Notice of Forced Placed Hazard Insurance sent to a Debtor in Bankruptcy was not a communication under FDCPA
The U.S. District Court for the Northern District of Illinois ruled that notice of force-placed insurance by the lender to a debtor in bankruptcy was not the collection of a debt subject to the federal Fair Debt Collection Practices Act, 15 U.S.C. §§ 1692, et seq. (“FDCPA”).
Borrowers had surrendered the property in the property in Chapter 13 bankruptcy and the plan was confirmed by the Court.
The Hazard Insurance Notice stated that:
“Your loan agreement requires that you maintain adequate hazard insurance at all times. . . You will be charged for the cost of this insurance if we do not receive adequate proof of coverage within 15 days from the date of this letter.”
The Hazard Letter also contained the following statement:
“IF YOU ARE IN BANKRUPTCY OR RECEIVED A BANKRUPTCY DISCHARGE OF THIS DEBT, THIS LETTER IS NOT AN ATTEMPT TO COLLLECT THE DEBT, BUT NOTICE OF POSSIBLE ENFORCEMENT OF OUR LIEN AGAINST THE COLLATERAL OR FOR INFORMATIONAL PURPOSES ONLY.”
The Borrowers filed a complaint against Servicer, alleging that the Hazard Insurance Notice violated three subsections of the FDCPA, 15 U.S.C. §§ 1692g, 1692c, and 1692e, as well the Illinois Collection Agency Act, 225 ILCS 42/1, et seq. (“ICAA”).
The FDCPA regulates a communication from a debt collector only if the communication is made “in connection with the collection of any debt.” See 15 U.S.C. §§ 1692, et seq.; Gburek v. Litton Loan Servicing LP, 614 F.3d 380, 385 (7th Cir. 2010).
The Court determined that the purpose and context of the communication suggested that the Hazard Insurance Notice was not an attempt to collect a debt, but instead an effort to comply with RESPA, which required Servicer to provide notice to Borrowers before purchasing hazard insurance and billing it to Borrowers.
Carol A. Lawson, Esq., 28870 U.S. Hwy 19 #300, Hodusa Towers, Clearwater, FL 33761
Phone: (727) 410-2705; email: [email protected]
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