The United States Court of Appeals for the Second Circuit recently made clear that foreclosure actions qualify as “debt collection” under the Fair Debt Collection Practices Act (FDCPA). See Cohen v. Rosicki, Rosicki & Assocs., P.C., 897 F.3d 75 (2d Cir. 2018). Thus, even if a foreclosure action is not seeking a deficiency judgment and the proceeding is strictly in rem, it now falls under the FDCPA debt collection umbrella in the Second Circuit.

In Cohen, the borrower appealed the district court’s dismissal of his FDCPA claims based on the defendants’ allegedly incorrect identification of Green Tree Servicing LLC as the creditor in the foreclosure complaint, certificate of merit, and request for judicial intervention. The basis for the district court’s dismissal of the case was that “enforcement of a security interest through foreclosure proceedings that do not seek monetary judgments against debtors” does not qualify as debt collection within the scope of the FDCPA. The Second Circuit disagreed. Cohen, aff’d, 897 F.3d 75 (2d Cir. 2018)

In issuing its decision, the Second Circuit stated that:

“[It] join[ed] those of [its] sister circuits that have concluded that a foreclosure action is an ‘attempt to collect a debt’ as defined by the FDCPA. See Kaymark v. Bank of Am., N.A., 783 F.3d 168, 174–79 (3d Cir. 2015); Glazer v. Chase Home Fin. LLC, 704 F.3d 453, 460–65 (6th Cir. 2013); Wilson v. Draper & Goldberg, P.L.L.C., 443 F.3d 373, 376–78 (4th Cir. 2006); see also Reese v. Ellis, Painter, Ratterree & Adams, LLP, 678 F.3d 1211, 1216–18 (11th Cir. 2012) (concluding that letters threatening foreclosure are not exempt from the FDCPA because ‘communication related to debt collection does not become unrelated to debt collection simply because it also relates to the enforcement of a security interest’); Kaltenbach v. Richards, 464 F.3d 524, 527–29 (5th Cir. 2006) (same).” Cohen, 897 F.3d at 82.

The Second Circuit also severely limited the standing defense pursuant to Spokeo, Inc. v. Robins, 136 S. Ct. 1540 (2016)[1]. Specifically, the Second Circuit explained that “1692e and 1692g [of the FDCPA] protect an individual’s concrete interests, so that an alleged violation of these provisions satisfies the injury-in-fact requirement of Article III.” Cohen, 897 F.3d at 81. Thus, the standing defense pursuant to Spokeo will not suffice going forward.

Moreover, the Second Circuit also provided guidance as to the materiality requirement under the FDCPA. Here, the Second Circuit held that the FDCPA violation was immaterial because it would not impact the consumer’s response. In so ruling, the Second Circuit provided that, even under the “least sophisticated consumer standard,” a statement must be “materially false or misleading to be actionable under the FDCPA.” Id. at 85. To clarify, the decision sets forth that “a false statement is only actionable under the FDCPA if it has the potential to affect the decision-making process of the least sophisticated [consumer].” Id. (internal quotation marks and citation omitted).

Accordingly, in the wake of Cohen, a foreclosure constitutes debt collection, standing defenses pursuant to Spokeo are largely eliminated and a false statement is material if it has the potential to impact the least sophisticated consumer’s response.


[1] The plaintiff in Spokeo alleged that the defendant had violated his rights under a federal consumer protection statute (the Fair Credit Reporting Act, or “FRCA”).  The FRCA provides for actual or statutory damages. Specifically, the Spokeo plaintiff commenced a lawsuit based on the premise that a technical statutory violation is sufficient to establish standing, irrespective of whether the violation caused the plaintiff to suffer injury, where the relevant statute provides statutory damages.  The Supreme Court rejected the plaintiff’s argument, holding instead that the mere violation of a statute does not confer the requisite injury-in-fact for the plaintiff to have standing to sue.