In Johns v. Wells Fargo Bank, N.A., 2015 WL 143753 (S.D.Ala. 2015), Judge DuBose found that a mortgage servicer who acquired defaulted debt had to comply with the FDCPA’s Mini-Miranda and debt validation requirements.
In this case, the Johns allege that servicing of their loan was transferred to the defendant on or about February 16, 2007—while their bankruptcy petition was pending—at a time when their loan was in default or considered to be in default by Washington Mutual and Wells Fargo. (Doc. 1, at ¶¶ 13–14.) The Magistrate Judge recommends that this Court find that these allegations are sufficient to establish that Wells Fargo is a “debt collector” under the FDCPA for purposes of this Court’s Rule 12(b)(6) review. Compare, e.g., Justice v. Ocwen Loan Servicing, LLC, 2014 WL 526143, *4 (S.D.Ohio Feb. 7, 2014) (“[I]f Ocwen acquired the servicing for the Loans before they were in default, then it is not a debt collector under the FDCPA. But if Ocwen acquired the servicing for the Loans after they were in default, it is a debt collector under the FDCPA.”); Yarney v. Ocwen Loan Servicing, LLC, 929 F.Supp.2d 569, 575 (W.D.Va.2013) (“At the time Ocwen became the servicer on Plaintiff’s home loan, the loan was already in default. Therefore, Ocwen is a debt collector seeking to collect an alleged debt for the purposes of FDCPA liability in this case.”); Comer, supra, at *3 (“Chase, as a mortgage servicing company, is not a debt collector unless Comer’s loan was in default at the time Chase took over the servicing.”); Parker v. BAC Home Loans Servicing LP, 831 F.Supp.2d 88, 93 (D.D.C.2011) (“[I]f BAC was handling the loan before it went into default, it is not a debt collector in this case under the Act.”); Portley v. Litton Loan Servicing LP, 2010 WL 1404610, *4 (E.D.Pa. Apr. 5, 2010) (“Because Plaintiff’s mortgage loan was already in default at the time Defendant obtained the assignment, Defendant is a ‘debt collector’ for the purpose of the FDCPA.”); Castrillo v. American Home Mortgage Servicing, Inc., 2010 WL 1424398, *5 (E.D.La. Apr. 5, 2010) (“[A]n ‘exclusion’ to the general definition of a debt collector applies to any person who attempts to collect a debt that was not in default at the time it was ‘obtained.’ AHMSI obtained its servicing rights in Castrillo’s mortgage loan in April 2008, after Castrillo’s loan was in default, and therefore AHMSI is not excluded from the general definition of a debt collector by § 1692a(6)(F)(iii).”), reconsideration denied, 2010 WL 1838061 (E .D.La. May 5, 2010); and Martin v. Select Portfolio Serving Holding Corp., 2008 WL 618788, *4 (S.D.Ohio Mar. 3, 2008) (“A servicing company is subject to the FDCPA [ ] if the loan was in default at the time the servicing company acquired the loan account.”) with, e.g., Loveless v. Bank of America, N.A., 2014 WL 4437576, *9 (M.D.Pa. Sept. 9, 2014) (“I conclude that the plaintiffs have alleged sufficient facts from which it can reasonably be inferred that the mortgage was in default at the time of the assignment, and, as such, the defendants fall within the definition of debt collectors.”); Prickett, supra, 946 F.Supp.2d at 1249 (“The import of the decision in Muniz, to which this Court agrees, is that the relevant test of whether an entity is a debt collector under the FDCPA is whether the statutory definition applies, not whether the entity has ever stated in a document that it is a debt collector. Thus, to survive a motion to dismiss, a complaint must allege facts demonstrating that the defendant obtained the debt after the plaintiff was in default.” (most emphasis supplied)); and Owens v. JP Morgan Chase Bank, 2013 WL 2033149, *4 (W.D.Pa. May 14, 2013) (“Plaintiffs have failed to adequately allege that the mortgage was in default at the time RCS obtained the servicing rights; therefore, their claim that RCS violated the FDCPA is dismissed.”). In other words, because Wells Fargo “does not fall within any exception created by § 1692a(6)(F), it falls within the FDCPA’s definition of ‘debt collector’ and is subject to the substantive provisions of the Act.” Memmott v. OneWest Bank, FSB, 2011 WL 1560985, *7 (D.Or. Feb. 9, 2011), report and recommendation adopted as modified on other grounds, 2011 WL 1559298 (D.Or. Apr. 25, 2011). Stated differently one more time, a party who acquires a debt after the debt is already in default, as alleged in the complaint here (or, at least, as can be inferred from the complaint allegations), “becomes a ‘debt collector’ under the statute.” Deutsche Bank Trust Co. Americas v. Garst, 989 F.Supp .2d 1194, 1201 (N.D.Ala.2013); see also Federal Trade Comm’n v. Check Investors, Inc., 502 F.3d 159, 173 (3rd Cir.2007) (“In Pollice, we relied on [§ 1692a(6)(F)(iii) ] … to hold that one attempting to collect a debt is a ‘debt collector’ under the FDCPA if the debt in question was in default when acquired.”), cert. denied, 555 U.S. 1011, 129 S.Ct. 569, 172 L.Ed.2d 429 (2008). . . .Defendant’s contention that its failure to fall within the exclusion set forth in § 1692a(6)(F)(iii) “does not eliminate the initial requirement for a ‘debt collector’ set out in the first sentence of 1692a(6)[,]” (Doc. 22, at 1 & 2) should, as just indicated, be rejected. Not only is this argument contrary to the numerous cases previously cited in this decision, it is also contrary to the Sixth Circuit’s holding in Bridge v. Ocwen Federal Bank, FSB, 681 F.3d 355 (2012) that “ the definition of debt collector pursuant to § 1692a(6)(F)(iii) includes any non-originating debt holder that either acquired a debt in default or has treated the debt as if it were in default at the time of acquisition.” Id. at 362 (emphasis supplied); see also id. at 359 (“If an entity which acquires a debt and seeks to collect it cannot be both a creditor and a debt collector, can it be neither? We answer no. To allow such an entity to define itself out of either category would mean that the intended protection of the FDCPA is unavailable. Both the statutory language and legislative history of the FDCPA establish that such an entity is either a creditor or a debt collector and its collection activities are covered under the FDCPA accordingly. The distinction between a creditor and a debt collector lies precisely in the language of § 1692a(6)(F)(iii). For an entity that did not originate the debt in question but acquired it and attempts to collect on it, that entity is either a creditor or a debt collector depending on the default status of the debt at the time it was acquired. The same is true of a loan servicer, which can either stand in the shoes of a creditor or become a debt collector, depending on whether the debt was assigned for servicing before the default or alleged default occurred.” (emphasis supplied)); F.T.C. v. Check Investors, Inc., supra, 502 F.3d at 173 (“Congress has unambiguously directed our focus to the time the debt was acquired in determining whether one is acting as a creditor or debt collector under the FDCPA.”). The undersigned recommends that this Court follow the reasoning in Bridge, supra, to reject the defendant’s “first sentence of § 1692a(6)” argument inasmuch as it is clear that Wells Fargo must be either a creditor or debt collector-it cannot be neither-and, in light of the complaint allegations that defendant began servicing the loan in February of 2007 after it was in default, the defendant was decidedly a “debt collector” under the FDCPA. Accordingly, dismissal of the plaintiffs’ complaint is not warranted.