Unless you notify us in writing within 30 days after receiving this notice
that you dispute the validity of this debt, or any portion of the debt, we will
assume that it is valid. If you do notify us in writing within 30 days that you
dispute the debt, or any part of the debt, we will provide you with verification of
the debt by mail. If you request the name and address of the original creditor in
writing within 30 days after receiving this notice, we will provide you with that

information.
* ORK

This letter is an attempt to collect a debt and any information obtained may be
used for that purpose.

(Pl. Mot. Summ. J. Ex. A.) Hutchins alleges that after the letter was sent out, Fairbanks
continued to send Hutchins monthly statements seeking payment of the debt and continued to
assess late charges subsequent to the acceleration of the loan.

DISCUSSION

In Count I, Hutchins alleges that Fairbanks violated § 1692g of the FDCPA because the
validation notice Fairbanks sent suffered from a number of deficiencies, including that it did not
state the full amount of the debt, it omitted unbilled fees or costs and it stated that any dispute
had to be in writing. In Count II Hutchins alleges violation of 1692e(11) of the FDCPA because
monthly statements Fairbanks sent to Hutchins did not contain the required notice under the
FDCPA. Finally, in Count III Hutchins maintains that Fairbanks violated the FDCPA when it
assessed late charges against Hutchins after his loan was accelerated.

The threshold issue for the court is whether the FDCPA applies to Fairbanks. By its
terms, the FDCPA applies only to “debt collectors.” See 15 U.S.C. § 1692b (“Any debt collector
communicating with any person other than the consumer for the purpose of acquiring location
information about the consumer shall... .”). A “debt collector” is specifically defined to

exclude a number of things, including “any person collecting or attempting to collect any debt


Hutchins in default, as the contractual definition of the term would not have been satisfied until
he was sent notice under Section 7(C) of the contract. The September 8 letter fits into the
express terms of the contract, in that before Hutchins could be in default, he had to be served
with notice telling him that if he did not pay by a certain date listed in the letter, he would in
default. No other evidence suggests that either EquiCredit or Fairbanks otherwise thought
Hutchins was in default when the assignment was made. Accordingly, the court concludes that
Hutchins’ loan was not in default when Fairbanks obtained it for servicing. Thus, Fairbanks is
not a debt collector under the FDCPA and all Counts of Hutchins’ Amended Complaint are
properly dismissed.'
CONCLUSION

Fairbanks’ motion to dismiss, or in the alternative, motion for summary judgment is
granted [#28]. Hutchins’ motion for summary judgment on liability is denied [#23]. Hutchins’
motion for class certification is denied as moot [#22]. Hutchins’ objection to Fairbanks’ motion

for supplemental authority is overruled as the court did not consider the evidence in making its

ENTER: panier ;

(JOAN HUMPHREY LEFKOW
Dated: March 28, 2003 United States District Judge

decision [#42]. This case is terminated.

‘In Schlosser, the Seventh Circuit discussed in depth the policy reasons why the FDCPA applies only to
debt collectors and not to “creditors,” meaning those who acquire a debt that is not currently in default. Schlosser,
2003 WL 1401417, at *2. The court noted that debt collectors would often have no future contact with a consumer
and disregard the consumer’s opinion of them, while a creditor may be more concerned with its desire to protect its
own good will. /d. One can certainly question whether the statutory purposes of the FDCPA, i.e., protection of the
consumer, is advanced by allowing a company such as Fairbanks to escape the “debt collector” status and be exempt
from the act simply because the debt was not technically in default under the terms of the contract and it did not
mistakenly believe the debt to be so. The language of the FDCPA, however, is clear, and from this court’s reading
of Schlosser, it stands for nothing more than if the debt collector believes that the loan is in default, they cannot
claim otherwise.


I waive my rights to require the Note Holder to do certain things. Those things

are: (A) to demand payment of amounts due (known as “presentment”); (B) to

give notice that amounts due have not been paid (known as “notice of dishonor”);

(C) to obtain an official certification of nonpayment (known as a “protest”).

(Id.) According to Hutchins, part B of this section provides that the notice required under section
7 is optional and not mandatory, which Hutchins believes makes sense because it allows a lender
to deal with borrowers who chronically pay late and do not pay late charges and could avoid the
possibility that a payment may have been lost or misapplied.

Hutchins’ argument, however, is unavailing. Section 10 of the note makes no mention of
waiving the borrower’s right to require the Note Holder to provide the notice mentioned in
paragraph 7(C). Moreover, the term “notice of dishonor” does not relate to the notice necessary
to hold Hutchins in default, as that term relates to liability under negotiable instruments. See
BLACK’S LAW DICTIONARY 1089 (7th ed. 1999) (“Notice to the indorser of an instrument that
acceptance or payment has been refused. @ This notice-along with presentment and actual
dishonor-is a condition of an indorser’s secondary liability.”)

Next, Hutchins argues that he satisfies the definition of “default” in the Note because on
September 8, 2001, nine days prior to the transfer of the loan, EquiCredit, Fairbanks’
predecessor, sent Hutchins a document labeled “Notice of Breach/Default.” The document
begins by stating “Dear Mr. Hutchins: You are in breach or default of the above referenced
Mortgage/Deed of Trust . . . by failing to pay your July 10, 2001 and subsequent mortgage
payments.” According to Hutchins, the letter does not say that “you will be in breach or default”
if you do not pay on a certain date. Hutchins argues that Fairbanks must “stand[] in the shoes of

its assignor” and that because the assignor stated that Hutchins was in default, Hutchins was in


owed or due or asserted to be owed or due another to the extent such activity... concerns a debt
which was not in default at the time it was obtained by such person.” 15 U.S.C.

§ 1692a(6)(F)(iii). Thus, if Hutchins’ loan was not in default at the time Fairbanks acquired it,
Fairbanks is not a debt collector and the FDCPA does not apply. E.g., Bailey v. Security Nat'l
Servicing Corp., 154 F.3d 384, 387 (7th Cir. 1998).

While the FDCPA does not define “default,” the term is explicitly defined in Hutchins’
loan documents and the court sees no need to fix a different meaning to the term under the
FDCPA when the loan documents present an unambiguous definition. E.g., Hartman v.
Meridian Fin. Serv., 191 F. Supp. 2d 1031, 1042-43 (W.D. Wis. 2002). Section 1(C) of
adjustable rate note entitled “Notice from Note Holder” states,

If I do not pay the full amount of each monthly payment on time, the Note Holder

may send me a written notice telling me that if I do not pay the overdue by a

certain date I will be in default. This date must be at least 10 days after the date

on which the notice is mailed to me or, if it is not mailed, 10 days after the date on

which it is delivered to me.

(Def. Mot. Ex. 1.) Section 7(D), entitled “Default,” further provides,

If I do not pay the overdue amount by the date stated in the notice described in (C)

above, I will be in default. If I am in default, the Note Holder may require me to

pay immediately the full amount of principal which has not been paid and all the

interest that J owe on that amount.
Ud.)

Fairbanks argues that Hutchins’ loan was not in default at the time Fairbanks acquired the
servicing rights because Hutchins did not meet the contractual definition of default listed above.

Hutchins disagrees, and first argues that section 7 of the note must be read in conjunction with

section 10, which provides,



would be accelerated if the entire unpaid balance was not paid. Id. at *1. This letter also
allegedly violated the FDCPA because it did not notify the debtors of their right to contest the
debt in writing. /d. As it turns out, the plaintiffs’ mortgage in Schlosser was not in default, and
only through mistake did Fairbanks believe it to be so. Id. Under these facts, the court
concluded that the FDCPA applied to Fairbanks because of its mistaken belief that the debtor
was in default. As the court stated, the provision exempting from the FDCPA a debt collector
attempting to collect a debt not in default did “not apply because Fairbanks attempted to collect
on a debt that it asserted to be in default and because the asserted default existed when Fairbanks
acquired the debt.” Jd. at *5. According to the court, any other result would be “implausible”
because “[i]t makes little sense, in terms of the conduct sought to be regulated, to exempt an
assignee from the application of the FDCPA based on a status it is unaware of and that is
contrary to its assertions to the debtor.” Id. at *4. Thus, the result in Schlosser was based on the
fact that at the time Fairbanks acquired the debt, it believed the plaintiffs to be in default.

No such facts are present in this case. The record in this case does not support the notion
that Fairbanks believed that the debt was in default when it was acquired. The letter Fairbanks
sent to Hutchins on September 19 does not say (what would have been mistakenly) that Hutchins
was in default. Hutchins attempts to portray Fairbanks as believing that Hutchins was in default
based on EquiCredit’s letter sent on September 8. As stated above, however, the court does not
believe that the September 8 letter either placed Hutchins in default or illustrates that either
EquiCredit (or its assignee Fairbanks) believed Hutchins to be in default. The letter does not
state definitively that Hutchins is in default, unlike the letter in Schlosser, which clearly stated

“This letter constitutes formal notice of default.” Id. at 1. Nor could this letter have held



Minute Order Form (06/97)

; Nay, 7 United States District Court, Northern District of Illinois
NN . .
Semetpiee ie | Joan H. Letkow | te oe .
T Lo e
CASE NUMBER 02 C 2256 DATE 3/61/2003
CASE Hutchins vs. Fairbanks Capital Corporation
TITLE

[In the following box (a) indicate the party filing the motion, ¢.g., plaintiff, defendant, 3rd party plaintiff, and (b) state briefly the nature
of the motion being presented.]

MOTION:

DOCKET ENTRY:

(1) oO Filed motion of [ use listing in “Motion” box above.]

(2) Qo Brief in support of motion due

(3) o Answer brief to motion due__. Reply to answer briefdue___

(4) oO Ruling/Hearingon___—_sset for__—_ at

(5) Oo Status hearing{held/continued to] [set for/re-set for]on__setfor__—_at

(6) Oo Pretrial conference[held/continued to] [set for/re-set for]on__setfor_ sat.

7) oO Trial[set for/re-set for]on_____at.

(8) Oo (Bench/Jury trial] [Hearing] held/continued to___at

(9) oO This case is dismissed [with/without] prejudice and without costs[by/agreement/pursuant to]
OFRCP4(m) O Local Rule 41.1 OFRCP41(a)(1) O FRCP41(a)(2).

(0) 4 (Other docket entry} Defendant Fairbanks’ motion to dismiss, or in the alternative, motion for

summary judgment is granted [#28]. Plaintiff Hutchins’ motion for summary judgment on liability is
denied [#23]. Hutchins’ motion for class certification is denied as moot [#22]. Hutchins’ objection to
Fairbanks’ motion for supplemental authority is overruled as the court did not consider the evidence in
making its decision [#42]. This case is terminated.

dl) @ [For further detail sce order attached to the original minute order.]

No notices required, advised in open court.
3

No notices required.
ql number of notices

Y | Notices mailed by judge's staff.

Notified counsel by telephone.

Docketing to mail notices.

J | Mail AO 450 form, Mailed by MD. 1unod Loiisia sn
theres

Copy to judge/magistrate judge.

ie © uty be
courtroom Lich td Ve dency i notice
MD deputy’s

initials

fo
Dateltime racelved in
central Clerk's Office ing deputy ils



default for Fairbanks also.

Fairbanks responds by relying on the plain language definition of default in the terms of
the contract and by referencing the entire September 8 letter, which has the full title of “Notice of
Breach/Default, Intent to Foreclose, Right to Cure.” Moreover, Fairbanks argues that this letter
was designed to serve as the “Notice for Note Holder” under Section 7(C) of the Note because it
states that Hutchins has until October 8, 2001 to cure the “breach/default.” The letter also states
in a later portion that “[I]f [Hutchins] fail[s] to pay the total amount due by the date specified
above, EquiCredit shall exercise it’s [sic] right to accelerate the sums secured by this
Mortgage/Deed of Trust and shall refer this loan to it’s [sic] attorney to commence foreclosure
proceedings.”

The court concludes that the letter is what Fairbanks argues it is, merely notice under
Section 7(C) of the contract that Hutchins will be held in default if the overdue amount is not
paid by October 8, the date listed in the letter. This clearly comports with the contractual
requirements under the Note. Nowhere does the letter state that Hutchins is in default-it stated
only that he is in breach or default. The contract itself does not allow for default until after the
date listed in the Section 7(C) notice letter. Moreover, the contract provides a detailed definition
of default. This letter obviously does not come close to fulfilling the contract’s definition, as
there was no evidence of a letter being sent previously informing the debtor that if any overdue
amount is not paid he or she will be in default.

Construing the letter as such, Schlosser v. Fairbanks Capital Corp., -F.3d-, 2003 WL
1401417 (7th Cir. March 20, 2003) is distinguishable. In Schlosser, Fairbanks sent a formal

notice of default to the plaintiffs informing them that they were in default and that the mortgage


material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). In response, the nonmoving
party cannot rest on bare pleadings alone but must use the evidentiary tools listed above to
designate specific material facts showing that there is a genuine issue for trial. Jd. at 324;
Insolia v. Philip Morris Inc., 216 F.3d 596, 598 (7th Cir. 2000). A material fact must be
outcome determinative under the governing law. Jnsolia, 216 F.3d at 598-99. Although a bare
contention that an issue of fact exists is insufficient to create a factual dispute, Bellaver v.
Quanex Corp., 200 F.3d 485, 492 (7th Cir. 2000), the court must construe all facts in a light most
favorable to the nonmoving party as well as view all reasonable inferences in that party’s favor.
Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255 (1986).
BACKGROUND

In the fall of 2001, Hutchins had a residential mortgage that was being serviced by
EquiCredit Corporation of America (“EquiCredit”). Servicing of the loan was transferred from
EquiCredit to Fairbanks effective September 17, 2001. Two days after the transfer of servicing,
Fairbanks sent Hutchins a validation of debt letter which stated as follows,

Dear Borrower

We recently provided you with a letter advising you that Fairbanks Capital

Corp. (“Fairbanks”) has acquired the servicing rights to your mortgage loan
effective September 17, 2001.
* * *

Our records reflect that as of the servicing transfer date your mortgage
payments that were due from July 01, 2001 forward have not been received. As
of the date of the servicing transfer, the total amount to bring your account current
was $1,586.84 including principal, interest, escrows and applicable fees. If your
payment has been sent, please accept our thanks.

Please note that these amounts do not include unbilled fees or costs, if any,
such as attorney’s fees. Please also note that the information regarding your
account is based on information provided to us by your prior mortgage servicer as
of the date of the servicing transfer.



alternative, for summary judgment. The court has jurisdiction over the claims pursuant to 15
U.S.C. § 1692k and 28 U.S.C. § 1331. For the reasons set forth below, Hutchins’ motion for
summary judgment on liability is denied while Fairbanks’ motion to dismiss or, in the alterative,
for summary judgment is granted.
STANDARDS

A MOTION TO DISMISS

A motion to dismiss under Federal Rule of Civil Procedure 12(b)(6) challenges the
sufficiency of the complaint for failure to state a claim upon which relief may be granted.
General Elec. Capital Corp. v. Lease Resolution Corp., 128 F.3d 1074, 1080 (7th Cir. 1997).
Dismissal is appropriate only if it appears beyond a doubt that the plaintiff can prove no facts in
support of its claim that would entitle it to relief. Conley v. Gibson, 355 U.S. 41, 45-46 (1957);
Kennedy v. Nat'l Juvenile Det. Assoc., 187 F.3d 690, 695 (7th Cir. 1999). In ruling on the
motion, the court accepts as true all well-pleaded facts alleged in the complaint, and it draws all
reasonable inferences from those facts in the plaintiffs favor. Dixon v. Page, 291 F.3d 485, 486
(7th Cir. 2002); Jackson v. E.J. Brach Corp., 176 F.3d 971, 977 (7th Cir. 1999).
B. SUMMARY JUDGMENT

Summary judgment obviates the need for a trial where there is no genuine issue as to any
material fact and the moving party is entitled to judgment as a matter of law. Fed. R. Civ. P.
56(c). To determine whether any genuine fact exists, the court must pierce the pleadings and
assess the proof as presented in depositions, answers to interrogatories, admissions, and
affidavits that are part of the record. Fed R. Civ. P. 56(c) Advisory Committee’s notes. The

party seeking summary judgment bears the initial burden of proving there is no genuine issue of



UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS

EASTERN DIVISION
DOCKETER
ROBERT HUTCHINS, ) MAR 3 1 2093
)
Plaintiff, )
)
vs. ) No. 02 C 2256
>) Judge Joan H. Lefkow
FAIRBANKS CAPITAL CORPORATION, )
)
Defendant. )
)

MEMORANDUM OPINION AND ORDER

Plaintiff, Robert Hutchins (“Hutchins”) filed this putative class action against defendant,
Fairbanks Capital Corporation (“Fairbanks”), pursuant to the Fair Debt Collection Practices Act,
15 U.S.C. §§ 1692 et seg. (“FDCPA”). In Count I, Hutchins brings suit individually and on
behalf of a putative class of similarly situated individuals alleging violations of § 1692g of the
FDCPA because, in a validation of debt notice sent to Hutchins and other putative class
members, Fairbanks (1) did not state the amount of the debt; (2) omitted “unbilled fees or costs,
if any, such as attorney’s fees,” so that there is no correlation between the amount stated and
either the total amount of the debt or the “total amount to bring your account current;” and
(3) required that any dispute regarding the debt be in writing. In Count I, Hutchins individually
alleges violation of § 1692e(11) of the FDCPA because monthly statements sent to him secking
payment of his debt to Fairbanks did not contain the required notice under the FDCPA. In Count
IN, Hutchins individually alleges violation of §§ 1692e, 1692f and 1692f(1) of the FDCPA
because Fairbanks assessed late charges while the loan was accelerated. Before the court is

Hutchins’ motion for summary judgment on liability and Fairbanks’ motion to dismiss or, in the

ol