KOONTZ V. SN SERVICING CORPORATION
- Case Type:
- Consumer
- Case Status:
- Reversed and Remanded
- Citation:
- 24-1261 (4th Circuit, Apr 04,2025) Published
- Tag(s):
-
- Ruling:
- Under Johnson v. Home State Bank, 501 U.S. 78 (1991), a person whose personal liability on a debt is discharged in bankruptcy is still a consumer with a debt under the federal Fair Debt Collection Practices Act. The FDCPA defined a debt as an obligation to pay. The Supreme Court's Johnson decision clarified that a mortgage interest that survives the discharge of personal liability on the underlying loan is an "enforceable obligation" of the debtor. Accordingly, the debtor still has consumer debt, and the holder or representative of the holder of the consumer debt is still subject to the FDCPA.
- Procedural context:
- After the district court granted a mortgage loan servicer summary judgment on the appellee's federal Fair Debt Collection Practice Act and state law claims, the appellee appealed.
- Facts:
- Appellant John Koontz obtained a mortgage secured by real property in West Virginia in 2008. Servicing of the mortgage loan was transferred to appellee SN Servicing Corporation ("SNSC").
Nearly ten years later, Koontz filed a chapter 7 bankruptcy petition and received a discharge.
Nearly five years after receiving his discharge, SNSC sent Koontz a letter informing him that it was going to try to foreclose on the mortgaged property but was limiting its efforts to foreclose rather than pursue a deficiency judgment against Koontz. The letter also stated that a $23,67 late fee had been assessed and charged to Koontz's loan account.
A month later, Koontz received a second letter stating that SNSC would not credit a payment Koontz made.
Eight months later, Koontz joined a putative class action lawsuit against SNSC and other collection action that accused SNSC of violating the Fair Debt Collection Practice Act ("FDCPA") and similar state legislation.
SNSC moved to dismiss, and the court granted the motion because the bankruptcy discharge eliminated Koontz's personal liability on the mortgage debt. The district court thus held that Koontz was not a "consumer" with a "debt," as defined in the FDCPA. Following these conclusions, district court held the letters received by Koontz were not attempts to collect a consumer debt. The trial court also held Koontz had failed other adequately plead a "false, deceptive, or misleading representation" under 15 U.S.C. § 1692e.
- Judge(s):
- HARRIS, HEYTENS, and BERNER, Circuit Judges
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