Court Dismisses Claims Against Mortgage Servicer Alleging Post-Bankruptcy Failures

A Massachusetts federal district court recently dismissed a plaintiff’s class action complaint claiming that the defendants, including her mortgage servicer, violated state and federal debt collection laws and state consumer protection laws when they failed to send her monthly statements showing what she owed on her HELOC after her bankruptcy discharge. 

According to the complaint, the plaintiff went through a bankruptcy, and after the discharge, she was not personally liable for the HELOC, but the HELOC remained a lien on her home that could be foreclosed if the plaintiff did not make payments.  The plaintiff stopped receiving monthly statements.  Approximately 16 years after the bankruptcy discharge, the plaintiff received a Notice of Default and Notice of Intent to Foreclose on the HELOC from her mortgage servicer, one of the defendants.  That mortgage servicer had assumed the serving rights to the HELOC a few years after the bankruptcy discharge, and the other defendant currently holds the HELOC.

The plaintiff alleged, among other things, that, under TILA, Regulation Z, and Massachusetts law, interest and fees could not be assessed if a monthly statement was not sent, and that, because interest and fees could not be assessed during that time, the mortgage servicer made misrepresentations under the FDCPA when it sent the default notice with debt calculations including interest and fees.

The court stated that there was no dispute that the mortgage servicer, who did not own the loan, was not a creditor under TILA, and that the plaintiff did not allege that the current holder of her loan was required to send her monthly statements.  The TILA requirement to send monthly statements only applies to creditors.  The FDCPA does not require sending monthly statements.  Accordingly, the court dismissed the FDCPA claims, on behalf of the class and individual plaintiff, because those claims were predicated on the failed TILA violation claim.  The court, then, declined to exercise supplemental jurisdiction over the state law claims after dismissing the federal claims, and dismissed the declaratory judgment claim because it was based on the same theory as the FDCPA claims.