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 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 an unpublished opinion, the Eleventh Circuit applied the Supreme Court’s recent opinion in Spokeo, Inc. v. Robins, 578 U.S. ___, 136 S. Ct. 1540 (2016) and held that a debtor who allegedly did not receive certain disclosures required by the Fair Debt Collections Practices Act (FDCPA) suffered an injury-in-fact to her statutorily created right to receive such information, and therefore had standing to pursue an FDCPA claim against the entity attempting to collect the debt.

Continue Reading Eleventh Circuit: Failure to provide debtor with FDCPA-required disclosures constitutes injury-in-fact to confer standing

Few issues involving the Fair Debt Collection Practices Act (FDCPA) are more hotly contested than whether filing a proof of claim on a time-barred debt violates the FDCPA. In bankruptcy, creditors have a right to file proofs of claim outlining the debt owed to them by the bankrupt debtor. In some instances, the statute of limitations for filing a lawsuit on that debt has run, and up until July 10, 2014, when the Eleventh Circuit Court of Appeals issued its decision in Crawford v. LVNV  Funding, LLC, it was common practice to file a proof of claim on such a time-barred debt. Crawford—for the first time—likened the filing of a proof of claim to the filing of a lawsuit, finding that if one is wrongful, so is the other. After Crawford, debt collectors have faced a tidal wave of cases across the country, raising numerous defenses, one of which is res judicata. The argument goes like this: if a debt collector files a proof of claim to which neither the debtor nor the trustee objects and the court subsequently confirms the debtor’s plan, then a final judgment exists stating the debt is valid. Thus the debtor is barred by res judicata  from further challenging the debt.

Despite a chorus of cases adopting this reasoning, the United States District Court for the Southern District of Georgia recently dealt a blow to the res judicata argument, finding that the grounds upon which the FDCPA claim was raised and the grounds upon which the proof of claim was confirmed were not sufficiently similar such that one could foreclose the other. For two years the so-called Crawford cases have raged; circuit splits exist; and this recent decision from the Southern District of Georgia shows that further disagreement is likely. Creditors and debt collectors alike should monitor the development of these cases to ensure they know how their claims will be treated in the bankruptcy courts.

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 CFPB’s first use of testing, also called “mystery shopping,” as an investigative tool.  This practice, which has long been in use by the Department of Justice and the Department of Housing and Urban Development, involves sending both white and African American individuals into branch offices to determine whether white customers are treated more favorably than African American customers.

More information about the CFPB’s use of mystery shopper’s as well as the redlining settlement can be located here.

 

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 or ethnic makeup.  The term was coined from the practice by lenders of marking in red areas on maps of cities that were not desirable for mortgage loans.

According to the CFPB and DOJ, when BancorpSouth expanded into the Memphis market, it did not build any branches in neighborhoods with large minority populations.  Further, nearly all of its loans allegedly originated outside minority neighborhoods.  The fine was announced as part of a settlement between BancorpSouth and the government under which, if approved by the court, Bancorp South will provide $4,000,000 in direct loan subsidies in minority neighborhoods, spend at least $800,000 on community programs and minority outreach, pay $2,780,000 to African American customers who were overcharged or denied  credit, and pay a $3,000,000 penalty.  Although it settled with the government, BancorpSouth did not admit guilt.

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 turning off their electrical service. However, if the utility calls the customer’s cell phone using an autodialer, then the utility could be subject to statutory damages under the TCPA. An industry group has requested further guidance from the Federal Communications Commission about the proper course of action when faced with this scenario. Hopefully, the FCC will exempt such calls from the TCPA’s scope, but that is not guaranteed. As the above example shows, the TCPA can be a difficult statute to navigate, especially as businesses increasingly communicate with their customers exclusively through mobile phones.

The bottom line is this: “Every company in every industry needs to have strong TCPA compliance procedures in place for communicating with customers.” Balch has advised numerous clients both inside and outside the utility industry on how to develop TCPA compliance procedures. If you believe our expertise could benefit your company, please do not hesitate to contact us.

The full text of the article is available here.

The CFPB is showing that its enforcement actions are not limited to larger companies and that it will file actions in federal courts across the country.  On May 11, 2016, it filed an enforcement action against Mississippi payday lender All American Check Cashing in the United States District Court for the Southern District of Mississippi.  In its complaint, the CFPB alleged that all American took steps to hide its fee from customers, going so far as to train its employees to “NEVER TELL THE CUSTOMER THE FEE.”  Further, the CFPB alleges that All American took steps to prevent customers who had changed their minds from cancelling transactions.  According to the CFPB, these actions would constitute “unfair, deceptive, or abusive acts” under 12 U.S.C.A. ss 5531 and 5536, portions of the Consumer Financial Protection Act.

Continue Reading CFPB Files Enforcement Action Against Mississippi Payday Lender

Following the Eleventh Circuit’s decision in Bishop v. Ross Earle & Bonan, P.A., No. 15-12585, creditors and debt collectors should immediately review their practices to ensure that any communication to a debtor or a debtor’s attorney complies with the Fair Debt Collection Practices Act (FDCPA). This is especially true for FDCPA § 1692g(a)’s requirement that the debtor has a right to dispute the debt and that such dispute must be in writing.

Continue Reading Eleventh Circuit holds that debt collection letters sent to a consumer’s attorney qualifies as a communication with a consumer under the Fair Debt Collection Practices Act.