New York Appeals Court Backs HSBC in Mortgage, FDCPA and TILA Dispute

Case Snapshot

• Court: New York Supreme Court, Appellate Division, Second Department
• Case: Michalczyk v. HSBC Bank USA, N.A., 2026 NY Slip Op 04850
• Decision Date: Aug. 5, 2026
• Core Issue: Whether claims arising from mortgage and HELOC foreclosure proceedings could proceed against HSBC under contract law, the FDCPA, TILA, and other theories.
• Key Allegation: The homeowner asserted multiple claims against HSBC, including breach of contract, an FDCPA violation, TILA violations, and trespass.
• Court Holding: The appellate court affirmed summary judgment for HSBC on all claims.
• Outcome: The lower court’s order dismissing the complaint was affirmed, with costs.
• Notable Detail: The court said disputes involving alleged billing errors or the amount owed under a mortgage were matters for a referee in the foreclosure proceeding rather than an independent breach-of-contract claim.

A New York appeals court has affirmed the dismissal of a homeowner’s claims against HSBC Bank USA, N.A., finding that alleged mortgage billing discrepancies did not support a breach of contract claim, HSBC was not a debt collector under the Fair Debt Collection Practices Act, and the borrower’s Truth in Lending Act claims were time-barred.

The Aug. 5 decision from the New York Supreme Court’s Appellate Division, Second Department, in Michalczyk v. HSBC Bank USA, N.A. provides creditors, mortgage servicers and receivables professionals with a useful application of several established principles governing foreclosure disputes and federal consumer financial laws.

Dispute Followed Two Mortgage Loans and Foreclosure Actions

The dispute traces back more than two decades.

In July 2005, Mildred J. Michalczyk executed a note in favor of HSBC Mortgage Corporation (USA), secured by a first mortgage on residential property in East Farmingdale, New York. She subsequently entered into a home equity line of credit agreement in May 2007 that was secured by a second mortgage on the property.

Both loans were assigned to HSBC Bank USA in 2013.

HSBC commenced an action to foreclose the HELOC in 2014. Michalczyk filed an answer and asserted counterclaims, but a state court subsequently granted HSBC’s motion for summary judgment and dismissed her answer and counterclaims.

HSBC separately initiated foreclosure proceedings involving the first mortgage in 2015. Michalczyk again asserted defenses, counterclaims, and cross-claims.

HSBC moved to discontinue the first-mortgage foreclosure action, and the court severed Michalczyk’s counterclaims into a separate action.

The Suffolk County Supreme Court granted HSBC summary judgment dismissing the complaint in November 2020. Michalczyk, who represented herself on appeal, challenged that decision before the Second Department.

Billing Dispute Did Not Establish Breach of Contract

The appellate court first rejected Michalczyk’s breach of contract claim.

Under New York law, a breach of contract claim generally requires the existence of a contract, performance by the plaintiff, breach by the defendant, and resulting damages.

The Second Department found that HSBC had demonstrated that Michalczyk failed to identify a specific provision of the mortgage agreement that HSBC allegedly breached. She also failed to raise a triable issue of fact in response.

The court similarly rejected an argument based on the implied covenant of good faith and fair dealing, finding that the homeowner’s broad allegations did not establish improper conduct by HSBC outside its commencement of the foreclosure action.

The court’s treatment of alleged billing discrepancies is particularly relevant to mortgage servicing and creditor operations.

According to the decision, disputes involving billing errors or the amount owed under the mortgage agreement did not independently establish a breach of contract claim. Instead, those disputes were issues for a referee to determine as part of the foreclosure proceeding.

That distinction can be important when borrowers challenge account balances, payment histories, fees, or other calculations while foreclosure litigation is pending.

Court Finds HSBC Was Not an FDCPA Debt Collector

Michalczyk also sought damages under the Fair Debt Collection Practices Act.

The Second Department affirmed dismissal of that claim after finding that HSBC had established that it was not a “debt collector” as defined by the FDCPA.

The federal statute generally defines a debt collector as a person whose principal business purpose is debt collection or who regularly collects debts owed or due another, although the statute contains additional provisions and exclusions governing who falls within its scope.

The distinction between creditors and FDCPA-covered debt collectors remains an important threshold question in receivables litigation. Whether a particular company qualifies requires consideration of the statutory definition and the facts surrounding the debt and collection activity.

In Michalczyk
, the appellate court found HSBC had established that it did not qualify as a debt collector under the statute, citing its earlier decision in HSBC Bank USA, N.A. v. Lien Thi Ngo and other New York precedent.

Michalczyk failed to raise a triable issue of fact in opposition.

TILA and Trespass Claims Were Time-Barred

The homeowner’s claims under the federal Truth in Lending Act were unsuccessful for a separate reason.

Michalczyk sought to rescind the mortgage loan and recover damages under TILA, but the court determined that her claims were time-barred.

The Second Department also affirmed dismissal of her trespass claim on limitations grounds.

The decision underscores the importance of limitations periods when consumers assert federal lending claims years after a loan transaction. Even where a plaintiff alleges an underlying violation, courts may never reach its substantive merits if the applicable deadline for bringing the claim has expired.

Earlier HELOC Litigation Prevented Claims From Being Relitigated

The Second Department also addressed Michalczyk’s remaining cross-claims, concluding that they were barred by res judicata and collateral estoppel.

Those doctrines generally prevent parties from relitigating claims or issues that have already been resolved through qualifying prior proceedings.

The appellate court determined that Michalczyk’s cross-claims duplicated counterclaims she previously asserted in the HELOC foreclosure action.

The 2017 order granting HSBC summary judgment and dismissing Michalczyk’s counterclaims in that proceeding constituted a final judgment on the merits for purposes of res judicata, according to the court.

The panel also noted that Michalczyk did not contend that she lacked a full and fair opportunity to litigate the issues during the earlier HELOC case.