Case Study: Mortgage Company
When Creditors Try to Collect a Debt That Doesn’t Exist
A big chunk of my job as a consumer protection attorney at The Dellutri Law Group, PA is suing banks, mortgage servicers, debt collectors, and various other creditors for continually trying to collect money that isn’t owed, either because it was paid off, legally discharged in a bankruptcy, or (occasionally) never owed in the first place. Usually, that means the creditor continues sending billing statements on a regular basis, sometimes every month, for a long time after the debt is no longer actually owed—and sometimes after a cease and desist letter or even a lawsuit.
I know what you’re thinking: “Joe, buddy, come on… nobody could possibly be that stupid, right?” Wrong. Creditors can be pretty stupid. Whether it’s willful ignorance, a glaring omission in their internal systems, or something else entirely, creditors frequently make the same mistakes over and over and over again, even after being sued for it. The federal Fair Debt Collection Practices Act (FDCPA) and its state law counterpart, the Florida Consumer Collection Practices Act (FCCPA), are designed to discourage certain debt collection practices that these creditors frequently engage in and to further encourage them to reconfigure their business processes and methods to avoid committing the kinds of violations that land them on the receiving end of a lawsuit. However, some creditors don’t take the hint, even after being sued multiple times for the same violation against the same person.
Case in Point
I sue mortgage servicers for this kind of thing all the time. I recently had a client—the sweetest lady I’ve ever met—who surrendered her home back to the bank in a bankruptcy long ago. She moved out of the house, finished her bankruptcy, got relieved of the debt, and assumed that was the end of it. Then, for reasons I’ll never understand, the mortgage debt was transferred to a new servicer several years after the bankruptcy discharge wiped out her personal obligation to pay the mortgage debt. That servicer then sent my client monthly billing statements every month for over a year, even after I sent a cease and desist letter. Stupid, right??
So, I had to sue the servicer, and eventually the case settled without going in front of the judge. As a part of the settlement agreement, the servicer specifically agreed that it would make no further attempts to collect the discharged mortgage debt from my client. That should have been the end of it, but it wasn’t. After a few months of zero contact, the servicer then resumes sending its monthly bill, demanding that my client pay money on a mortgage that she didn’t owe anymore. The best part was that the house itself had already been foreclosed upon by the homeowners’ association, so the house didn’t legally belong to her anymore anyway. There was absolutely no reason the servicer should be sending the bills, especially given the prior lawsuit—yet they were still being sent every month, like clockwork. Cue the facepalm.
But wait, it gets better. Thus, we sued the servicer a second time, and this time demanded punitive damages—damages designed to punish them for egregiously violating the law with no regard for my clients’ rights and no excuse that they could possibly mount with a straight face. They were served with the lawsuit, and their attorney began filing things in opposition, but the billing statement continued for several months after the second suit was filed!
Eventually the case settled, but not before several years of hardcore litigation. Despite very obviously being on the wrong end of the law, the servicer fought us tooth and nail, right up until trial, because they would never admit that what they did was stupid. And that, friends, should tell you just how stupid creditors can be!