by Craig M. Barbee
Liebo, Weingarden, Dobie & Barbee
USFN Member (MN)

Like police officers warning a criminal suspect before interrogation, debt collectors also have a duty to inform parties of their legal rights. In the servicing and debt collection industry, the mini-Miranda is included with letters, emails, voicemail greetings, and all other communications with debtors: This is a communication from a debt collector attempting to collect a debt. Any information obtained will be used for that purpose. Should a debt collector fail to provide the notice, it could be sued and fined up to $1,000 under the Fair Debt Collection Practices Act (FDCPA) for each communication that fails to include this language. This begs the question: are servicers and foreclosure firms making an admission with this boilerplate language that specific communications are attempts to collect a debt that are subject to the FDCPA?

In Heinz v. Carrington Mortgage Services, LLC, the United States Court of Appeals for the Eighth Circuit reviewed this issue and, upholding the District Court’s grant of summary judgment for the mortgage servicer against the Plaintiff, responded in the negative. You can almost hear the collective sighs of relief from foreclosure and debt collection attorneys across the country (or maybe that was just my partner down the hall).

The Plaintiff in the Heinz case asserted claims against a mortgage servicer under the FDCPA in connection with communications regarding loss mitigation assistance. Plaintiff’s Complaint alleged that specific communications by the servicer violated the FDCPA because they were false, deceptive, misleading, and unfair or unconscionable and violated 15 U.S.C. Sec. 1692e and 1692f. The dispositive issue on appeal was “whether the challenged communications and conduct were made in connection with the collection of the debt[.]” The Court of Appeals examined each of the communications in question under the “animating purpose test,” which looks at the substance of each communication and asks if it was to “induce payment by the debtor” (citing McIvor v. Credit Control Servs., Inc., 773 F.3d 909, 914 (8^th Cir. 2014).

While this is a question of fact for the jury, summary judgment may be granted where “a reasonable jury could not find that an animating purpose of the statements was to induce payment” (citing Goodson v. Bank of Am., N.A., 600 Fed. Appx. 422, 431 (6^th Cir. 2015). In applying the animating purpose test, the Eighth Circuit found that none of the servicer’s communications, which included a notification of a loss mitigation denial, a phone call between servicer representatives and the Minnesota Attorney General’s Office, and a post-foreclosure sale letter, were attempts to collect a debt. The Court declined to accept Plaintiff’s arguments that any communications about foreclosure or an underlying debt are “always intended to facilitate collection.” 

When it came to the use of the mini-Miranda, though, the Eighth Circuit found the boilerplate in the Defendant’s communications to the debtor “more troublesome.” The Court’s opinion states, “[at] first glance, it may seem implausible that a communication labeled by the sender as ‘for the purpose of collecting a debt’ would, in fact, not be sent ‘in connection with the collection of a debt.’” Read that again. The Court almost goes down the path of accepting the mini-Miranda as an admission of debt collection activity. This would have put servicers and foreclosure firms in a frightening position.

Thankfully, there is always a “but.” And in Heinz, there is a big one. Citing decisions from the Sixth and Seventh Circuits in addition to the McIvor case, the Court does a surprising one-eighty: “But these types of boilerplate mini-Miranda disclosures . . . ‘do not automatically trigger the protections of the FDCPA[.]” The Court then applied the animating purpose test in evaluating whether the servicer’s communications were attempts to collect a debt, and reaffirmed that the communications in question did not try to induce payment. The opinion might have said instead to use the old “duck test.” Ignore any signs that say “I am a duck,” and see if it quacks, swims, and has feathers.

The Court summarizes its holding in Heinz on the mini-Miranda as follows: “We thus conclude that a routine disclosure statement that is at odds with the remainder of the letter does not turn the communication into something that it is not-in this case, a communication made in connection with the collection of a debt for the purposes of the FDCPA.” So, remember Heinz the next time you read someone their rights like a cop from a TV show and tell them you are attempting to collect a debt. Despite your warning, your communication might not be an attempt to collect a debt that is subject to the FDCPA after all.

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August 2021 e-Update