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11th Circuit: Unsolicited text message doesn't establish standing under TCPA
On August 28, the U.S. Court of Appeals for the 11th Circuit held that receiving one unsolicited text message is not enough of a concrete injury to establish standing under the TCPA. According to the opinion, a former client of an attorney received an unsolicited “multimedia text message” from the attorney offering a ten percent discount on services. The client filed a putative class action, alleging the attorney violated the TCPA arguing the text message caused him “‘to waste his time answering or otherwise addressing the message’” leaving his cell phone “‘unavailable for otherwise legitimate pursuits’” and resulted in “‘an invasion of [] privacy and right to enjoy the full utility’” of his cell phone. The attorney moved to dismiss the complaint for lack of standing and the district court denied the motion. However, the court allowed the attorney to pursue an interlocutory appeal.
On appeal, the 11th Circuit looked to the Supreme Court decision in Spokeo, Inc. v. Robins— which held that a plaintiff must allege a concrete injury, not just a statutory violation, to establish standing—as well as the legislative history of the TCPA and determined there was “little support” for treating the client’s allegations as a concrete injury. Specifically, the panel noted that the allegations of “a brief, inconsequential annoyance are categorically distinct from those kinds of real but intangible harms” Congress set out to protect. Moreover, the “chirp, buzz, or blink of a cell phone” is annoying, but not a basis for invoking federal court jurisdiction. The panel also acknowledged that Congress, not a federal court, is “well positioned” to assess the new harms of technology. Because the client failed to allege a concrete harm by receiving the unsolicited text message, the panel reversed the district court decision.
11th Circuit reverses dismissal of EFTA action alleging inadequate overdraft notice, denies EFTA safe harbor defense
On August 27, the U.S. Court of Appeals for the 11th Circuit reversed the dismissal of a consumer’s action against her credit union, in which the consumer alleged the credit union used the wrong balance calculation method to impose overdraft fees. According to the opinion, the consumer filed suit against the credit union for using an “available balance” calculation method to impose overdraft fees on her account when the credit union allegedly agreed to use the “ledger balance” method at the time of account opening, in violation of the Electronic Fund Transfer Act (EFTA) and various state law contract claims. The district court dismissed the action, concluding that the agreements “unambiguously permitted [the credit union] to assess overdraft fees using the available balance calculation.”
On appeal, the 11th Circuit disagreed with the district court’s interpretation of the agreements. The court noted that while the opt-in overdraft agreement used by the credit union is based on Regulation E’s (the EFTA’s implementing regulation) Model Form A-9, the model does not address which account balance calculation method is used to determine whether a transaction results in an overdraft. The language chosen by the credit union, according to the appellate court, is “ambiguous because it could describe either the available or the ledger balance calculation method for unsettled debits” and therefore, does not describe the calculation in a “clear and readily understandable way” as required by Regulation E. Because the language was ambiguous, the consumer did not have the opportunity to affirmatively consent to the overdraft service. Moreover, the appellate court concluded that the credit union was not protected under the EFTA’s safe harbor because it used the Model Form A-9 text. Specifically, the appellate court reasoned that the “safe-harbor provision insulates financial institutions from EFTA claims based on the means by which the institution has communicated its overdraft policy,” but does not provide a shield from allegations of inadequacy. Because the consumer argued that the credit union violated the EFTA due to its failure to prove enough information to allow for affirmative consent, the safe-harbor provision does not preclude liability.
11th Circuit rejects city’s FHA suit against bank
On July 30, the U.S. Court of Appeals for the 11th Circuit dismissed the City of Miami Gardens (City) Fair Housing Act (FHA) suit against a national bank for lack of standing. This decision was the result of the appeal of a lower court decision previously covered by InfoBytes in June 2018. In the prior decision, the U.S. District Court for the Southern District of Florida granted the national bank’s motion for summary judgment. This was a loss for the City, which had argued that the bank made loans that were more expensive for minority borrowers as compared to non-minority borrowers, resulting in greater rates of default and foreclosure and leading to reduced property values and tax revenue for the City. The district court granted the national bank summary judgment based on the City’s failure to present sufficient evidence of discriminatory lending.
On appeal, the bank argued that the district court should have dismissed the claims for lack of standing because “‘the undisputed evidence confirmed that none of the 153 loans originated by [the bank] [within the limitation period] foreclosed,’ so the City could not have suffered an injury as a result of any of [the] loans.” The 11th Circuit agreed that the City lacked standing, concluding that the City’s evidence that certain loans may go into foreclosure at some point in the future “does not satisfy the requirement that a threatened injury be ‘imminent, not conjectural or hypothetical.’” Moreover, although the City referenced ten loans that had gone into foreclosure, the appellate court ruled that “the City did not produce any evidence of the effect of these foreclosures on property-tax revenues or municipal spending,” nor that the loans were issued on discriminatory terms. Accordingly, the 11th Circuit vacated the district court’s award of summary judgment, and held that the district court should have dismissed the action on standing grounds.
11th Circuit: Motion to reschedule foreclosure does not violate RESPA
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.
11th Circuit continues flood insurance action against mortgage servicer
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.
11th Circuit: City of Miami sufficiently alleged Fair Housing Act violations
On May 3, the U.S. Court of Appeals for the 11th Circuit held that the City of Miami plausibly alleged that two national banks’ lending practices violated the Fair Housing Act (FHA) and led to defaults, foreclosures, and vacancies, and eventually reduced property values and corresponding property tax revenues. The court did so by finding “some direct relation” between the City’s tax revenue injuries and the Bank’s alleged violations of the FHA. The case returned to the 11th Circuit after having been appealed to and resolved in part in the U.S. Supreme Court in 2017, where the Court held that municipal plaintiffs may be “aggrieved persons” authorized to bring suit under the FHA against lenders for injuries allegedly flowing from discriminatory lending practices (previously covered by a Buckley Special Alert). According to the appellate court opinion, the Court “declined to ‘draw the precise boundaries of proximate cause under the FHA and to determine on which side of the line the City’s financial injuries fall,’” leaving to the lower courts the issue of how the principles of proximate cause function when applied to the FHA and the facts of the complaints.
The appellate court concluded that the district court erred in dismissing the City’s claims against the banks in their entirety, with the 11th Circuit finding “a logical and direct bond between discriminatory lending as a pattern and practice applied to neighborhoods throughout the City and the reduction in property values.” However, the appellate court concluded that the City’s allegations fell short of establishing a direct relationship between the alleged misconduct and the City’s purported increase in its municipal services expenditures, noting that the U.S. Supreme Court “has told us that foreseeability alone is not enough.” The appellate court emphasized that at the motion to dismiss stage it was only addressing the plausibility that the alleged conduct violated the FHA, and remanded the case back to the district court.
11th Circuit: Bank not obligated to investigate FCRA dispute
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.”
11th Circuit: Increased risk of identity theft is sufficient to bring FACTA claims
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.”
11th Circuit: Consumer’s repayment agreement not an escrow account
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.
11th Circuit: An implicit threat of litigation is enough to assert a FDCPA claim
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.