against the real property of a pair of homeowners was subject to a provision of the Florida Consumer Collection Practices Act (FCCPA) governing debt-collection assignments. The homeowners asserted an affirmative defense against Deutsche Bank National Trust in the bank’s foreclosure action, contending that Deutsche Bank could not foreclose against their property because the bank was required to provide them with written notice of the assignment of their mortgage debt but did not comply with the FCCPA's requirements.
Ultimately, in the case of Deutsche Bank National Trust Company v. Hagstrom, the Florida District Court of Appeal (Second District) rejected the homeowners’ contention. In reviewing the relationship of the FCCPA provision governing debt-collection assignments with Florida mortgage foreclosure law and Florida’s Uniform Commercial Code provisions governing negotiable instruments, the state appellate court determined that the FCCPA provision did not apply to Deutsche Bank under the facts of the case nor did it limit the bank’s right, as holder of the promissory note, to enforce the note.
Backdrop. Deutsche Bank was not the original lender but eventually was assigned the mortgage in its capacity as a trustee. Further, the bank became the holder of the underlying promissory note on the secured property.
Homeowners’ stance. The homeowners argued that Deutsche Bank failed to comply with the FCCPA’s requirement to provide them with written notice of the assignment of their mortgage debt at least 30 days prior to the bank’s lawsuit to foreclose on their property. The homeowners contended that this failure to comply with Florida’s debt-collection assignment provision prevented the bank from advancing its foreclosure action.
Bank’s stance. In contrast, while Deutsche Bank maintained that it had sent a letter to the homeowners in November 2006—several years before the foreclosure action—informing the homeowners of the transfer of the servicing of the mortgage loan. Deutsche Bank further argued that it was not required to comply with the FCCPA notice requirement in any event because the bank was not a “debt collector” and its filing of the foreclosure lawsuit was not a “debt collection activity.” In addition, even if the bank was required to comply with the FCCPA provision, its noncompliance did not bar the bank from pursuing its foreclosure action, Deutsche Bank argued.
FCCPA provision. The FCCPA (section 559.715) provides that it “does not prohibit the assignment, by a creditor, of the right to bill and collect a consumer debt. However, the assignee must give the debtor written notice of such assignment as soon as practical after the assignment is made, but at least 30 days before any action to collect the debt. The assignee is a real party in interest and may bring an action to collect a debt that has been assigned to the assignee and is in default.”
Court’s analysis. At the outset, the Florida appellate court noted that it had previously and “implicitly” determined that a “promissory note secured by a mortgage is a consumer debt for purposes of the FCCPA.”
Next, the court underscored that Deutsche Bank was entitled to enforce the promissory note “not because it is an assignee of the right to bill and collect but because it meets the statutory definition of the holder of the note” under Article 3 (Negotiable Instruments) of the Florida UCC. The court pointed out that Deutsche Bank had provided the trial court with sufficient evidence showing that the bank was the holder of the note and was assigned the mortgage.
Construing the FCCPA provision, (section 559.715), the court emphasized that the statute applied to “assignees of the right to bill and collect consumer debt” but not to assignees of the debt itself. Consequently, the FCCPA provision did not require any action by the pertinent creditor or the noteholder. The court asserted that the “right of the note holder to enforce the note exists regardless of an assignment to bill and collect the debt.” Moreover, the FCCPA “contains no reference to notes, mortgages, or foreclosure, and there is no express connection” between the FCCPA and Florida mortgage foreclosure law, the court stated.
As a result, the court concluded that the FCCPA provision “simply does not apply to holders of notes secured by mortgages on real property. Neither is it an affirmative defense to foreclosure actions; it does not establish a condition precedent and in no other way avoids the claims to foreclose a mortgage and enforce a note.”
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