M.D.N.C.: Koepplinger v. Seterus- FDCPA Violation for Threat to Accelerate Mortgage

Koepplinger, as a putative class representative, alleged that Seterus would send North Carolina residents who were more than 45 day delinquent on mortgage payments its “NC Final Letter”, which stated, in pertinent part, that:

“If full payment of the default amount is not received by us . . . on or before the Expiration Date, we will accelerate  the maturity date of your loan and upon such acceleration the ENTIRE indebtedness of the loan, including principal, accrued interest, and all other sums due thereunder, shall, at once and without further notice, become immediately due and owing.”

The NC Final Letter further states:

[“]If you send only a partial payment, the loan still will be in default and we may keep the payment and still will accelerate the maturity date.[”]

In depositions, however, Seterus admitted that if a borrower makes partial payments sufficient to bring the account less than 45 days delinquent, it never accelerates the mortgage note.

Accordingly, Koepplinger asserted such threat to accelerate violated the FDCPA, as well as state statutes.  15 U.S.C.  §   1692e forbids the use of ‘any false, deceptive, or misleading representation or means’ in debt collection,” including:

(5) The threat to take any action that cannot legally be taken or that is not intended to be taken.

and

(10) The use of any false representation or deceptive means to collect or attempt to collect any debt or to obtain information concerning a consumer.

Accordingly, Koepplinger alleged that the NC Final Letter “falsely inform[ed] debtors that, on pain of acceleration and foreclosure, they must pay the entire specified default amount by the Expiration Date, when, in reality, to forestall acceleration and foreclosure under Defendant’s corporate policy, they need[ed] only pay enough of the default amount (and/or of any other intervening charges) to bring their loans less than 45 days past due by the Expiration Date.”

Seterus argued that even though it never accelerated mortgages that were less than 45 days delinquent, it, nonetheless, possessed the authority to do so and giving homeowners an undisclosed additional “grace period” was not a false threat.

In its recommendation regarding the Motion to Dismiss filed by Seterus, this was rejected by the magistrate (and adopted by the district court) finding that the NC Final Letter conveyed a false sense of urgency and could, accordingly, be deceptive.

The cynic will argue that this will only encourage mortgage servicers to actually accelerate mortgage notes that are delinquent and stop helping debtors with secret grace periods.  Or Seterus could stop lying and trying to intimidate homeowners.