Federal Court Holds Ocwen Must Comply With Fair Debt Collection Practices Act

April 14, 2012

A federal judge held Ocwen must comply with the Fair Debt Collection Practices Act ("FDCPA"). Zervos v. Ocwen Loan Servicing, LLC, 2012 U.S. Dist. LEXIS 44869 (D. MD 2012).

A husband and wife brought a lawsuit against Ocwen Loan Servicing falsely stating their home had been foreclosed on when it had not. Ocwen is a debt buyer that had bought the couple's mortgage loan from the original mortgage creditor. The couple claimed, in part, that Ocwen violated the Fair Debt Collection Practices Act- a federal law that governs how collection agencies are allowed to collect debts (and also covers those collection agencies attempting to collect debts here in California). The FDCPA provide consumers powerful rights to fight back against abusive debt collectors, without having to file bankruptcy.

Ocwen tried to get the case thrown out, arguing that the company is not a debt collector under federal law, and that they don't need to abide by the FDCPA. The federal court disagreed with Ocwen and refused to throw the case out.

Many consumers have complained about Ocwen's mortgage loan modification procedures. See video.


The consumers were in the process of modifying their mortgage with their original mortgage creditor. During this time Ocwen acquired the defaulted mortgage loan. The consumers tried to modify their loan with Ocwen but Ocwen refused. Indeed, the consumers attempted to continue negotiations with Ocwen by sending it their loan modification package, but Ocwen denied the modification and allegedly attempted to foreclose on the the Property.

On September 21, 2011, the consumers received a letter from Ocwen that said the home would not be foreclosed if the husband and wife contacted Ocwen in the next 30 days. However, when the consumers attempted to contact Ocwen they were unable to do so because the automated phone system informed them there were over 200 callers ahead of them. Also, although the consumers were told they had 30 days to contact Ocwen, a representative showed up at the consumer's residence to change the locks, saying that the property had already been foreclosed on.

Additionally, on September 22, 2011, Ocwen sent another letter, this time saying that there was a foreclosure sale set within the next 60 days. The consumer's lawsuit alleged that Ocwen's statements were false, and that no foreclosure proceedings had ever occurred and no sale was ever scheduled.

Court Holds Ocwen May Be a Debt Collector

Ocwen asked the court to throw out the lawsuit, arguing that the company could not be sued under the FDCPA because it is not a debt collector. However, the court disagreed with Ocwen.

Ocwen argued that the consumers could not state a valid claim against the company under the Fair Debt Collection Practices Act because loan servicers are not considered "debt collectors" under that law. But, the court ruled that exemption, does not apply where a loan servicer acquires a loan after it has already gone into default. Allen v. Bank of America Corp., Civil No. CCB-11-33, 2011 WL 3654451 at *7 n.9 (D. Md. Aug. 18, 2011)(citing Schlosser v. Fairbanks Capital Corp., 323 F.3d 534, 536-39 (7th Cir. 2003);
Shugart v. Ocwen Loan Servicing, LLC, 747 F.Supp.2d 938, 942-43 (S.D. Ohio

Ocwen also argue the consumer's lawsuit complaint did not allege that the mortgage was in default when Ocwen acquired it, but the Court found that default can be easily inferred from the alleged fact that Ocwen sent the consumers letters threatening foreclosure only days after acquiring the mortgage. The court held that Ocwen could be a debt collector under the FDCPA since the company acquires debts in default for the purposes of attempting to collect on those debts.

The court also determined that Ocwen can be in violation of the FDCPA (15 U.S.C. section 1692d) by engaging in conduct the natural consequence which is to harass, oppress, or abuse, in connection with the collection of the defaulted mortgage loan. The lawsuit claimed Ocwen informed the consumers that their home had been foreclosed and that a sale date was scheduled, when in fact there was no such foreclosure.

Additionally, Ocwen's attempt to foreclosure and evict the consumers by changing the locks without allowing consumers the 30 day response time promised in its first letter could be construed as abuse and or harassment. Similarly, Defendant's alleged attempt to effect foreclosure and eviction of Plaintiffs from their home by changing the locks without allowing Plaintiffs the thirty days response time allegedly promised in the first letter could be construed as abuse and or harassment, in violation of 15 U.S. 1692d of the FDCPA.

The court also found that the consumers properly stated claims that Ocwen used deceptive practices in an attempt to collect a debt, in violation of 15 U.S.C. 1692e of the FDCPA; falsely represented the legal status of a debt, in violation of 15 U.S.C. 1692e(2) of the FDCPA; threatened action it did not intent to take, in violation of the 15 U.S.C. 1692e(5).

Get Help Now

Our San Jose law office protects consumers from being harassed by debt collectors. We are investigating claims against Ocwen for allegedly violating the federal and California Fair Debt Collection Practices Acts.

If you are being contacted by Ocwen or any other creditors or debt collectors, give us a call at 408-296-0400.