Alert

District Court Dismisses FDCPA and TILA Claims Against Mortgage Servicer

November 20, 2024

On November 14, 2024, the United States Court for the District of Arizona dismissed a pro se litigant’s claims against Sun West Mortgage Company, Inc. (Sun West) and Cody N. Crosier, foreclosure counsel for Sun West (collectively, Defendants) for, inter alia, alleged violations of the Fair Debt Collections Practice Act (FDCPA), 15 U.S.C. § 1692 and the Truth in Lending Act (TILA), 15 U.S.C. § 1640(k). The court ruled that a third party could foreclose on a property after the original lender sold its interest in the promissory note and deed of trust associated with the property.

Factual Background

Plaintiff’s Amended Complaint alleges that she executed a promissory note and deed of trust to purchase property but that an “unnamed lender ‘cashed in and sold’” that promissory note and deed of trust to a third party. Plaintiff claims that because the original lender no longer owns an interest in her property, any foreclosure attempts by the third party violated not only the FDCPA and TILA but also Plaintiff’s “constitutional rights.” Further, in her Amended Complaint, Plaintiff demanded that the court order Defendants “show that ‘they actually gave [Plaintiff] a loan for [Plaintiff’s] property’” before any lawful foreclosure of the property could occur.

Defendants moved to dismiss Plaintiff’s Amended Complaint pursuant to Fed. R. Civ. P. 12(b)(6).

Analysis

The court reasoned that Plaintiff’s Amended Complaint had zero plausible basis in common and statutory law. First, the court noted that Plaintiff could not identify any terms in the original loan documents that prohibited Defendants from assigning their interests in the property. They furthered this reasoning by reminding Plaintiff that the court had “repeatedly” rejected borrower attempts to obtain the original promissory note associated with the loan. Plaintiff also failed to cite any case law, federal or state, that supported her position as to whether Defendants should produce the original documentation. Accordingly, the court granted Defendants’ Motion to Dismiss as to Plaintiff’s common law claims.

As to Plaintiff’s FDCPA claim, the court found that Plaintiff had not alleged sufficient facts to show that Defendants were “debt collectors” under the FDCPA. Nothing in the Amended Complaint indicated that Defendants “regularly collect[ed] or attempt[ed] to collect debts.” Accordingly, the court dismissed Plaintiff’s FDCPA claim. With regard to Plaintiff’s TILA claim, the court relied on the plain language of the statute that authorizes a “debtor to bring … claims as defense in an action brought by the creditor” and “not as an affirmative claim.” Because Plaintiff’s Amended Complaint did not levy a viable TILA claim, the court dismissed her action under TILA as to Defendants.

The Takeaway

This case should remind lenders that pro se plaintiffs often misread statutes. Pro se plaintiffs routinely misinterpret not only who or what can be defined as a “debt collector” or “debt collecting activity” under FDCPA, but also what is a viable claim under TILA. Further, this case serves as a reminder to lenders that despite borrower demands to obtain the original promissory note associated with a loan, courts are reluctant to order lenders to provide that information.