In Patel, et al v. Specialized Loan Servicing LLC, et al, No. 16-12100 (11th Cir. 2018), the Eleventh Circuit held that claims against a loan servicer for “artificially inflated” force-placed insurance premiums were barred by the filed rate doctrine. In Patel, the plaintiff alleged that loan servicers and insurance companies breached implied covenants of good faith and fair dealing, as well as various deceptive and unfair trade practice statutes, by purchasing force-placed insurance for the plaintiffs’ mortgaged properties. Plaintiffs alleged that the premiums were “artificially inflated”, “unreasonably high”, and that they reflected the “costs of kickbacks” to the loan servicers. The Court affirmed the Southern District of Florida’s dismissal of the plaintiff’s complaint for failure to state a claim, finding that the allegations in the complaint were “textbook examples of the sort of claims” barred by the filed-rate doctrine.

Continue Reading Eleventh Circuit: Filed-Rate Doctrine bars claims over lender’s force-placed insurance

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.

On August 17, 2017, the Eleventh Circuit issued an opinion in Steven Bivens v. Select Portfolio Servicing, Inc. (No. 16-15119), holding that a borrower must send requests for information to a mortgage servicer’s designated addressed before a servicer’s duty to respond under the Real Estate Settlement Procedures Act are triggered. Lenders should take note of this decision because it indicates that the Eleventh Circuit will require plaintiffs to strictly comply with the terms of that statute before holding banks or mortgage servicers liable under that statute.

Continue Reading Bivens v. Select Portfolio Servicing, Inc. – 11th Circuit Confirms Right of Servicers to Designate in a Reasonable Manner a Distinct Address and Department to Respond to QWR’s

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

A recent Supreme Court decision may allow defendants to avoid lawsuits in distant courts that have little or no connection to the lawsuit, especially in cases (such as mass actions) where the claims of out-of-state plaintiffs are joined with those of in-state plaintiffs.  In Bristol-Myers Squibb Co. v. Superior Court of California, San Francisco Cty., — U.S. —, 137 S. Ct. 1773, 1775 (2017), the Supreme Court held that a California state court did not have personal jurisdiction to adjudicate claims against a drug company, at least for the plaintiffs who were not California residents and who had not alleged a connection between the alleged injury and the state of California.  While law school civil procedure professors spend weeks covering personal jurisdiction, the defense rarely appears in real-world practice because most plaintiffs’ attorneys are smart enough to avoid a fight over jurisdiction.  Thus, defendants may give this defense only cursory consideration at the outset of a lawsuit.  Following Bristol-Myers, defendants may want to more carefully consider the personal jurisdiction defense as a way to avoid litigation in a hostile forum.

Continue Reading Defendants should consider personal jurisdiction defense following Supreme Court decision, especially when the claims of out-of-state plaintiffs are joined with those of in-state plaintiffs.

The Dodd Frank Act expressly provided that any CFPB rule on arbitration would not apply to existing contracts.  12 U.S.C. § 5518(d).  Therefore, the CFPB rule released last week will only bar class action waivers for contracts “entered into after” the applicable date for the regulation (60 days after publication of the rule in the Federal Register and then 180 days after that date).

However, the CFPB has taken an aggressive position on what is an existing contract.  Therefore, for existing customers, lenders and other “covered persons” will need to examine every change in any product or services they offer that is subject to the arbitration rule. If any “new product or service” is given to an existing customer, the new regulation applies to that product or service even if it is covered by the terms of an existing contract (assuming that the new product or service is within the scope of the rule).  In such a case, the lender would need to amend the previous agreement or provide a new agreement for the new product and could not rely on the arbitration clause to avoid a class action.

Continue Reading Are existing agreements governed by the new CFPB Arbitration Rule?

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

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