On January 11, 2019, the United States Court of Appeals for the Sixth Circuit reversed the United States District Court for the Eastern District of Michigan in interpreting what it means to “cease collection of the debt,” as required by the Fair Debt Collection Practices Act (“FDCPA”) in 15 U.S.C § 1692g(b). This section requires that if a consumer notifies a debt collector that the debt is disputed, within the appropriate amount of time, “the debt collector shall cease collection of the debt, or any disputed portion thereof, until the debt collector obtains verification of the debt…and a copy of such verification…is mailed to the consumer by the debt collector.”
In Kevin Scott v. Trott Law, P.C., Case No. 18-1051, the Court of Appeals held that when a borrower disputes a debt, “[t]he debt collector cannot allow the essential statutory elements of a Michigan foreclosure to proceed after receiving a timely Dispute Letter until it obtains sufficient verification of the debt.” While the District Court indicated the FDCPA did not require the foreclosure firm to verify the debt, and that the foreclosure firm had ceased collection of the debt pursuant to the statute because they themselves performed no more activity, the Court of Appeals found that the District Court’s reading of the FDCPA would nullify the Dispute Letter. The District Court went on to interpret the FDCPA requirement to cease collection to mean that all statutory elements of the Michigan foreclosure process (even those performed by a law firm’s vendor) must stop if a consumer notifies a debt collector that the debt is disputed.
This Sixth Circuit ruling changes the way that debt disputes must be handled by those deemed to be debt collectors in Michigan. If you would like to further discuss this change to better understand how it might impact your Michigan loan population, please contact Managing Attorney, Michael Woods, at firstname.lastname@example.org or (248) 853-4400, ext. 1199.