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On June 11, the U.S. Court of Appeals for the 11th Circuit affirmed the dismissal of a RESPA action against a mortgage servicer, concluding that rescheduling a foreclosure sale is not a violation of Regulation X’s prohibition on moving for an order of foreclosure sale after a borrower has submitted a complete loss-mitigation application. According to the opinion, a consumer’s home was the subject of an order of foreclosure, and the mortgage servicer subsequently approved a trial loan-modification plan for a six-month period. The servicer filed a motion to reschedule the foreclosure sale so that the sale would not occur unless the consumer failed to comply with the modification plan during the trial period. The consumer filed suit, alleging that the servicer violated Regulation X––which prohibits loan servicers from moving for an order of foreclosure sale after a borrower has submitted a complete loss-mitigation application––because the servicer rescheduled the foreclosure sale instead of cancelling it. The district court dismissed the action.
On appeal, the 11th Circuit agreed with the district court, concluding that the consumer failed to state a claim for a violation of Regulation X. The appellate court reasoned that Regulation X does not prohibit a servicer from moving to reschedule a foreclosure sale as that motion is not the same as the “order of sale,” a substantive and dispositive motion seeking authorization to conduct a sale at all, as referenced in Regulation X. Moreover, the appellate court argued that the consumer’s interpretation of the prohibition is inconsistent with the consumer protection goals of RESPA because it would disincent loan servicers from offering loss-mitigation options and helping borrowers complete loss-mitigation applications, if a foreclosure sale has already been scheduled. Lastly, the appellate court noted that the motion to reschedule is consistent with the CFPB’s commentary that, “[i]t is already standard industry practice for a servicer to suspend a foreclosure sale during any period where a borrower is making payments pursuant to the terms of a trial loan modification,” rejecting the consumer’s argument that the servicer should have cancelled the sale altogether.
On May 8, the U.S. Court of Appeals for the 11th Circuit affirmed in part and reversed in part the dismissal of a consumer’s putative class action against her reverse mortgage servicer for the alleged improper placement of flood insurance on her home. The consumer claimed violations of the FDCPA and multiple Florida laws, including the Florida Deceptive and Unfair Trade Practices Act (FDUTPA), based on allegations that the mortgage servicer improperly executed lender-placed flood insurance on her property, even though the condo association had flood insurance covering the property. The lender-placed flood insurance resulted in $5,200 in premiums added to the balance of the loan, and an increase in financing costs on the mortgage. The district court dismissed the action, concluding the mortgage servicer was required by federal law to purchase the flood insurance and the monthly account statements were not collection letters under the FDCPA or state law.
On appeal, the 11th Circuit agreed with the district court that the monthly account statements of the reverse mortgage, which prominently stated “this is not a bill” in bold, uppercase letters, and did not request or demand payment, were not an attempt to collect a debt under the FDCPA. Additionally, the appellate court concluded that the consumer failed to allege the mortgage servicer was a debt collector within the meaning of the FDCPA because the complaint does not allege that the debt was in default. The appellate court also affirmed the district court’s dismissal of the state debt collection claims for similar reasons. However, the appellate court reversed the district court’s dismissal of the consumer’s FDUTPA claims, noting that the mortgage servicer failed to cite to a state or federal law requiring it to purchase flood insurance “when it has reason to know that the borrower is maintaining adequate coverage” in the form a condo association insurance.
On April 25, the U.S. Court of Appeals for the 11th Circuit affirmed a district court’s dismissal of a putative class action against a national bank, finding that the plaintiff failed to show an investigation would reveal the bank inaccurately furnished information to credit reporting agencies (CRAs). According to the opinion, after the plaintiff failed to make payments on his mortgage, the bank reported the delinquencies to the three CRAs. A Florida circuit court entered a final judgment of foreclosure in the bank’s favor, which the plaintiff paid two years later after the account was transferred to a different lender. Two years after he paid the foreclosure judgment, the plaintiff noticed that the CRAs showed his account as past due despite the fact that the judgment had been paid. However, following an investigation, the CRAs confirmed that the information provided by the bank was accurate, since it reflected two years of missed payments that the plaintiff later contended he was not obligated to make due to the filing for the foreclosure action. The plaintiff filed a class action suit alleging the bank violated the FCRA by failing to report that he had paid off the foreclosure judgment. The district court dismissed the case with prejudice, ruling that the bank satisfied its obligations under the FCRA, and that the plaintiff failed to support his claim that the bank was obligated to report the payoff after it transferred the account.
On appeal, the 11th Circuit agreed with the district court, opining that because the plaintiff never claimed that the bank was informed of the past-due status dispute by the CRAs, the bank was not obligated to investigate under the FCRA. The court noted that the plaintiff “never alleged that [the bank] received notification from the CRAs that he disputed his account's past-due status as of July 2017,. . .that the CRAs provided notification of any such dispute to [the bank],. . .or even that he contacted the CRAs to dispute that aspect of his credit reports.” The plaintiff further argued that the filing of the foreclosure action and acceleration of the loan relieved him of the obligation to make monthly payments. The 11th Circuit was “unconvinced” by the argument and said that, nonetheless, “[w]hether [the plaintiff] was obligated to make payments on the mortgage after the Foreclosure Action was filed is a currently unresolved legal, not a factual, question. Thus, even assuming [the bank] furnished information that turned out to be legally incorrect under some future ruling, [the bank’s] purported legal error was an insufficient basis for a claim under the FCRA.”
On April 22, the U.S. Court of Appeals for the 11th Circuit affirmed a district court’s ruling that including too many digits of a consumer’s credit card account number on a receipt was sufficient to constitute a concrete injury even if the consumer’s identity was not stolen. Under the Fair and Accurate Credit Transactions Act (FACTA), merchants are prohibited from including more than the final five digits of a consumer’s credit card number on a receipt. According to the opinion, the consumer filed a class action suit against a chocolate company, alleging that one of its stores printed the first six and last four digits of his account number on a receipt, which exposed the class members “to an elevated risk of identity theft.” When the parties sought approval of a proposed settlement, two unnamed class members contested the settlement on the grounds that, among other things, the consumer/class representative lacked standing to sue because he had not suffered a concrete injury as defined in the U.S. Supreme Court’s decision in Spokeo, Inc. v. Robins. The district court, however, approved the settlement.
On appeal, the 11th Circuit held that an increased risk of identity theft is sufficient to bring claims under FACTA, and that the class representative’s “alleged injury is ‘particularized’ because the heightened risk of identity theft affected him ‘in a personal and individual way’—it was his credit card number that appeared on the receipt.” Moreover, the appellate court noted, “In our view, if Congress adopts procedures designed to minimize the risk of harm to a concrete interest, then a violation of that procedure that causes even a marginal increase in the risk of harm to the interest is sufficient to constitute a concrete injury.”
On April 9, the U.S. Court of Appeals for the 11th Circuit held that a consumer’s insurance repayment plan on her reverse mortgage did not qualify as an escrow account under RESPA’s Regulation X. According to the opinion, a consumer’s reverse mortgage required her to maintain hazard insurance on her property, which she elected to pay herself, and did not establish an escrow account with the mortgage servicer to pay her insurance and property taxes. After her insurance lapsed, the mortgage servicer advanced her over $5,000 in funds paid directly to her insurance carrier to ensure the property was covered, subject to a repayment agreement. After the consumer failed to make any payments under the agreement, the servicer initiated a foreclosure action against the consumer and obtained a forced-placed insurance policy when the insurance lapsed for a second time. Ultimately, a state-run forgivable loan program brought the consumer’s past due balance current and excess funds were placed in a trust to cover future insurance payments on the property. The consumer filed an action against the mortgage servicer alleging the servicer violated RESPA’s implementing Regulation X when it initiated forced-placed insurance, because the repayment agreement purportedly established an escrow account, which required the servicer to advance the funds for insurance. The district court entered judgment in favor of the servicer.
On appeal, the 11th Circuit agreed with the district court, concluding that no escrow account existed between the consumer and the servicer, emphasizing that nothing in the repayment agreement set aside funds for the servicer to pay insurance or taxes on the property in the future. The 11th Circuit rejected the consumer’s characterization of the repayment agreement as an arrangement under Regulation X “where the servicer adds a portion of the borrower’s payment to principal and subsequently deducts from principal the disbursements for escrow account items.” The 11th Circuit reasoned that not only did the consumer never make a principal payment to the servicer, the consumer’s characterization is “entirely inconsistent” with the reverse mortgage security instrument. Because the servicer never deducted anything from the principal when it disbursed funds to pay the insurance, the repayment agreement did not qualify as an escrow agreement under Regulation X.
On April 5, the U.S. Court of Appeals for the 11th Circuit reversed in part and affirmed in part a district court’s order dismissing a plaintiff’s action alleging a debt collector violated the FDCPA when attempting to collect on a time-barred debt. According to the opinion, the plaintiff brought a lawsuit asserting a debt collector (i) violated the FDCPA’s prohibition on “false, deceptive or misleading” practices under section 1692e; (ii) violated the FDCPA’s prohibition on “unfair or unconscionable” practices under section 1692f by attempting to collect on a time-barred debt; and (iii) violated Florida state collection laws. The district court dismissed the FDCPA claims, concluding that the law allows for collectors to seek “voluntary repayment of…time-barred debt so long as the debt collector does not initiate or threaten legal action,” and declined to exercise jurisdiction over the state law claims once it dismissed the FDCPA claims.
On appeal, the 11th Circuit affirmed the dismissal of the section 1692f claim, rejecting the argument that attempts to collect on time-barred debt are generally unconscionable or unfair under the law. As for the claim under section 1692e, the 11th Circuit concluded the collection letter could plausibly be misleading or deceptive to the “least sophisticated consumer.” Specifically, the 11th Circuit noted that, “as a general matter, a creditor can seek voluntary payment of a time-barred debt,” but the “right to seek repayment does not confer a right to mislead” and one must only “reasonably infer an implicit threat” of litigation to state a claim under section 1692e. The 11th Circuit concluded that the letter’s offer to “resolve” the debt at a discount—“combined with a deadline” to accept the offer—is a “warning” that the offer may not be renewed, and that a lack of disclosure that the debt is time barred could “plausibly deceive or mislead an unsophisticated consumer as to the legal status of the debt, even in the absence of an express threat of litigation.” In reversing the dismissal of the claim under section 1692e, the appellate court also reinstated the state law claim and remanded the case back to district court.
On March 11, the U.S. Court of Appeals for the 11th Circuit affirmed a lower court’s dismissal of a consumer’s FDCPA action. The consumer alleged that his mortgage servicer violated the FDCPA by attempting to collect overdue payments beyond Florida’s five-year statute of limitations for foreclosure actions. According to the opinion, the consumer “stopped paying his mortgage in 2008 and has not made payments since then.” In 2009, the servicer invoked an acceleration clause and attempted to foreclose on the property, but the foreclosure action was dismissed in 2011. In 2015, the servicer sent another notice of default, accelerated the debt once again, and filed a second foreclosure action seeking the entire debt, including all delinquent payments since 2008. The consumer filed suit, arguing that the servicer, by seeking pre-2010 debt in 2015, violated the FDCPA’s prohibition on the collection of time-barred debts. The lower court dismissed the action.
On appeal, the 11th Circuit held that the pre-2010 debt sought in the 2015 foreclosure action “was not time-barred as a matter of law” and therefore did not violate the FDCPA. The 11th Circuit found that Florida’s five-year statute of limitations does not necessarily bar the recovery of payments that were originally due more than five years prior to the filing of the foreclosure action. Instead, any time a consumer defaults and the servicer invokes an acceleration clause, the entire debt “comes due” and the five-year clock starts to run.
11th Circuit holds deaf plaintiff not required to file complaint with FCC before filing lawsuit under other federal disability rights laws
On September 28, the U.S. Court of Appeals for the 11th Circuit vacated a district court’s decision to grant a Florida city’s (City) motion to dismiss for lack of subject matter jurisdiction, holding that (i) the Twenty-First Century Communications and Video Accessibility Act of 2010 (CVAA) did not require the appellant to exhaust his remedies before the FCC prior to commencing a lawsuit under other federal disability statutes; and (ii) the primary-jurisdiction doctrine does not apply to this case.
According to the opinion, the appellant, a deaf individual, alleged that none of the video content stored on the City’s four webpages provided closed captioning, in violation of the Rehabilitation Act and the Americans with Disabilities Act. The district court dismissed the action without prejudice, holding the CVAA requires exhaustion of remedies by the FCC as a prerequisite to the filing of a lawsuit.
On appeal, the 11th Circuit rejected as “an overbroad reading of the statute” the City’s argument that the CVAA contains an exhaustion requirement for claims brought under other disability rights statutes. In support of its position that the FCC only has exclusive jurisdiction over closed captioning complaints brought under the relevant section of the CVAA, the Court cited a 9th Circuit decision, which concluded “the FCC’s exclusive jurisdiction over complaints under the CVAA does nothing to extinguish [the plaintiff’s] right to pursue broader relief for online captioning under [California state law].” In rejecting the City’s primary-jurisdiction argument, the 11th Circuit first cited instances where the FCC—in a report to Congress and in a communication to this plaintiff in an unrelated action—took the position that the CVAA does not require plaintiffs to exhaust administrative remedies as a prerequisite to bringing lawsuits under other federal statutes. The Court also applied the two-factor primary jurisdiction doctrine test, concluding that (i) the FCC has no expertise with respect to the claims under the other federal disability rights statutes before the lower court; and (ii) “this case presents no special need for uniformity.”
On September 24, the U.S. Court of Appeals for the 11th Circuit affirmed the district court’s dismissal of two class actions on grounds that the “filed-rate doctrine” precludes the plaintiffs’ claims. In their complaints, the plaintiffs alleged that their loan servicers charged “inflated amounts” for lender-placed insurance by receiving “rebates” or “kickbacks” from an insurance company without passing the savings on to consumers. The district court dismissed the actions with prejudice, holding that the filed-rate doctrine barred the plaintiffs’ claims. On appeal, the 11th Circuit upheld the lower court’s decision, finding that the plaintiffs’ allegations challenged the insurance company’s filed rate. As a result, the court determined that the plaintiffs’ allegations were textbook examples of claims barred by the nonjusticiability principle, which provides that duly-empowered administrative agencies have exclusive say over the rates charged by regulated entities because agencies are more competent than the courts at the rate-making process.
On June 27, the U.S. Court of Appeals for the 11th Circuit affirmed summary judgment for a mortgage servicer, concluding that reporting the consumer as delinquent to credit bureaus during a forbearance plan is neither inaccurate nor materially misleading under the Fair Credit Reporting Act (FCRA). According to the opinion, a borrower enrolled in a forbearance plan with her mortgage servicer, which allowed for a “monthly forbearance plan payment” of $25 while the remaining payment balance accrued and became due at the end of the plan. Before the borrower agreed to the plan, a representative for the servicer explained to the borrower that because she was not paying the actual contractual payment under the note, the monthly payments would still be considered late. The mortgage servicer reported the borrower past due for the duration of the plan, and the borrower subsequently filed suit alleging violations of the FCRA. In affirming the lower court’s decision, the appeals court found that while the borrower made timely payments under the forbearance plan, the payments were not the ones she was contractually bound to make under the mortgage note. Additionally, the appeals court found that the borrower did not establish that the forbearance plan legally modified the original note and, therefore, the information the servicer reported to the credit bureaus was not inaccurate and was also not materially misleading “particularly in light of [the servicer’s] additional affirmative statement that [the borrower] was paying under a partial payment agreement.”
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