7th Circuit says inspection company that left door hangers is not a debt collector

Courts Seventh Circuit Appellate Mortgages Mortgage Servicing Debt Collection

On August 10, the U.S. Court of Appeals for the 7th Circuit affirmed a lower court’s ruling that a company (defendant) that performed inspections for a mortgage servicer is not a “debt collector” under the Fair Debt Collection Practices Act (FDCPA) and was not liable for claims brought by a putative class of homeowners. According to the opinion, the defendant entered into a contract with the mortgage servicer to perform inspections to determine whether properties were still occupied for homes with defaulted mortgage payments of 45 days or more if the servicer was unable to contact the homeowner directly. When performing the inspections, the defendants left door hangers on the plaintiffs’ properties containing instructions to contact the mortgage servicer, which the plaintiffs claimed violated the FDCPA's disclosure requirements, including the requirement to disclose the creditor’s name, the amount owed, and that the debtor can dispute the debt. However, the lower court ruled—and the appellate court affirmed—that the defendant was not a “debt collector” for purposes of the FDCPA. The court found that the activities did not constitute direct debt collection because the door hangers did not demand payment and did not reference the underlying debt. The court also held that the defendant was not engaged in “indirect” debt collection, agreeing with the characterization of the lower court that the activities were more akin to those of a “messenger” than those of an “indirect” debt collector.