On March 23, the U.S. Court of Appeals for the 8th Circuit affirmed in part, vacated in part, and remanded in a case arising from a Minnesota nonjudicial foreclosure, upholding the dismissal of a TILA claim against a national bank but reinstating an FDCPA claim against the bank’s foreclosure counsel. According to the opinion, after the original mortgagors died and their heir defaulted, the bank initiated foreclosure in February 2022. Before the sheriff’s sale, the heir’s attorney requested a payoff amount to reinstate the mortgage. Foreclosure counsel allegedly acknowledged the request but did not provide the figure. One week later, the property was sold at auction, and the heir subsequently redeemed it for approximately $77,159, significantly more than the roughly $58,722 loan balance at the time of her request. The heir later sued, alleging (i) a TILA violation for crediting two mortgage payments upon receipt and then refunding the funds because they were insufficient to reinstate; and (ii) an FDCPA violation for proceeding with the sale and dispossessing her without providing the requested reinstatement amount.

With respect to the TILA claim, the court held that 15 U.S.C. § 1639f(a) requires servicers to credit payments as of the date of receipt but does not prohibit later returning the funds, particularly where they are insufficient to cure a default. The court therefore affirmed dismissal. As to the FDCPA claim, the appellate court’s analysis focused on whether the foreclosure counsel’s alleged failure to provide the requested reinstatement amount within three days, as required by Minnesota statute § 580.30, meant they lacked the “present right to possession” that § 1692f(6)(A) of the FDCPA requires before nonjudicial dispossession. The 8th Circuit acknowledged the district court’s concern about broadly converting state foreclosure-statutory violations into federal FDCPA claims but found its analysis incomplete because it did not address whether a violation of Minnesota’s reinstatement statute, which grants an “absolute right” to cure a default and is “intended to protect mortgagors and be construed in their favor,” is distinguishable for purposes of establishing a present right to possession. The 8th Circuit remanded the case to the district court to determine whether such a violation under Minnesota law would deprive foreclosure counsel of that present right under § 1692f(6)(A).