If a mortgage servicer fails to comply with its obligations under the Real Estate Settlement Procedures Act (“RESPA”), 12 U.S.C. 2601, et seq., or its implementing regulations, a borrower may recover “any actual damages . . . as a result of the failure.” 12 U.S.C. 2605(f)(1)(A). Thus, to prevail on a RESPA claim, a borrower must show “actual damages” sustained as a result of the failure to comply. What constitutes “actual damages” has been the subject of a litany of recent decisions involving RESPA claims. In Baez v. Specialized Loan Servicing, LLC, 2017 WL 4220292 (Sept. 22, 2017), the Eleventh Circuit provided more clarity on the scope of “actual damages” under the statute.

Jaki Baez took out a mortgage loan in 2005, and Specialized Loan Servicing (“SLS”) took over the servicing of the loan a few years later. In January 2015, Baez stopped paying her mortgage to see if she could qualify for a loan modification agreement. She retained a law firm to both help with any ensuing foreclosure and to achieve a loan modification. She agreed to pay the firm a flat fee of $400 per month in connection with those efforts. In September 2015, Baez, through her attorney, sent a written request for information under 12 C.F.R. 1024.36(a) (part of RESPA’s implementing Regulation X, 12 C.F.R. part 1024) to SLS, in which she asked for information about her mortgage loan. SLS acknowledged the letter and later submitted a packet of information in response, but Baez claimed that the packet was deficient because it did not contain a file with SLS’s communications with her. Soon after receiving SLS’s purportedly deficient response, Baez filed suit under RESPA. The trial court granted summary judgment in favor of SLS, finding that Baez failed to show that she had been injured by SLS’s response to her request for information. Baez appealed, and the Eleventh Circuit affirmed.

Continue Reading 11th Circuit Provides that Postage Fees Incurred for Sending a Request for Information under RESPA are Insufficient to Independently Establish “Actual Damages”

The CFPB is aggressively litigating overdraft issues, which means lenders should proactively review their overdraft policies to avoid the specter of costly litigation with the CFPB. For example,  in Consumer Financial Protection Bureau v. TCF National Bank, No. 17-166 (D. Minn. September 8, 2017), a Minnesota district court allowed the Consumer Financial Protection Bureau to proceed to discovery on its claims against TCF National Bank for deceptive and abusive trade practices relating to overdraft fee “opt-in” programs. The district court concluded that TCF’s practice of enticing new and existing customers to opt-in to its overdraft services program (which subjected them to overdraft fees) could constitute an “unfair, deceptive, or abusive act or practice” under the Consumer Financial Protection Act.

Continue Reading Lenders Beware: Overdraft policies may spur CFPB litigation.

Earlier this month, in Schweitzer v. Comenity Bank, the Eleventh Circuit held that a consumer can partially revoke consent to be called under the Telephone Consumer Protection Act (TCPA), This decision will only further complicate the already complex and treacherous net of liability cast by that statute.

Continue Reading Eleventh Circuit Allows Partial Revocation of Consent under TCPA with Class and Contractual Consent Implications

What to do now about the new CFPB rule on arbitration?  (1) begin planning now and (2) begin actual preparation after the 60 days runs.

Congress has 60 days after publication of the new CFPB rule to take action to stop the application of this rule.  Publication occurred on Wednesday (July 19th).  It is impossible to predict what Congress will do.  However, we can be virtually certain that absent such Congressional action, this new rule will apply 180 days after those 60 days expire.  While there are other possible hurdles for this rule (for instance, an expected lawsuit challenging the rule; a possible new CFPB Director in the future; a challenge to the CFPB’s structure, etc.), these other impacts are unlikely to prevent the rule from beginning to have application.

We suggest you use the next 60 days to plan but wait to make any substantial expenditures until it is certain what Congress will do.  Here are some key questions which financial institutions should consider during those 60 days:

Continue Reading What to do now about the new CFPB rule on arbitration?

The Consumer Financial Protection Bureau (CFPB) recently finalized various updates to its mortgage disclosure rule, often referred to as “Know Before You Owe” or the TILA-RESPA Integrated Disclosures (TRID).  The updates were proposed approximately one year ago.  They include technical corrections, formal guidance, and a few substantive changes.  Some of the changes include:

  • Adding tolerance provisions for total payments that track existing TILA requirements regarding finance charges
  • Expanding the scope of certain exemptions for housing assistance loans
  • Applying TRID to all cooperative units, regardless of whether the cooperative units are classified as real property under state law
  • Providing guidance on sharing information with third parties

The new rule takes effect 60 days after publication in the Federal Register, but compliance is not mandatory until October 1, 2018.  A copy of the final rule is available here.

Notably absent from the final rule is guidance on the “black hole”—the period of time between issuing the Closing Disclosure and the actual closing date when, in certain instances, lenders may be prevented from resetting tolerances (and passing on closing cost increases to the borrower).  The amendments as originally proposed included a potential fix for this problem.  However, the CFPB decided not to adopt the fix based on conflicting comments that it received.  Instead, the CFPB issued a new proposed rule (with a new comment period) to address the “black hole” issue.  A copy of the proposed rule is available here.

The Consumer Financial Protection Bureau (CFPB) issued a rule on Monday prohibiting class action waivers in arbitration provisions of certain consumer contracts. The rule—to be codified at 12 C.F.R. § 1040—also requires covered businesses to submit records to the CFPB regarding any arbitration filed by or against their customers regarding covered products and services. The provided records will be made public and hosted by the CFPB on a searchable database. The likely impact of this rule (should it be allowed to go into effect) will be significant for financial institutions and dramatically alter their relationships with their customers.

Continue Reading CFPB Kills Class Action Waivers for Consumers Contracts and Makes Arbitration Public

Last week, the Second Circuit Court of Appeals, in Reyes v. Lincoln Automotive Financial Services, held that contractual consent—once given—cannot be unilaterally revoked. The landmark Telephone Consumer Protection Act (TCPA) case gives a potent tool against the flood of TCPA cases based on the revocation of consent, at least for businesses with well documented relationships with their customers.

In reaching its ultimate conclusion, the Reyes court acknowledged the seemingly contrary case law from the Courts of Appeal for the Third and Eleventh Circuits. According to ReyesGager v. Dell Fin. Servs., LLC (Third Circuit) and Osorio v. State Farm Bank, F.S.B. (Eleventh), as well as the 2015 FCC Declaratory Ruling which relied on Gager and Osorio, “considered a narrow question: whether the TCPA allows a consumer who has freely and unilaterally given his or her informed consent to be contacted [to] later revoke that consent.” Reyes “present[ed] a different question . . . : whether the TCPA also permits a consumer to unilaterally revoke his or her consent to be contacted by telephone when that consent is given, not gratuitously, but as bargained-for consideration in a bilateral contract.”

The key to framing the question in this light comes from the distinction “between tort and contract law. In tort law, ‘consent’ is generally defined as a gratuitous action . . . .” On the other hand, “[i]t is black-letter law that one party may not alter a bilateral contract by revoking a term without the consent of a counterparty.” In addressing the policy arguments mounted by Reyes, the Court declined to step into a role it found more suited for Congress:

We are sensitive to the argument that businesses may undermine the effectiveness of the TCPA by inserting ‘consent’ clauses of the type signed by Reyes into standard sales contracts, thereby making revocation impossible in many instances. . . . But this hypothetical concern, if valid, is grounded in public policy considerations rather than legal ones; if the abuse came to pass, it would therefore be ‘for the Congress to resolve—not the courts.’

Reyes adds more weight to the already existing incentive for businesses to capture written consent. However, it is not panacea for TCPA liability. First, at present, it is confined to the Second Circuit. Second,  it applies to those businesses who have a contractual relationship with the plaintiff. Third, plaintiffs may argue—like they would in fighting arbitration—that the call must relate to or fall within the scope of the contract and the consent provision under which a business seeks to invoke Reyes. Fourth, certain scenarios, like debt collection, may fall outside of Reyes. While consent already transfers from a business relationship to debt collection activities, that is a revocable form of consent. Reyes arguably makes that consent non-revocable if contracted. However, a plaintiff may argue that a contractual default and the subsequent election to pursue default remedies terminates the contract.

In light of the above, businesses may want to consider just how broad their consent language is in their contracts and just how they may seek to capture a written relationship in as many instances as possible. Undoubtedly, TCPA defendants will look to Reyes when able and plaintiffs will push back. Monitoring how and if the decision gains traction across the country will be one of the more important TCPA trends for the second half of 2017.

This week, the United States Supreme Court issued a key decision under the Fair Debt Collection Practices Act in a case litigated by Balch & Bingham lawyers, Jason Tompkins and Chase Espy. In Midland Funding, LLC v. Johnson, the Supreme Court resolved a circuit split over the issue of whether debt collectors who file bankruptcy proofs of claim for stale debts are subject to suit under the Fair Debt Collection Practices Act. Siding with Midland, one of the nation’s largest buyers of unpaid debt, the Supreme Court held that “filing a proof of claim that on its face indicates that the limitations period has run” is not actionable under the FDCPA, thereby avoiding a potential conflict between the FDCPA and the Bankruptcy Code. Although ostensibly limited to the bankruptcy context, the Johnson decision could potentially ripple into other FDCPA cases. In the meantime, though, Johnson will undoubtedly turn off the faucet for would-be FDCPA plaintiffs who had hoped to capitalize on what the Eleventh Circuit complained is a “deluge” of out-of-statute proofs of claim.

Continue Reading Supreme Court Sides With Balch Lawyers and Finds for Midland Funding, Rejecting FDCPA Lawsuits Based on Bankruptcy Proofs of Claim for Out-of-Statute Debts

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), Florida Consumer Collection Practices Act (FCCPA), and other state laws when it sent Ms. Helman periodic mortgage statements after her mortgage loan was discharged in bankruptcy.  She claimed that the statements unlawfully attempted to collect a discharged debt and that such communications would be misleading to the least sophisticated consumer because it suggested she remained liable for the debt.

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

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 acknowledgment of a request for information within five days. Though this decision is unpublished, it is persuasive authority that may guide the district courts within the Eleventh Circuit.

In Meeks v. Ocwen Loan Servicing, LLC, No. 16-15536, Charles Meeks sent a Request for Information to his mortgage servicer via certified mail. The servicer’s agent signed the return receipt the same day the request was received. The receipt was then returned to the Meeks’ counsel. Several months later, Meeks sued the servicer and attached the certified receipt to his complaint.

Meeks asserted two claims against the servicer: (1) the servicer violated Regulation X by not sending him written acknowledgment of the Request for Information within 5 days and (2) that the servicer had shown a reckless disregard for the requirements of Regulation X. After the case was removed, the district court dismissed the first count for failure to state a claim and the second count for lack of standing. On appeal, the Eleventh Circuit affirmed.

The Court pointed out that no other circuit court has considered whether a certified receipt satisfies the written response obligation under Regulation X. Rather than engage in a lengthy legal analysis, the Court focused on the undisputed facts. Because there was no serious dispute that Meeks had received the certified receipt, Meeks had failed to state a claim under Regulation X. Put another way, a failure to send a notice of acknowledgment is unnecessary when the undisputed evidence shows that the borrower knew the request had been received.

More important, the Court concluded that Meeks lacked standing to bring a pattern or practice claim. Pointing to the Supreme Court’s decision in Spokeo, Inc. v. Robins, 136 S. Ct. 1540, 1548-49 (2016), the Court noted that an injury must be both concrete and particularized in order to confer Article III standing. Meeks had not suffered an injury because it was undisputed that he had received the return receipt. Even though Meeks argued that this receipt was deficient under Regulation X, the Eleventh Circuit held that this deficiency was nothing more than “a bare procedural violation” that was insufficient to create a “real, concrete injury.”

Meeks is important for two reasons. First, it holds that a procedural deficiency alone—here, the failure to send a written acknowledgment within five days—is insufficient to confer standing when the undisputed evidence shows that the deficiency caused no injury to the plaintiff. On this point, Meeks is in tension with another unpublished Eleventh Circuit decision, Church v. Accretive Health, Inc., 654 F. App’x 990 (11th Cir. 2016), which held that the FDCPA creates a statutory right to receive certain information and that a failure to include this information in the debtor’s letter to the plaintiff was a sufficient injury to confer standing. Because neither opinion is published, neither will be binding on a subsequent Eleventh Circuit panel. Moreover, it may be possible to reconcile the holdings in Meeks and Church. In Meeks, it was undisputed that the plaintiff had received the benefit established by the procedural right while in Church it was not clear that the plaintiff had actually received the information that the statute required.  It is also worth pointing out that many post-Spokeo courts have declined to extend Spokeo to its logical conclusions. At the very least, this apparent contradiction signals that the law on this issue is evolving. The Eleventh Circuit is likely to address this issue in a published opinion in the future.

Second and for purposes of Regulation X specifically, Meeks holds that a certified return receipt can satisfy a lender’s obligations under Regulation X when there is no dispute that the borrower received the return receipt. This holding may be somewhat limited however because plaintiffs’ counsel may not attach the receipts to their complaints or will deny receiving them. Meeks also leaves open the question of what happens if the receipt is received by the borrower more than five days after the lender signs it. Still, lenders should look for ways to bring their case within Meeks as doing so will create a strong argument for dismissal in district courts within the Eleventh Circuit.