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U.S. SDNY dismisses FDCPA case against student loan trusts for time-barred violations
On August 16, the U.S. SNDY dismissed as time-barred a student loan debt class-action brought against student loan trusts, servicing agents and a law firm. The suit, brought by a class of New York residents holding student loan debt, alleged defendants collected student loan debt without proper documentation. Plaintiffs brought three sets of claims: FDCPA claims against the servicing agents and law firm defendants, New York State General Business Law (GBL) § 349 claims against all defendants, and Judiciary Law (JL) § 487 claims against the law firm defendant.
However, the court found that all the plaintiffs’ claims were time-barred. The FDCPA claims have a one-year limitations period, GBL claims have a three-year limitations period, and JL claims have a six-year limitations period. Based on injury and violation dates, the plaintiffs’ FDCPA, GBL and JL claims expired in 2015, 2017 and 2020, respectively. In addition, although equitable tolling did apply to plaintiffs’ FDCPA and GBL claims, the extraordinary circumstances warranting such tolling ended shortly after September 18, 2017, when the CFPB released a report describing the defendants’ conduct. As such, even with equitable tolling, the plaintiffs’ claims were time-barred.
On the same day, in the CFPB’s case against several of the same defendants alleging similar conduct, defendants filed a petition for certiorari with U.S. Supreme Court (covered previously in InfoBytes here and here) requesting that the Court review the following questions: (i) when should an enforcement action that is initiated by an agency head unconstitutionally insulated from removal be dismissed to remedy that separation-of-powers violation?; and (ii) whether passive securitization vehicles used to acquire and pool consumer loans are “covered persons” because they “engage[] in offering or providing a consumer financial product or service” under the CFPA.
U.S. Supreme Court delays 6-year deadline to challenge federal regulations
On July 1, the U.S. Supreme Court entered an opinion delaying a 6-year statute of limitations to legally challenge federal regulations until a plaintiff is injured. In Corner Post Inc., vs. Board of Governors of the Federal Reserve System, 603 U. S. ____ (2024)., the Supreme Court held that the statute of limitations for an Administrative Procedures Act challenge accrues from the date of a plaintiff’s injury, not from the date of final agency action. In general, the APA authorizes parties injured by agency action to obtain judicial review. 5 U.S.C. § 702. In most cases, this review is limited to “final agency action.” 5 U.S.C. § 704. Both elements–injury and final agency action–are necessary, but not sufficient, for an APA claim. In Corner Post, the Court considered whether the absence of one of these elements–injury–prevents the limitations period from starting. The APA’s limitations period is “six years after the right of action first accrues,” the default limitations period for civil actions against the United States. 28 U.S.C. § 2401(a). The Court granted certiorari to resolve a Circuit split over the interpretation of “accrues.” The Eighth Circuit, and others, held that the limitations period accrues from the date of final agency action, regardless of the date of injury. The Sixth Circuit, however, held that the limitations period accrues from the date of injury.
Corner Post is a North Dakota-based truck stop and convenience store, incorporated in 2017 and opened in 2018. In 2021, it brought an APA challenge under 5 U.S.C. §§ 706(2)(A), (C) to the Federal Reserve Board’s Debit Card Interchange Fees and Routing Rule, Regulation II. Corner Post alleged that Regulation II permitted interchange fees above Dodd-Frank’s threshold: “reasonable and proportional to the cost incurred by the issuer with respect to the transaction.” 15 U.S.C. §1693o–2(a)(3)(A). The District Court dismissed the suit as barred by § 2401(a). It held that the six-year limitations period accrued from the date of final agency action–when Regulation II was promulgated, in 2011–not the date Corner Post suffered an injury, in 2018. As such, the limitations period had expired. On appeal, the Eighth Circuit affirmed.
To identify the original meaning of “accrues,” the Court reviewed the term’s meaning in 1948, when Congress passed § 2401(a). At that time, accrue had a “well-settled meaning”–rights accrue when they “come[ ] into existence.” Corner Post Inc., 603 U.S. at 7 (quoting United States v. Lindsay, 346 U.S. 568, 569 (1954)). Legal dictionaries contemporaneous with § 2401(a)’s passage support this definition. Precedent also supports this reading, referring to this interpretation as the “standard” or “traditional” rule. Graham County Soil & Water Conservation Dist. v. United States ex rel. Wilson, 545 U.S. 409, 418 (2005); TRW Inc. v. Andrews, 534 U.S. 19, 37 (2001) (Scalia, J.). Nothing in § 2401(a)’s text indicates that Congress sought to depart from this traditional rule. As such, the limitations period begins accruing when the plaintiff has a complete and present cause of action, which requires injury. There is no distinction, moreover, between facial and as-applied challenges because § 2401(a)’s text lacks finality-focused language such as “promulgation” or “entry.” In addition, Congress’ passage of statutes with finality-based limitations periods contemporaneous with § 2401(a)’s passage does not defeat the text’s ordinary meaning.
To complete the analysis, the Court examined the Board’s reliance on Reading Co. v. Koons, 271 U.S. 58 (1926) and Crown Coat Front Co. v. United States, 386 U.S. 503 (1967). Koons considered a Federal Employer’s Liability Act that used “accrued” to describe a limitations period for estate claims that run from the decedent’s death, even though those claims are only available to an estate administrator, who may not be appointed for some period after the decedent’s death. The Court distinguished Koons by noting beneficiaries’ capacity to sue immediately and amend that suit when appointed administrator. Crown Coat applied § 2401(a) to a Government contractor’s claim against the United States. There, the claim did not “mature” until the contractor exhausted all administrative remedies, meaning that § 2401(a)’s limitation period did not begin until the contractor exhausted those administrative remedies. Even if Crown Coat’s dicta supports a more flexible reading of “accrues,” it is not enough to overcome decades of precedent supporting the traditional reading of accrues. In closing, the Court rejected the Board’s policy arguments, finding that later opportunities to challenge agency action will often meet binding (or persuasive) precedent.
Justice Kavanagh concurred, writing separately to emphasize the APA’s authorization of vacatur for unlawful agency action. No other Justices joined the concurrence. Justice Jackson, joined by Justice Sotomayor and Justice Kagan, dissented. Justice Jackson worried about gamesmanship. Corner Post’s procedural history shows Corner Post’s addition to the suit only after the Government moved to dismiss under § 2401(a)’s limitations period. Plaintiffs may manufacture injury for a Regulation II challenge by, for example, purchasing a cash-only business and choosing to accept debit cards. In general, however, the dissent proposed a more flexible meaning for “accrues” based on the cause of action at issue. Plaintiff-specific claims would not accrue until injury, but facial administrative-law claims would accrue when a rule is finalized, regardless of injury.
Illinois Supreme Court sets five-year SOL for section 15 BIPA violations
On February 2, the Illinois Supreme Court held that under the state’s Biometric Information Privacy Act (BIPA), individuals have five years to assert violations of section 15 of the statute. The plaintiff sued his former employer claiming that by scanning his fingerprints, the company violated section 15(a) of BIPA (which provides for the retention and deletion of biometric data), as well as sections 15(b) and 15(d) (which provide for the consensual collection and disclosure of biometric identifiers and biometric information). According to the plaintiff, the defendant allegedly failed to implement and adhere to a publicly available biometric information retention and destruction policy, failed to obtain his consent to collection his biometric data, and disclosed his data to third parties without his consent. The defendant moved to dismiss the complaint as untimely, arguing that “claims brought under [BIPA] concern violations of privacy, and therefore, the one-year limitations period in section 13-201 of the [Code of Civil Procedure (Code)] should apply to such claims under [BIPA] because section 13-201 governs actions for the ‘publication of matter violating the right of privacy.’”
The circuit court disagreed, stating that the lawsuit was timely filed because the five-year limitations period codified in section 13-205 of the Code applied to violations of BIPA. While the circuit court agreed that BIPA is a privacy statute, it said section 13-201 of the Code applies to privacy claims where “publication” is an element of the complaint. Because the plaintiff’s complaint does not involve the publication of biometric data and does not assert invasions of privacy or defamation, the one-year limitations period should not apply, the circuit court said, further adding that BIPA is not intended “to regulate the publication of biometric data.” The circuit court also concluded that the five-year limitations period applied in this case because BIPA itself does not contain a limitations period.
The defendant amended his complaint and eventually appealed. The appellate court ultimately concluded that the one-year limitations period codified in section 13-201 of the Code applies to claims under section 15(c) and 15(d) of BIPA “where ‘publication or disclosure of biometric data is clearly an element’ of the claim,” and that the five-year limitations period codified in section 13-205 of the Code governs actions brought under section 15(a), 15(b), and 15(e) (which provides data safeguarding requirements) of BIPA “because ‘no element of publication or dissemination’ exists in those claims.” The defendant continued to argue that BIPA is a privacy statute and as such, claims brought under section 15 of BIPA should be governed by the one-year limitations period codified in section 13-201 of the Code.
In affirming in part and reversing in part the judgment of the appellate court, the Illinois Supreme Court applied the state’s “five-year catchall limitations period” to claims brought under BIPA. “[A]pplying two different time limitations periods or time-bar standards to different subsections of section 15 of [BIPA] would create an unclear, inconvenient, inconsistent, and potentially unworkable regime as it pertains to the administration of justice for claims under [BIPA],” the Illinois Supreme Court wrote.
Illinois state appellate court applies different limitation periods under BIPA
On September 17, the First District Appellate Court of Illinois held that different limitation periods should be applied to the Biometric Information Privacy Act (BIPA), concluding that while Section 15 imposes various duties that all concern privacy, “each duty is separate and distinct.” Specifically, the panel stated that claims related to “[a]ctions for slander, libel or for publication of matter violating the right of privacy” have a one-year limitation period, while “all civil actions not otherwise provided for” carry a five-year limit. Plaintiffs filed a class action complaint alleging violations of BIPA Sections 15(a), 15(b), and 15(d), claiming the defendant collected, stored, used, and disseminated individuals’ biometric data obtained through fingerprint scans without, among other things, (i) informing plaintiffs of the purpose and length of the storage and use of their data; (ii) receiving written release from plaintiffs; (iii) providing a retention schedule and guidelines for destroying the data; or (iv) obtaining consent from plaintiffs and other employees to disseminate their data to third parties. The defendant moved to dismiss, arguing that the claims were filed outside the limitation period, noting that while BIPA itself has no limitation provision, “the one-year limitation period for privacy actions under Code section 13-201 applies to causes of action under [BIPA] because [BIPA’s] purpose is privacy protection.” A state trial court denied the defendant’s motion to dismiss, ruling that the plaintiffs’ claims were subject to Illinois’ “catchall” five-year limitation provision rather than the state’s one-year privacy claim limitation period, since the plaintiffs were alleging specific BIPA violations rather than a general privacy invasion.
On appeal, the appellate court considered the limitations question and determined, among other things, that since Illinois’ one-year statute of limitations applies only to published privacy violations, it can only govern BIPA claims filed under section 15(c)’s profit restrictions and section 15(d)’s disclosure/dissemination prohibitions. As such, plaintiffs suing under BIPA’s section 15(a)’s retention requirements, section 15(b) informed consent, and section 15(e) data safeguarding requirements have five years to bring such claims since these duties “have absolutely no element of publication or dissemination.”
Massachusetts Appeals Court: Plaintiffs’ counterclaim under PHLPA filed after foreclosure sale is untimely
On April 7, the Massachusetts Appeals Court held that plaintiffs could not assert a violation of the Massachusetts Predatory Home Loan Practices Act (PHLPA) in connection with a foreclosure proceeding. In 2005, the plaintiffs obtained a loan to purchase a home but later defaulted on their mortgage. In 2016, the defendant loan servicer began foreclosure proceedings, and sent plaintiffs a right to cure letter followed by an acceleration notice more than 90 days later. Approximately a year later, the servicer sent the plaintiffs a notice of the foreclosure sale, purchased the property, and ultimately filed a summary process eviction action and motion for summary judgment, which the state housing court granted. The plaintiffs then filed a counterclaim alleging the servicer violated PHLPA § 15(b)(2). The servicer maintained, however, that it is “entitled to judgment as a matter of law because more than five years had passed between the time the [plaintiffs] closed on the loan and the time they brought their counterclaim for violation of the PHLPA,” and that, as such, “the five-year statute of limitations in § 15(b)(1) bars their counterclaim.”
On appeal, the Appeals Court majority determined that while the five-year statute of limitations under § 15(b)(1) did not apply to the borrowers’ counterclaim, § 15(b)(2)—under which the plaintiffs brought their counterclaim—“provides that a borrower may employ a defense, claim, or counterclaim ‘during the term of a high-cost home mortgage loan.’” However, because a foreclosure sale following acceleration of a note and mortgage “concludes the term of a mortgage loan,” the Appeals Court deemed the plaintiffs’ counterclaim was untimely.
New York Court of Appeals reverses mortgage foreclosure timeliness claims
On February 18, the New York Court of Appeals reversed appellate division orders in four cases concerning the timeliness of mortgage foreclosure claims, seeking to develop “clarity and consistency” for cases affecting real property ownership. In particular, the decision clarifies questions regarding what actions will constitute acceleration of a debt and how such acceleration can be revoked, or de-accelerated, which resets the foreclosure timeline.
The Court of Appeals first addressed the question about how and when a default letter to a borrower constitutes an acceleration, thus commencing the six-year statute of limitations period for initiating a foreclosure action. With respect to two of the cases (appellants three and four), the Court of Appeals applied the ruling from Albertina Realty Co. v. Rosbro Realty Corp., which held “that a noteholder must effect an ‘unequivocal overt act’ to accomplish such a substantial change in the parties’ contractual relationship.” The Court of Appeals reviewed a default letter sent in one of the cases and agreed with the bank that merely warning a borrower of a potential future foreclosure via a default letter does not count as an “overt, unequivocal act.” “Noteholders should be free to accurately inform borrowers of their default, the steps required for a cure and the practical consequences if the borrower fails to act, without running the risk of being deemed to have taken the drastic step of accelerating the loan,” the Court of Appeals stated. Instead, the letter must be accompanied by some other overt, unequivocal act. In addition, the Court of Appeals also reviewed a portion of the appellate division’s decision in appellant four’s case, which held that the bank “could not de-accelerate because it ‘admitted that its primary reason for revoking acceleration of the mortgage debt was to avoid the statute of limitations bar.’” The Court of Appeals majority wrote, “We reject the theory. . .that a lender should be barred from revoking acceleration if the motive of the revocation was to avoid the expiration of the statute of limitations on the accelerated debt. A noteholder's motivation for exercising a contractual right is generally irrelevant.”
The Court of Appeals also addressed the issue of “whether a valid election to accelerate, effectuated by the commencement of a prior foreclosure action, was revoked upon the noteholder’s voluntary discontinuance of that action” in the two other cases (appellants one and two). According to Court of Appeals, when a noteholder has accelerated a loan by filing a foreclosure action, “voluntary discontinuance” of that foreclosure action de-accelerates the loan unless the noteholder states otherwise. Thus, the noteholder can later choose to re-accelerate the loan and file another foreclosure action with a new six-year statute of limitations period, the Court of Appeals wrote, reversing appellate division orders that had dismissed the two cases as untimely.
While largely unanimous, one judge issued a dissenting opinion on two of the rulings concerning whether the noteholders effectively revoked acceleration. The judge stated that if the court is going to impose a deceleration rule based on a noteholder’s voluntary withdrawal of a foreclosure action, she would require that noteholders “provide express notice to the borrower regarding the effect of that withdrawal.”
District court advances CFPB action against bank for alleged TILA, CFPA violations
On December 1, the U.S. District Court for the District of Rhode Island denied a national bank’s motion to dismiss a CFPB lawsuit alleging violations of the Consumer Financial Protection Act (CFPA) and TILA, rejecting the bank’s arguments that, among other things, the CFPB’s claims were time-barred and that the case cannot proceed because the CFPB’s structure violates constitutional separation-of-powers identified in Seila Law LLC v. CFPB. As previously covered by InfoBytes, the CFPB filed suit in January against the bank alleging, among other things, that when servicing credit card accounts, the bank failed to properly (i) manage consumer billing disputes for unauthorized card use and billing errors; (ii) credit refunds to consumer accounts resulting from such disputes; or (iii) provide credit counseling disclosures to consumers. According to the CFPB, the alleged conduct “began in 2010 or earlier and ended, depending on the violation, sometime in 2015 or 2016.” The CFPB also noted that the parties signed agreements tolling all relevant statutes of limitations from February 23, 2017, until January 31, 2020. The bank argued that the CFPB’s claims are governed by section 1640 of TILA with its one-year statute of limitations, but the CFPB countered that its claims were brought pursuant to section 1607 of TILA, which provides a “three-year discovery period.”
In denying the bank’s motion to dismiss, the court concluded that the tolling agreements were valid and that the three-year limit under section 1607 applied because “plain language indicates that § 1640 only governs cases brought by individuals or state attorneys general,” whereas § 1607 “provides the cause of action for federal enforcement agencies such as the CFPB.” Furthermore, the court determined that because § 1607 “does not contain a statute of limitations,” and “instead stat[es] that cases brought by the CFPB ‘shall be enforced under. . . subtitle E of the [CFPA],’ the action is governed by subtitle E’s requirement that cases be brought within three years of discovery by the CFPB.” The court also dismissed the bank’s constitutional claims, ruling, among other things, that the argument is moot following the U.S. Supreme Court’s decision in Seila, which held that the director’s for-cause removal provision was unconstitutional but was severable from the statute establishing the CFPB (covered by a Buckley Special Alert).
4th Circuit holds FDCPA’s limitation period restarts at each new violation
On July 2, the U.S. Court of Appeals for the Fourth Circuit vacated the dismissal of an action alleging violations of the FDCPA, concluding that each violation of the FDCPA is governed by its own limitation period. According to the opinion, in April 2018, homeowners filed a complaint against a law firm retained by their homeowners’ association for allegedly violating various provisions of the FDCPA for collection actions taken between April 2016 and February 2018. The district court dismissed the action, concluding that the entire complaint was time-barred because the “FDCPA’s limitations period runs from the date of the first violation, and that later violations of the same type do not trigger a new limitations period under the Act.”
On appeal, the 4th Circuit disagreed with the lower court. Specifically, the appellate court noted that “nothing in the FDCPA suggests that ‘similar’ violations should be grouped together and treated as a single claim for purposes of the FDCPA’s statute of limitations.” And, similar to holdings of other circuits, the 4th Circuit stated that the “FDCPA’s limitations period runs anew from the date of each violation.” While the homeowners did not dispute that several alleged violations fall outside of the FDCPA’s one-year limitations period, the appellate court agreed that the district court erred in dismissing the entire complaint, because it contained at least two potential violations occurring within one-year of the April 2018 filing date.
Appellate court affirms dismissal of RESPA kickback suit
On March 13, the U.S. Court of Appeals for the Fourth Circuit affirmed the dismissal of a putative class action filed by two consumers (plaintiffs) against a real estate brokerage group (real estate defendant) and a title company (title defendant), (collectively defendants), alleging a kickback scheme in violation of RESPA. The plaintiffs bought a house in 2008 with the help of a real estate agent affiliated with the real estate defendant. The real estate agent told the plaintiffs that the title defendant would provide settlement services, after which the plaintiffs filed an acknowledgment that they understood they could use the title company of their choice for their closing, and that they were not first-time homebuyers. The plaintiffs indicated their approval to use the settlement company selected by the real estate agent. Five years later, the plaintiffs filed suit, claiming that the real estate agent’s referral to the title defendant violated RESPA. The consumers, as lead class members, alleged that a marketing agreement between the defendants provided for payments by the title defendant to the real estate defendant for settlement services referrals. The plaintiffs claimed that the illegal kickback arrangement denied class members of ‘“impartial and fair competition between settlement service[s] providers in violation of RESPA.’”
The district court granted the defendants’ motion for summary judgement, holding that the plaintiffs lacked Article III standing to file suit because they were not overcharged in the settlement of their real estate transaction and did not otherwise show an injury-in-fact. In addition, the court determined that the claim was time-barred under RESPA’s one-year statute of limitations.
On appeal, the 4th Circuit agreed with the district court that the plaintiffs lacked standing, noting that “a statutory violation is not necessarily synonymous with an intangible harm that constitutes injury-in-fact.” The appellate court pointed out that the plaintiffs did not claim to have been overcharged for settlement services, and indeed, the plaintiffs agreed that the settlement service fees were reasonable. The appellate court also rejected the plaintiffs’ assertion that they suffered a concrete injury due to the lack of competition between settlement service providers.
5th Circuit: Non-party plaintiff cannot bring action to enforce violation of CFPB consent order
On March 4, the U.S. Court of Appeals for the Fifth Circuit affirmed summary judgment in favor of a debt collector (defendant) accused of violating the FDCPA and the terms of a CFPB consent order. According to the opinion, the defendant attempted to collect a credit card debt from the plaintiff that the plaintiff did not recognize. In December 2014, the defendant filed suit to collect the past due debt. In the meantime, the CFPB issued a consent order against the defendant for violations of the FDCPA (covered by InfoBytes here) while the parties awaited trial. Thereafter, the plaintiff filed a complaint with the CFPB regarding the validity of the debt, but the Bureau closed that complaint after verifying the defendant’s ownership of the plaintiff’s debt. The plaintiff responded by filing his own lawsuit in March 2017, claiming the defendant violated the FDCPA by (i) “lacking validation of his debt prior to his January 2016 trial”; (ii) failing to timely validate his debt in violation of provisions of its consent order with the CFPB; and (iii) “misrepresenting that it intended to prove ownership of his debt if contested.” The district court granted summary judgment for the defendant based on the plaintiff’s failure to prove actual damages.
On appeal, the appellate court determined that the district court erred in ruling that the plaintiff failed to plead actual damages, finding that “the FDCPA does not require proof of actual damages to ground statutory damages.” However, the appellate court did not reverse the district court’s decision. Instead, the appellate court affirmed, holding that the plaintiff’s debt validation claims were time-barred because he did not file suit within the FDCPA’s one-year statute of limitations. Regarding the other two claims, the appellate court stated that while the claims were not time-barred, the plaintiff lacked standing because “private persons may not bring actions to enforce violations of consent decrees to which they are not a party.” The CFPB’s consent order with the defendant specified that the CFPB was the enforcer of the order, and its text could not be read to invoke a private right of action permitting the plaintiff’s suit. Accordingly, the appellate court affirmed summary judgment against the plaintiff on these remaining two claims.