4th Circuit Holds That Mortgage Statements Sent to Borrower in Bankruptcy Did Not Violate Automatic Stay or FDCPA

A panel of the U.S. Court of Appeals for the Fourth Circuit recently held that sending mortgage loan statements, with express disclaimers, to a borrower undergoing bankruptcy proceedings did not violate the bankruptcy court’s automatic stay and did not constitute debt collection attempts under the FDCPA.

After the borrower had filed for Chapter 13 bankruptcy, his loan servicer regularly sent him written communications, including monthly statements, payoff statements, and tax forms.  The borrower sued the servicer, alleging that these documents constituted debt collection attempts in violation of the bankruptcy court’s automatic stay of collection activities.  Additionally, he alleged that these documents contained inaccurate numbers in violation of the FDCPA and the Maryland Debt Collection Act.  A Maryland federal district court granted summary judgment in favor of the servicer on the federal law claims and dismissed the state law claim for lack of jurisdiction.

A panel of the Fourth Circuit affirmed.  Relying on its previous decisions, the court held that because the borrower should have known from express disclaimers on the forms that the servicer was not trying to collect a debt, the monthly statements did not relate to debt collection activities.  The court also observed that, in addition to the payoff statements’ inclusion of similar disclaimers, the borrower had requested these documents, so they were not sent to obtain payment.  Further, the court reasoned that the tax forms did not relate to debt collection activities because they contained no request or instructions for payment.

Given that none of the documents related to debt collection activities, the court concluded that the borrower had failed to establish an FDCPA violation.  Likewise, the court concluded that sending these documents could not have violated the automatic stay because they were not debt collection activities.  And without a federal law claim remaining or other jurisdictional basis, the court agreed that the federal district court lacked subject-matter jurisdiction to entertain the state law claim.