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Schlaf v. Safeguard Property, LLC

United States Court of Appeals, Seventh Circuit

August 10, 2018

Andrew Schlaf, on behalf of plaintiffs and a class, et al., Plaintiffs-Appellants,
Safeguard Property, LLC, Defendant-Appellee.

          Argued February 21, 2018

          Appeal from the United States District Court for the Northern District of Illinois, Western Division. No. 3:15-cv-50113 - Frederick J. Kapala, Judge.

          Before Ripple, Kanne, and Hamilton, Circuit Judges.

          Ripple, Circuit Judge.

         Andrew and Wendy Schlaf brought this action against Safeguard Property, LLC, alleging violations of the Fair Debt Collection Practices Act ("FDCPA"). Specifically, they claim that Safeguard is a debt collector under the statute and failed to comply with various obligations imposed on debt collectors under the statute. The parties filed cross-motions for summary judgment. The district court ruled that Safeguard is not a "debt collector" under the FDCPA and therefore granted summary judgment to Safeguard. Because Safeguard's actions were too attenuated from Green Tree's own debt-collection efforts, we hold that the district court was correct to conclude that Safeguard is not a debt collector. We therefore affirm its judgment.




         Andrew and Wendy Schlaf own property in Illinois. The property is subject to an FHA-insured mortgage serviced by Green Tree Servicing, LLC.[1] The Schlafs defaulted on the mortgage, and Green Tree was unsuccessful in its initial attempts to contact them about the delinquent payments and late fees.

         Green Tree contracts with Safeguard, a "mortgage field servicing company, "[2] to perform a variety of services on properties with defaulted mortgages, including lawn maintenance and winterizing services. The relationship between Green Tree and Safeguard is governed by a Master Property Services Agreement.[3] Exhibit A to the Agreement describes the various property preservation services that Safeguard will perform for Green Tree when Green Tree places an order; these include a variety of property inspections, lock changes, pool maintenance, and utility management.[4] Most relevant here, Green Tree arranged with Safeguard to assist Green Tree in complying with certain Department of Housing and Urban Development ("HUD") regulations to which any of its properties with FHA-insured mortgages are subject (including the Schlafs' mortgage). As relevant here, the regulations require Green Tree to inspect those properties for occupancy:

When a mortgage is in default because a payment was not received within 45 calendar days of the due date of the missed payment, and efforts to reach the mortgagor by telephone or correspondence have proven unsuccessful, the mortgagee must make an inspection to determine if the property is vacant or abandoned.[5]

         To comply with the HUD inspection obligation, Green Tree contracted with Safeguard to perform "contact attempt inspection[s]" on the properties.[6] Green Tree's "servicing system" automatically placed an order for a contact attempt inspection when an account was "45 or more days past due" and "efforts to reach the mortgagor by telephone or correspondence have proven unsuccessful."[7] The inspection order was sent automatically to Safeguard "through [a] system that is built between [Green Tree] and Safeguard."[8] The results of the inspection were then sent back to Green Tree through the same automated system.

         During the contact attempt inspections, a Safeguard representative visited the property to determine its occupancy status and placed a door hanger on an outside doorknob of the property. The door hanger it placed for Green Tree contained a piece of paper that gave instructions in English and Spanish for the property owner to contact Green Tree:

GREEN TREE 800-666-1143

         The phone number listed on the door hanger was Green Tree's phone number. The door hanger did not identify Safeguard in any way.

         Safeguard's representatives verified occupancy for Green Tree by visually inspecting the property for indicators such as "whether grass is cut, personal property is visible, glass is intact and utilities are on."[10] The door hanger was to be left only after the Safeguard representative verified through such an inspection that the property was occupied. Further, Safeguard representatives were instructed to leave the door hanger even if they spoke personally to the homeowner while conducting the inspection. However, they were not to identify themselves as Safeguard representatives if they encountered the homeowners or others on the property and were instructed "to avoid talking about why they are on the property."[11]

         Safeguard admits that contact attempt inspections are performed "because HUD guidelines require them to be performed when a mortgage is in default."[12] It maintains that the purpose of the inspection, as required by the guidelines, is "to determine if a property is being maintained and whether it is occupied."[13] However, Safeguard acknowledges that "one of the purposes of leaving the door hanger is to attempt to contact the mortgagor in an effort to have the mortgagor … contact the client."[14]

         When Green Tree was unsuccessful in its initial attempts to contact the Schlafs about their delinquent payments, it arranged with Safeguard to perform a series of contact attempt inspections at the Schlafs' property.[15] During each of the inspections, [16] a Safeguard representative left Green Tree's door hanger on the Schlafs' door. On at least one occasion, Mr. Schlaf encountered the Safeguard representative while the representative was hanging the door hanger. Mr. Schlaf testified that the representative did not identify himself as being employed with Safeguard or with any company and that the representative told Mr. Schlaf he was "[j]ust doing [his] job."[17] On other occasions, Mr. Schlaf encountered the Safeguard representatives as they were leaving his property, and he was unable to identify them or speak with them.

         Mr. Schlaf called the number on the door hanger at least once and testified that it "took [him] right to Green Tree."[18]He testified that, to his knowledge, Safeguard is "property preservation," and he did not know if Safeguard collected debt.[19] Further, he testified that he never "receive[d] anything" or "ha[d] a conversation with anybody from Safeguard Properties attempting to collect" on the delinquent mortgage debt.[20]


         The Schlafs filed this action[21] on May 14, 2015, alleging that Safeguard had violated the FDCPA by not including certain disclosures on the door hangers. Specifically, they alleged that Safeguard had failed to comply with the initial disclosure requirements of 15 U.S.C. § 1692g. Section 1692g requires debt collectors, "[w]ithin five days after the initial communication with a consumer in connection with the collection of any debt," to disclose certain details about the debt, such as the name of the creditor, the amount owed, and that the debtor has the right to dispute the debt. The Schlafs also alleged that Safeguard had violated 15 U.S.C. § 1692e(11), which requires debt collectors to ...

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