A North Carolina federal court has allowed a putative class case to proceed on a theory that a residential mortgage servicer’s notice that it “may” accelerate is deceptive under the FDCPA and state law. On September, 16, 2025, a judge for the US District Court of the Middle District of North Carolina issued a memorandum opinion and order in the class action proceeding captioned Christel England et al. v. Selene Finance, LP, case number 23-cv-00847, denying the defendant servicer’s motion to dismiss a putative class action complaint. The putative class plaintiffs alleged that the servicer’s default notice is deceptive under the federal Fair Debt Collection Practices Act (FDCPA), the North Carolina Debt Collection Act, and the North Carolina Collection Agencies Act.
The language of the notice at issue is familiar to the residential mortgage servicing industry. Titled Notice of Default and Intent to Accelerate, the notice states that:
the servicer of your mortgage loan [] in accordance with the Security Instrument and applicable state laws, provides you with formal notice of the following: The mortgage loan associated with the Security Instrument is in default for failure to pay the amounts that came due on [date] and all subsequent payments. To cure this default, you must pay all amounts due under the terms of your Note and Security Instrument, which includes any delinquent payments and regularly scheduled payments. . . . The total amount you must pay to cure the default stated above must be received by [date]. Failure to cure the default on or before the date specified may result in acceleration of the sums secured by the Security Instrument, sale of the property and/or foreclosure by judicial proceeding and sale of the property.
Threatening to Take Action that Cannot Legally be Taken
Plaintiffs argue that the notice threatens legal action that cannot be taken, which constitutes an unfair and deceptive collections practice. The language at issue is the statement that, “[f]ailure to cure the default on or before the date specified may result in acceleration of the sums secured by the Security Instrument, sale of the property.” Plaintiffs allege that the threat to accelerate the loan if the arrears are not paid in full by the date contained in the letter violates section 1692e of the FDCPA because “residential servicers do not commence foreclosure when a loan obligation is less than 120 days delinquent.”
Section 1692e of the FDCPA prohibits a debt collector from threatening “to take any action that cannot legally be taken or is not intended to be taken” and using “any false representation of deceptive means to collect or attempt to collect any debt.” The court found sufficient plaintiffs’ allegation that the servicer does not accelerate the loans of borrowers who fail to pay their total default amount before the date set out in the letters—usually 30 days from the notice—“in the usual course of business” because residential servicers do not commence foreclosure until the loan obligation is more than 120 days delinquent. Therefore, to avoid acceleration and foreclosure a borrower needs only to bring the loan to less than 120 days past due. (This arises from a regulatory restriction under Regulation X, 12 C.F.R. § 1024.41(f)(1)(i), which provides: “(1) Pre-foreclosure review period. A servicer shall not make the first notice or filing required by applicable law for any judicial or non-judicial foreclosure process unless: (i) A borrower’s mortgage loan obligation is more than 120 days delinquent;… .”)
Assuming the vantage of the “least-sophisticated consumer,” the district court concluded that the plaintiffs had plausibly stated a claim for relief under section 1692e(5) of the FDCPA because this statement was a threat to take action the servicer “has no intention of taking.” The court rejected the servicer’s argument that its statement that the borrower’s failure to pay may result in acceleration and foreclosure was: (1) merely a statement of its legal options to pursue the debt; and (2) not untrue on its face. The court also rejected the servicer’s argument that any alleged misrepresentations were immaterial because the borrower was given a longer cure period than required under the security instrument.
The Equivocal Statement that Lender “May” Accelerate
Another aspect of the language the district court found may violate the FDCPA is the statement that failure to pay the arrears “may” result in acceleration and foreclosure. The district court found the plaintiffs also plausibly stated a claim under section 1692e(10) of the FDCPA, which prohibits the “use of any false representation or deceptive means” in collecting a debt. The district court reasoned that despite the use of the equivocal language “may,” the least-sophisticated consumer might be deceived to believe the servicer threatened to take actions it had no intention of taking and has never or very rarely taken before.
While the judge was careful to note that the servicer’s arguments were unpersuasive at “this stage” of the litigation (i.e. a motion to dismiss addressed to the sufficiency of the pleading), the fact that the plaintiffs’ class action complaint survived dismissal may lead to the commencement of copy-cat class action proceedings against mortgage loan servicers utilizing the same or similar language in their default notices.
Importantly, the statement used in the notice, including the language “may” is nearly verbatim to the notice required by paragraph 26(a) of the non-uniform covenants in the current standard form North Carolina security instrument. (See North Carolina Single Family – Fannie Mae/Freddie Mac Uniform Statement Form 3034.) This notice has generally been construed as a contractual condition precedent to commencing foreclosure. This situation presents a catch-22 for servicers trying to comply with both the FDCPA and the mortgage covenants.
For questions about this Alert or the issues presented in this decision, please contact the authors of this alert or any member of McCarter & English’s Bankruptcy, Restructuring & Litigation Practice Group.