Category Archives: Uncategorized
New Ruling Subjects Mortgage Companies to FDCPA Liability
By Michael Fuller, Portland Trial Attorney
A new legal opinion subjects mortgage companies to FDCPA liability for falsely implying that a law firm has been retained to collect on past-due accounts.
Creditors Not Regulated by the FDCPA
The Fair Debt Collection Practices Act (FDCPA) (15 USC § 1592a(6)) doesn’t generally regulate creditors collecting their own accounts. For example, the FDCPA doesn’t prohibit Verizon Wireless from directly harassing a consumer.
However, if Verizon Wireless turns a past-due account over to a third party for collections, the third party debt collector is subject to liability for harassment under the FDCPA.
Exception for Creditors Using “False Names”
Last week, the Second Circuit Court of Appeals held that the FDCPA applies to original creditors who give the false impression they have hired a third party law firm to collect debts.
How the “False Names” Exception Works
Under the case of Maguire v. Citicorp (2nd Cir. 1998), a creditor can be liable under the FDCPA if it:
- uses a name that falsely implies a third party is involved in collecting its debts,
- pretends to be someone else, or
- uses a pseudonym or alias.
The Money Store’s Law Firm Constituted a “False Name”
The case, Vincent v. The Money Store (2nd Cir. 2013), highlights a loophole used by many mortgage companies to escape liability under the FDCPA.
How the Loophole is Supposed to Work
‘The Money Store’ services Ms. Vincent’s mortgage.
The Money Store, in a letter sent by its law firm, allegedly charges Ms. Vincent improper mortgage fees.
If The Money Store is sued under the FDCPA, it argues the FDCPA doesn’t apply to it because the alleged misrepresentations were made by an independent third party law firm.
If a law firm is sued under the FDCPA, it argues that the FDCPA doesn’t apply to it because it was not “collecting debt” but merely sending a mortgage statement.
Why ‘The Money Store’ Fell Under the ‘False Name’ Exception
The Money Store’s letters told homeowners that a law firm had been retained to collect a debt for its client.
However, evidence showed that the threat was hollow; the law firm was simply a mass processor of letters. The Money Store actually maintained possession over its files. The law firm later shut its doors.
The Court reasoned that because the law firm did not engage in actual bona fide debt collection, a jury could find that The Money Store made false implications as to the name of the entity collecting its debts.
What This Means For Homeowners and Mortgage Companies
The opinion should have a positive impact on consumers seeking to hold mortgage companies and law firms accountable for alleged abuses in the foreclosure process, says consumer protection attorney Kelly Jones.
“The Vincent decision is a logical and necessary application of the ‘false name exception.’ A creditor shouldn’t be able to retain its exempt status under the FDCPA when it rents the name or letterhead of a law firm or other debt collector in order to further intimidate consumers and increase its collections rates,” says Jones.
The opinion is binding and must be followed by judges in the Second Circuit (Connecticut, New York, and Vermont). In all other states, the opinion serves as non-binding persuasive authority.
The Fifth and Seventh Circuits have reached the same conclusion under different circumstances. For more information, read Taylor v. Perrin (5th Cir. 1997) and Boyd v. Wexler (7th Cir. 2001).
About the Author: Michael Fuller is a Portland trial attorney and chair of the Olsen Daines law firm’s Consumer Protection Group. You can follow him on Google+, Twitter, and visit his blog at www.UnderdogLawBlog.com.
Click here to read more from this author about a Ninth Circuit case dealing with FDCPA liability in the mortgage fraud context called Corvello v. Wells Fargo Bank (9th Cir. 2013).
New Rules Help Consumers Fight Back Against RoboCallers
In 1991 the Telephone Consumer Protection Act (TCPA) (47 U.S.C. 227 et. seq) was passed into law, allowing individuals to file actions for receiving unsolicited telemarketing calls, faxes, pre-recorded phonecalls or automated calls. In 2012, the Federal Communications Commission (FCC), which implements the TCPA, revised its regulations and on October 16, 2013, those new protections for consumers went into effect.
The new TCPA regulations require that businesses have prior express written consent for (1) all autodialed and/or pre-recorded calls or texts sent to cell phones and (2) all pre-recorded calls made to residential land lines for marketing purposes. This rule eliminates the “prior business relationship” exception that allowed businesses to contact consumers with pre-recorded messages or automated dialers if there was a prior business relationship, such as a prior purchase from the business. Additionally, the new rules require that consumers provide unambiguous written consent before receiving automated phone calls. Consents obtained before October 16, 2013 will not apply and a business cannot require consent as a condition of purchasing the goods or services. Consumers who have received these prohibited calls, texts, or faxes are entitled to statutory damages for each call, and may be entitled to treble damages if the violations are found to be willful. 47 U.S.C. 227 (b)(3).
Oregon Foreclosure Avoidance Program begins August 4th
By Anna Braun, Consumer Law Section Executive Committee
The Oregon Foreclosure Avoidance Program goes into effect August 4.[1] After that date, most lenders must request a face-to-face meeting (called a “resolution conference”) with the homeowner prior to commencing a judicial or non-judicial foreclosure. A homeowner does not have to wait for the lender and may initiate the process through any approved housing counseling agency.
Only those lenders that commenced fewer than 175 foreclosures in the prior calendar year are exempt from the requirement. (Lenders claiming the exemption must submit a sworn affidavit to the Oregon Department of Justice.)
BEFORE COMMENCING A FORECLOSURE
A non-exempt lender that intends to foreclose must request a resolution conference and receive a Certificate of Compliance before filing a complaint for judicial foreclosure or recording a Notice of Default. The request is submitted to the service provider, Mediation Case Manager (MCM),that was chosen by the Attorney General’s office to coordinate this program.
A homeowner will receive an initial notice with instructions and a date range for the resolution conference. At this point a HOMEOWNER MUST PAY A FEE WITHIN 25 DAYS TO PRESERVE THE RIGHT TO A RESOLUTION CONFERENCE. The fee is $175 but will be reduced to $50 if the homeowner is low income.
If no fee is paid, MCM will cancel the resolution conference. At that time the foreclosing lender will receive a certificate to file when commencing a foreclosure that shows they complied with the program and the homeowner did not participate.
If the fee is paid, the homeowner will receive a second notice with the exact date and time of the resolution conference, which will be scheduled within 75 days of the first notice. Between that notice and the conference, a homeowner must meet with a housing counselor and submit required documents to the lender through a secure online portal. A housing counselor will assist the homeowner at no charge in preparing the best possible proposal to the lender. After the homeowner submits his documents, the lender must provide the homeowner with information about the loan, including the owner’s name, a payment history, and an itemized list of all fees and charges.
At the resolution conference, an agent of the lender must attend in person and either have complete authority to negotiate and commit the lender to an agreement or have another person with authority participate by phone. The homeowner must also attend in person. The conference will be conducted by a facilitator trained in mediation and basic foreclosure issues. Any agreement reached must be in writing and signed by both parties. A lender is not required to offer a modification if the homeowner is not eligible.
After the resolution conference concludes, the lender will receive a certificate of compliance good for one year that the lender must record if foreclosing nonjudicially or attach to the complaint if foreclosing judicially. The certificate must be valid and unexpired at the time the foreclosure is commenced (but not at the time the foreclosure is completed).
If the lender does not comply with the program requirements, it will receive a non-compliance notice and must foreclose judicially. To foreclose judicially, a lender must attach to the complaint either an affidavit showing they were exempt from the program or a certificate of compliance or a notice of non-compliance.
If a lender commences a foreclosure either with a notice of non-compliance or no attachment of the documents listed above, a party may move to abate or dismiss the foreclosure and if a motion is granted the court may award attorney fees and costs to the moving party.
Other enforcement of the program is the responsibility of the Oregon Attorney General’s office.[i]
[1] SB 558 was enacted by the Oregon legislature in the 2013 session.
[i] Many thanks to premier foreclosure defense lawyer (and Consumer Law Section Treasurer) Kelly Harpster for her help on editing this article.
New resources from the Oregon Department of Justice
By David Koen, Past Chair, Consumer Law Section Executive Committee
The Financial Fraud and Consumer Protection section of the Oregon Department of Justice (DOJ) has several new consumer protection resources that may be of interest.
They include:
• A new brochure titled, “Top Ten Consumer Tips to Protect You and Your Family.” The DOJ says it created the brochure in the hope that it will become a quick-reference guide to help Oregonians make wise consumer decisions and protect themselves, their family, their money, and their personal information. The brochure is available online – in both English and Spanish – at the Financial Fraud and Consumer Protection section of the Oregon Department of Justice’s website www.oregonconsumer.gov.
• A Facebook safety and privacy public service announcement (PSA). The DOJ says it created the PSA to advance safety and privacy education and help raise awareness of how teens can make safe, smart and responsible choices online. The PSA, tips sheets, and other online resources are available online at http://www.doj.state.or.us/consumer/Pages/facebook_safety.aspx.
Although not new, DOJ also encourages you to join the Scam Alert Network. You can sign up online at www.oregonconsumer.gov and follow the Network on Twitter at https://twitter.com/oregonscamalert. DOJ says that as a member of the Scam Alert Network you will get immediate access to information on emerging frauds and scams and hear about events as they happen.
New Ninth Circuit Consumer Law Opinion! – In re: HP Inkjet Printer Litigation
By Michael Fuller, Member at Large, Consumer Law Section Executive Committee
In re: HP Inkjet Printer Litigation (9th Cir. May 15, 2013)
The Ninth Circuit held attorney fee awards in class settlements involving a coupon component must be based, at least in part, on the redemption value of the coupons.
A class action settlement entered by HP in 2010 provided coupon and injunctive relief to class members. The district court used the loadstar method to award $1.5 million in fees to class counsel in light of the results achieved.
The Ninth Circuit reversed and remanded, holding that 28 U.S.C. § 1712(a)-(c) requires separate fee calculations.
The Court reasoned that fees attributable to the coupon recovery must be based on the redemption value of the coupons and fees attributable to the injunctive relief must be based on loadstar.
The Court noted that the structure of the settlement prohibited issuance of coupons until after entry of final judgment, thus making it impossible for the district court to calculate redemption value as required by § 1712(a).
Read the full opinion for complete analysis: http://cdn.ca9.uscourts.gov/datastore/opinions/2013/05/15/11-16097.pdf
Oregon Supreme Court defines role of MERS in Oregon
By David Koen, Past Chair, Consumer Law Section Executive Committee
On June 6, 2013, the Oregon Supreme Court issued decisions in Brandrup v. ReconTrust Company, N.A. and Niday v. GMAC Mortgage, LLC. In both cases, the court decided that the financial industry creation Mortgage Electronic Registration Systems, Inc. (“MERS”) did not qualify as a “beneficiary” of a trust deed for property pursuant to ORS 86.705(2). The court held that only the actual beneficiary, the lender, could foreclose nonjudicially and only if it was entitled to enforce the loan. The court decided, however, that when foreclosing nonjudicially in Oregon, a lender need not record a transfer of a trust deed that occurs by operation of law upon the transfer of the underlying promissory note.
New Ninth Circuit Consumer Law Opinion! – Hedlund v Educational Resources Inst.
By Michael Fuller, Member at Large, Consumer Law Section Executive Committee
Hedlund v Educational Resources Inst. (9th Cir. May 22, 2013)
Michael Hedlund graduated law school and later filed bankruptcy. The bankruptcy court determined Mr. Hedlund acted in good faith and discharged a portion of his student loans. On appeal, the district court reversed, finding that Mr. Hedlund failed to act in good faith.
The Ninth Circuit Court of Appeals reversed because the bankruptcy court’s determination was not clearly erroneous.
In 1998, the Ninth Circuit adopted a three-prong Brunner test to determine student loan dischargeability under 11 U.S.C. § 523(a)(8). To satisfy the third Brunner prong, a debtor must prove he has made good faith efforts to repay his loans.
The Appeals Court reasoned that the district court incorrectly used the de novo standard instead of the “clearly erroneous” standard in reviewing the bankruptcy court’s good faith determination.
Read the full opinion for complete analysis.
How to submit blog items
Please send ideas for Consumer Law blog content to [email protected].