Though it is inevitable that your bank will contact you to collect an outstanding mortgage payment, you are still entitled to be treated fairly.
In many states, mortgage holders or banks must adhere to The Fair Debt Collection Practices Act (FDCPA), which protects homeowners from the abusive tactics used by aggressive debt collectors. This act can also be used in claims filed by the homeowner to fight foreclosure.
The FDCPA (15 U.S.C. § 1692, et seq.), a federal law, which shields consumers from abusive debt collection practices employed by collection agencies, attorneys, companies and others, is meant to limit abusive practices and allow consumers to dispute mistaken debt collections. The FDCPA, which outlines the rights of consumers being targeted by debt collectors, imposes severe penalties for those who violate the law.
The FDCPA prohibits practices such as:
• Communicating with an alleged debtor (borrower) after written notice has been received
regarding the refusal to pay a purported debt.
• Contacting an alleged debtor who has known legal representation.
• Communicating with an alleged debtor following a written request submitted within 30 days by the consumer to confirm the validity of the debt.
• Requesting amounts unauthorized by the debt agreement.
• Reporting false or disputed debt amounts to a credit bureau.
Unfortunately, not all courts agree whether the FDCPA can be applied to foreclosures, since banks and mortgage companies have not been legally defined as debt collectors. However, many courts consider that any person who demands payment or files for foreclosure on behalf of a mortgage holder or bank is a debt collector and is bound by the FDCPA regulations.
Other courts believe that mortgage foreclosures are governed by security interest enforcement regulations and therefore not subject to the FDCPA rules. Homeowners are advised to consult with an attorney as to how their corresponding county court views the FDCPA regulations.
If the FDCPA regulations apply, the mortgage holder or corresponding attorney must mail a letter within five days of its first communication with the homeowner. The document must include the following:
• The amount of the debt
• The name of the mortgage holder or creditor
• A statement that notifies the homeowner that they have 30 days to dispute the debt. If the homeowner fails to do so, the debt will be considered valid.
• A statement that confirms that if the homeowner submits a written dispute within 30 days, the mortgage holder or creditor must provide verification of the debt or a copy of the judgement against the homeowner.
These regulations allow homeowners to dispute debt collections and unfair charges.
If the debt collector is in violation of the FDCPA, the homeowner can legally demand actual damages and statutory damages up to $1,000, as well as any associated legal fees and costs.