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Counsel’s Corner: Changes to the FDCPA Landscape

Lauren Thurmond

Lauren Thurmond

Lauren S. Thurmond is a partner with Hutchens Law Firm [1], concentrating her practice on the default servicing mortgage industry. Thurmond represents substitute trustees, national mortgage lenders, servicers and investors in foreclosure and creditors’ rights actions in North Carolina. Thurmond frequently speaks at educational seminars and industry conferences for lender and mortgage servicers throughout the country. Hutchens has five offices in North and South Carolina and is headquartered in Fayetteville, North Carolina.

Thurmond spoke recently with DS News about a December 2015 decision in the 11th Circuit Court of Appeals in the case of Prescott v. Seterus, Inc., which states that charging attorney fees or any additional amount in a reinstatement letter (or a loan payoff) violates the federal Fair Debt Collection Practices Act unless those fees are outlined in the original loan documents.

What is the latest on the legislative front as far as new laws that affect default servicing?

In North Carolina, a law became effective on October 1, 2015, that essentially took the federal protecting tenants at foreclosure (PTFA) law and codified it as a state statute. The federal PTFA expired, but now North Carolina has its own version. That effects residential property when you get to the eviction stage. The change made sure that a notice is sent to vacate to the occupants of the property and give them more time to reside in the property if they have a lease that satisfies the statutory requirements of the new North Carolina statute. As far as the firm's operating procedures, those were already in place due to the federal act. So it wasn't a big change for us or the courts that are accustomed to reviewing the writs of possession. We just tailored the language in those pleadings to use the definitions in the North Carolina statute instead of the federal act.

One of the big issues that was talked about in the Legal League 100 [2] Spring Servicer Summit [3] in April is the change in landscape with the FDCPA cases that have come down across the country and how that affects our clients and how we are communicating with the borrowers in the various types of actions that we prosecute for them for clients. That has added a new layer of complexity to things that used to be routine. The reinstatement and payoff quotes and the issue that you cannot include estimated fees and costs anymore is really new for everyone to deal with. In North Carolina, we have a payoff statute that says that you do have to provide a good through date for up to 30 days. So if our clients are no longer including estimated fees and costs, if there are fees and costs that are incurred between the date that the quote is given and the date that the borrower remits the funds, they have to be waived. That is a big deal and is something that everybody is trying to deal with.

How is your firm dealing with it?

We're communicating with our clients to make sure they're aware of the North Carolina statute. I would imagine that all across the country there are different state nuances on how to deal with this issue so that they are aware of what they need to do to comply with that state statute in addition to considering the FDCPA implications of these other cases across the country.

What adjustments has your firm made as REO has fallen to only a fraction of what it was at the peak of the crisis?

We have been fortunate that our firm is already a very diversified practice, so the REO decline hasn't affected our business as much. We do general corporate representation; we represent one of the local utilities; one of our attorneys has a large mediation practice; we do wills, trusts and estates; non-bank litigation; bank litigation; and we have a huge real estate practice as well where we do closings for first-time homebuyers.