3rd Cir. Says Communications with Represented Party Must Still Be in Connection with the Collection of a Debt in Order to Violate the FDCPA

In Vilinsky v. Phelan Hallinan & Diamond, PC, 2016 WL 805970, at *2 (C.A.3 (N.J.),2016), the Court of Appeals for the Third Circuit found that a notice of assignment sent directly to a represented debtor did not violate the FDCPA because it was not in connection with the collection of the debt.

The issue in this case is whether a communication needs to be in connection with the collection of a debt in order to obtain relief under § 805(a)(2). We believe that it does. While the term “communication” is defined broadly in § 803(2), its language is circumscribed by § 805(a)(2), which prohibits communications with a consumer in connection with the collection of any debt. This conclusion is in accordance with prior decisions in this circuit that have examined the scope of the FDCPA. See, e.g., McLaughlin v. Phelan Hallinan & Schmieg, LLP, 756 F.3d 240, 245 (3d Cir.2014) (“The statute’s substantive provisions … make clear that it covers conduct taken in connection with the collection of any debt.” (internal quotations omitted)).  The only remaining question is whether Phelan violated § 805(a)(2). To answer that question, we must ascertain the purpose of the letter. If Phelan’s intent was to “induc[e] payment,” the letter is a communication in connection with the collection of a debt and is actionable under § 805(a)(2). Simon v. FIA Card Servs ., N.A., 732 F.3d 259, 266 (3d Cir.2013). “[A] communication need not contain an explicit demand for payment to constitute debt collection activity.” McLaughlin, 756 F.3d at 245. “Indeed, communications that include discussions of the status of payment, offers of alternatives to default, and requests for financial information may be part of a dialogue to facilitate satisfaction of the debt and hence can constitute debt collection activity.” Id. at 245–46.  The record demonstrates that Phelan’s letter was neither an explicit demand for payment nor part of a dialogue to facilitate satisfaction of a debt. First, the state court had already entered a judgment foreclosing on the New Jersey property in question. Second, the content of the letter demonstrates that its sole purpose was simply to notify Vilinsky that PennyMac had assigned its mortgage interest to PMT].].  Vilinsky points out that the letter notified him that the assignee of the mortgage may “use and take all lawful ways and means for the recovery of all the said money and interest” and referenced the amount of the loan. App. 34a. We do not believe, however, that this can be classified as collection activity. Rather, Phelan was merely identifying the affected mortgage and notifying Vilinsky that the assignment gave PMT all legal rights that had previously been assigned to PennyMac.