UDAAP Council Weekly UDAAP Standards Report – 12/10/2014

Every week, courts around the United States issue decisions addressing aspects of civil UDAAP claims.

In an effort to illuminate the UDAAP standards, below is a sampling of some of this week’s UDAAP decisions on the meaning of unfair, deceptive, and abusive.

Unfair

• A mortgagee was not liable under Consumer Financial Protection Bureau (“CFPB”) regulations when it failed to provide a written explanation of the mortgagor’s ineligibility for a loan modification before initiating foreclosure proceedings. The mortgagee recorded three separate instances of default, and at least several intermittent communications that indicated that the mortgagor was ineligible for a modification. Even though the mortgagor alleged that the modification denials were revoked by the bank, he failed to provide sufficient facts to show a sequence of events that supported his allegations. The court determined that the CFPB’s requirement “to inform the consumer that a loan modification has been denied before initiating the foreclosure process serves to ensure that the consumer is on notice of the pending foreclosure.” Because the mortgagee had informed the mortgagor about his previous defaults on numerous occasions, the court held that mortgagor had sufficient notice before foreclosure. Andre v. Bank of America, N.A., United States District Court for the Northern District of California.

Deceptive

• A creditor was not liable under the Fair Debt Collection Practices Act (“FDCPA”) for making deceptive statements to a credit reporting agency.  The consumer alleged that she disputed her debt with the creditor through a credit reporting agency’s online dispute resolution mechanism.  During its investigation, the reporting agency contacted the creditor, who did not report the debt as disputed. The consumer filed suit under the FDCPA, alleging that the creditor’s statement was a “false, deceptive, or misleading representation or means in connection with the collection of a debt.” The Court of Appeals for the Eighth Circuit found that the reporting agency could not possibly have been misled by the creditor’s statements, since the consumer’s dispute about the existence of the debt originated from the reporting agency’s website. McIvor v. Credit Control Services, United States Court of Appeals for the Eighth Circuit.
• A debt collector was not liable under the FDCPA for attempting to collect a debt owed by a consumer. The consumer filed suit under the FDCPA alleging the debt collector falsely misrepresented the “character, amount or legal status of any debt.” The consumer failed to provide any substantiating information challenging the debt, whereas the debt collector provided significant information from the consumer’s bank obtained during the collector’s purchase of the disputed debt.  Wiehebring v. Midland Funding, LLC, United States District Court for the Western District of Kentucky.
• A bank was found to have potentially violated the FDCPA when it launched a foreclosure action based upon two recorded assignments. The consumer alleged that the bank used a “false, deceptive, or misleading representation” when it based its foreclosure action on two recorded mortgage assignments, where two unrecorded assignments in the bank’s possession contradicted the recorded assignments and negated their validity. Importantly, the court held that a false representation “need not be intentional.” Further, the court rejected the bank’s argument that the bank’s action did not have a “material effect” on the outcome of the foreclosure action. The court rejected this argument, stating that basing a foreclosure action on specific assignments would mislead a consumer, “sophisticated or otherwise” and satisfy the materiality element of an FDCPA claim. Hoffman v. Wells Fargo Bank, United States District Court for the Eastern District of Pennsylvania.

Note that this Weekly UDAAP Standards Report serves to highlight only some of the many weekly developments in the law around these standards.

Please feel free to contact me for more information or to discuss these cases or any other UDAAP developments.