Texas Court Upholds FDCPA Claim Against Collection Agency

A Texas class action lawsuit against a Coloradan collection agency and a Delaware-based mortgage company won’t succeed solely on the strength of its Fair Debt Collection Practices Act (FDCPA) violation claim. (Take a breath.) Or, at least, the mortgage company is somewhat in the clear. It may, however, succeed based on Texas’s own Texas Debt Collection Act (TDCA).

The suit, filed back in December of 2010, has been slowly working its through the Texas courts. In it, a Texas woman, Naomi Boles, alleges that her mortgage company, Nationstar Mortgage, broke the law when it sent her (allegedly) past-due home equity loan account to Moss Codilis LLP, the Coloradan collection agency.

At issue is the notice Moss Codilis sent to Boles, and possibly thousands of other Texas mortgage holders, which in part states, “If you voluntarily surrender possession of the collateral specified herein, you could still owe additional monies after the money received from the sale of the collateral is deducted from the total amount you owe.”

That’s not how they roll in Texas, though. As stated in the complaint, “The letter misrepresents Texas law because Texas residents who have obtained Texas home equity loans secured by their homesteads have no personal liability for any deficiency owing on a home equity loan.”

The good news for Nationstar Mortgage is that the FDCPA violation won’t stick; Nationstar Mortgage isn’t considered a debt collector under the FDCPA. (This doesn’t help Moss Codilis at all.) Both Nationstar and Moss Codilis, however, could be in dutch with the Texas Debt Collection Act. U.S. District Judge Xavier Rodriguez wrote in his ruling, “Under the TDCA, a debt collector is defined as ‘a person who directly or indirectly engages in debt collection.’ Thus, the TDCA’s definition of a debt collector is broader than that under the FDCPA, and includes creditors seeking to collect debts originated by them.”

Both defendants have until August 30 to respond to the motion for class certification.