Category Archives: Lender Liability

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Eleventh Circuit Declines to Expand Reach of “Least Sophisticated Consumer” Standard In the Context of Sending Periodic Mortgage Statements Following Bankruptcy Discharge

The Eleventh Circuit recently clarified that sending periodic mortgage statements following a debtor’s bankruptcy discharge is not misleading to the “least sophisticated consumer.” In Helman v. Bank of America, 15-13672, 2017 WL 1350728 (11th Cir. April 12, 2017) Gayle Helman filed suit, alleging that Bank of America violated the Fair Debt Collections Practices Act (FDCPA), … Continue Reading

Eleventh Circuit accepts Spokeo argument; holds that mere procedural violation is not enough to confer standing

In a victory for defendants, the Eleventh Circuit recently agreed that a mere procedural violation—the kind of injury that has become the favorite of the plaintiffs’ bar—is insufficient to confer Article III standing. More specifically, the Eleventh Circuit concluded that a certified return receipt will satisfy a lender’s obligation under Regulation X to provide written … Continue Reading

Still No “Free House” in Florida – Florida Supreme Court Denies Motions for Rehearing in Bartram

On March 16, 2017, the Florida Supreme Court solidified the position of its November 3, 2016 opinion in Bartram v. U.S. Bank, N.A., SC14-1266, 2016 WL 6538647 by denying the motions for rehearing filed in response to the Court’s holding that an involuntary dismissal unwinds acceleration, returning lender and borrower to their previous positions and allowing lender to pursue foreclosure on future defaults. … Continue Reading

Citing Spokeo, Eleventh Circuit Rejects Class Action Over Late Mortgage Satisfaction Recordation, Holding Plaintiff Had Not Alleged Concrete Injury-In-Fact Due to Statutory Violation

The Eleventh Circuit recently held in Nicklaw v. CitiMortgage, Inc.(No. 15-14216) that a plaintiff lacks standing to sue a creditor where the plaintiff merely alleges that the creditor failed to timely record a mortgage satisfaction, as it is statutorily required to do, but does not allege any additional concrete injury.… Continue Reading

Eleventh Circuit Holds That Reg. X Does Not Require Mortgage Servicers to Evaluate Untimely Loan Modification Plans Even If the Foreclosure Is Rescheduled So That the Sale Actually Occurs Beyond Reg. X’s 37-day Window

In a recent decision, the Eleventh Circuit (Lage v. Ocwen Loan Servicing, LLC, No. 15-15558 (11th Cir. Oct. 7, 2016)) held that a loan servicer is not required to evaluate a completed loan modification application if that application is submitted less than 37 days before a foreclosure sale is originally scheduled to occur. The Court … Continue Reading

Alabama Court of Civil Appeals reverses summary judgment granted in favor of mortgage servicer based on res judicata defense.

In Sims v. JPMC Specialty Mortgage, LLC, No. 2150437, a borrower had been involved in two previous lawsuits arising out of a mortgage servicer’s foreclosure upon the borrower’s property. The servicer obtained summary judgment in the trial court based on the doctrine of res judicata.  The Alabama Court of Civil Appeals reversed, finding that genuine … Continue Reading

CFPB Employs “Mystery Shoppers” to Investigate Allegations of Discrimination

With the Consumer Financial Protection Bureau (“CFPB”) now employing mystery shoppers, financial institutions must ensure that their branches are actually putting non-decimation policies into practice.  As we reported here on July 1, BancorpSouth, a Mississippi-based bank, recently entered into a $10.6M settlement with the CFPB regarding alleged redlining in the Memphis market.  That investigation was the … Continue Reading

Eleventh Circuit: No arbitration because bank failed to prove existence of arbitration agreement

Last week, the Eleventh Circuit refused to compel arbitration because the defendant financial institution failed to prove that its online deposit agreement actually included an arbitration clause.  This decision reflects the importance of (1) documenting the original agreement (both the actual terms and the assent of the consumer), (2) retaining the documentation, (3) documenting any … Continue Reading

CFPB Announces $10.6M Settlement with Mississippi Bank over Redlining

In a case that demonstrates the scope of the Consumer Financial Protection Bureau’s (“CFPB’s”) reach, the CFPB and Department of Justice (“DOJ”) have entered into a settlement with BancorpSouth totaling almost $10,600,000 over alleged redlining.  Redlining is the practice of denying services or raising prices to residents of certain geographic areas based upon their racial … Continue Reading

Balch attorneys provide guidance on TCPA compliance

Balch recently authored an article for Law 360 regarding the conundrum the Telephone Consumer Protection Act poses for electric utilities. While their article does not involve the financial industry, it does shed insight on the many problems created by the TCPA. For example, electric utilities are often required by state law to call customers before … Continue Reading

New Proposed Rule from the CFPB Paves Way for Massive Increase in Class Actions Suits Against Financial Institutions

Last week, the Consumer Financial Protection Bureau (“CFPB”) issued a proposed rule which would prohibit mandatory arbitration provisions in millions of banking contracts, including contracts with consumers for credit cards and bank accounts. While financial institutions would still be allowed to offer arbitration as an option to customers individually, they would no longer be able … Continue Reading

Eleventh Circuit Affirms Jury Verdict Against Mortgage Servicer for Extreme and Outrageous Conduct

Following the Eleventh Circuit’s decision last month in McGinnis v. American Home Mortgage Servicing, Inc., No. 14-13404, mortgage servicers should be aware that failing to recognize and correct miscalculations of a borrower’s payment may subject them to liability for extreme and outrageous conduct in certain circumstances. American Home Mortgage Servicing, Inc. took over the servicing … Continue Reading

Managing Litigation Risks in Third Party Technology Service Arrangements

One of the biggest risk trends for banks to watch in coming years will be risks arising from the outsourcing of information technology. Banking supervisors as well as the Consumer Financial Protection Bureau (CFPB) and the Federal Trade Commission have all brought enforcement actions related to vendor management. When relationships with IT vendors are not … Continue Reading

Eleventh Circuit holds that TILA does not create claim against an assignee for failure to timely provide payoff balance to mortgagor

The Eleventh Circuit recently reduced mortgage assignees’ potential exposure to liability for a servicer’s alleged violation of the Truth in Lending Act (“TILA”). In Evanto v. Federal National Mortgage Association, No. 15-11450, (11th Cir. Mar. 1, 2016), the Court held that TILA does not create a cause of action against an assignee for a mortgage … Continue Reading

Recent Letter From CFPB Director Makes Clear That Mortgage Lenders Should Be Promptly Correcting Defects In Loan Documents, Even After Closing

In December 2015, the Mortgage Bankers Association wrote to the Consumer Financial Protection Bureau for clarification regarding the implementation of the recent TILA-RESPA Integrated Disclosure (“TRID”) rule. In its letter to the CFPB, the Mortgage Bankers Association expressed concern that third-party due diligence firms are failing a high percentage of loans in the secondary market over minor TRID violations, in part due to uncertainty as to what errors in the Loan Estimate document may be remedied by the Closing Disclosure form.

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Florida Court Holds Offer of Judgment Statute is Preempted in Actions under the Florida Consumer Collection Practices Act (FCCPA)

A Hillsborough County Court recently held that Florida’s offer of judgment statute, Fla. Stat. § 768.79, is preempted by the Florida Consumer Collection Practices Act (the “FCCPA”), Fla. Stat. § 559.72.  This decision and, others like it, have stripped defendants in lender liability suits of valuable settlement tools.  In May 2013, the plaintiff in Hall … Continue Reading

Eleventh Circuit Affirms Dismissal of RESPA Class Action Holding That (1) Mortgage Service Provider’s Procurement of Closing Attorney Is More Than “Nominal” Service and (2) RESPA Does Not Prevent Mortgage Service Provider From Marking Up Price of a Third-Party Service

The Eleventh Circuit recently affirmed the dismissal of a putative class action relating to the settlement charges a mortgage service provider is allowed to collect under the Real Estate Settlement Procedures Act (“RESPA”).  In Clements v. LSI Title Agency, Inc., No. 14-11636, the Court held: (1) that a mortgage service provider does not perform only … Continue Reading

Mortgage Servicer Not Required to Make “Corrections” to Borrower’s Account in Response to a QWR When Servicer Provided Documents and Information Explaining Why it Believed Account to be Correct

On Tuesday February 10, 2015, the United States District Court for Southern District of Alabama adopted a Magistrate Judge’s Report and Recommendation dismissing a Real Estate Settlement Procedures Act (RESPA) claim brought by a borrower against a former servicer of her mortgage loan.  The borrower’s RESPA claim was based on a response to a Qualified … Continue Reading

Eleventh Circuit holds that a credit reporting agency can be held liable for emotional distress damages even though it never communicated erroneous credit information to a third party

In Collins v. Experian Information Solutions, Inc., No. 14-11111 (11th Cir. January 5, 2015), the plaintiff sought to recover damages for emotional distress resulting from a credit reporting agency’s failure to reasonably investigate disputed information in his credit file.  Prior to the lawsuit before the court, Equable Ascent Financial, LLC sued Curtis Collins in small … Continue Reading

Alabama Supreme Court Holds Claim For Breach-Of-Fiduciary Duty Subject To Two-Year Statute Of Limitations And Claim Accrues When Aggrieved Party Discovers Or Should Have Discovered Its Injury.

The Alabama Supreme Court recently held in Tender Care Veterinary Hospital, Inc. v. First Tuskegee Bank, No. 1131078 (Nov. 26, 2014), that standard breach-of-fiduciary duty and fraud claims asserted against a bank are subject to a two-year statute of limitations, which begins to run when the aggrieved party is injured and discovers or should have … Continue Reading

Eleventh Circuit holds that post-dated waiver of the right to rescind a home loan negates “clear and conspicuous” notice under the Truth in Lending Act.

In Harris v. Schonbrun, No. 13-15505 (11th Cir. Dec. 10, 2014), the Eleventh Circuit recently held that a waiver of the buyer’s right to rescind that is executed at the same time as a borrower’s loan documents can be a violation of the Truth in Lending Act (“TILA”).  Additionally, the Court explained that, once a … Continue Reading

Georgia Court of Appeals Upholds sua sponte Summary Judgment Against Lender in Wrongful Foreclosure Case

In BAC Home Loans Servicing, L.P. v. Wedereit,  328 Ga. App. 566 (2014), the Georgia Court of Appeals affirmed a trial court’s sua sponte granting of summary judgment for breach of contract based upon the lender’s failure to give proper notice prior to accelerating the loan at issue.  The borrower filed suit for wrongful foreclosure, based … Continue Reading

Alabama Supreme Court Holds Check Encoding Warranty Shifts Liability for Encoding Error

On September 30, 2014, the Alabama Supreme Court issued an important decision regarding which financial institution will bear the burden of a check encoding error under the check-encoding warranty found in Alabama’s U.C.C. Article 4.  According to the Alabama Supreme Court, this case is truly a case of first impression as there are no reported … Continue Reading

Court Clarifies Statute of Limitations in TILA Actions Involving Missing Disclosures, Rejects Equitable Tolling in Such Cases

A recent decision by the Eleventh Circuit Court of Appeals holds that the statute of limitations for a missing disclosure claim under the Truth-In-Lending Act (“TILA”), 15 U.S.C. §1601, et seq., begins to run on the date the lender distributed its loan application to the prospective borrower.  Further, in holding that the borrower “knew or … Continue Reading
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