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Noonan and Lieberman keeps you current on litigation news with its regular Case Law Update focusing on important and emerging trends in federal and state case law. Case Law Update is edited by attorney James V. Noonan.

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April, 2010

Failure to register as a collection agency under state law may also violate FDCPA

In LeBlanc v. Unifund CCR Partners, 08-16031, 2010 WL 1200691 (11th Cir. Mar. 30, 2010) the Court of Appeals for the 11th Circuit held as matter of first impression that a debt collector may violate the FCCPA by failing to register as an “out-of-state consumer collection agency” and returned the case to the jury. Specifically, the court considered whether a federal cause of action pursuant to Section 1692e of the FDCPA for threatening to take an action that cannot legally be taken is cognizable when premised upon the failure to register as a consumer collection agency under Florida’s consumer debt collection statute. The court’s stated that its goal in construing the state and federal statutes is to provide the consumer with the most protection possible under either statute. The remedies under the statutes are cumulative suggesting a broad reach. Further, Florida has demonstrated the seriousness with which it intends to address violations of the FCCPA by the fact that a debt collector’s failure to register as a debt collector and subsequent pursuit of unauthorized debt collection activity is a misdemeanor criminal act. These facts compelled the court to find that a violation of the FCCPA for failure to register may support a federal cause of action under the FDCPA prohibition on threatening to take an action it could not legally take. Importantly, the court said its holding should not be read to mean that all activities that violate state law constitute per se FDCPA violations. The court also found there was a question of fact as to whether the dunning letter could reasonably be perceived as a “threat to take legal action” under the “least-sophisticated consumer” standard. The letter stated: “ If we are unable to resolve this issue within 35 days we may refer this matter to an attorney in your area for legal consideration. If suit is filed and if judgment is rendered against you, we will collect payment utilizing all methods legally available to us, subject to your rights below.” The court rejected the debt collector’s argument that no reasonable jury, viewing the letter through the eyes of a “least-sophisticated consumer,” and making all reasonable inferences in the debt collector’s favor, could find that the letter was merely informative as opposed to threatening.

Demanding too much in a loan modification agreement constitutes bad faith on the lender’s part warranting sanctions.

A state court judge in Suffolk County New York ruled in favor of the mortgagors in a mortgage foreclosure action, arguing that the mortgagee did not act in good faith and “deliberately tried to ruin the couple’s chance of keeping their home”. In Emigrant Mortgage Co. Inc. v. Corcione, No. 2009-28917 (April 16, 2010) the borrowers defaulted on their $302,500 loan leading the mortgagee to commence foreclosure proceedings. The borrowers charged the mortgagee with being unresponsive and unwilling to work with them. Because it waited 14 months before starting a foreclosure case, the court believed the mortgagee was trying to stick the borrowers with hefty penalty fees, making it impossible for them to recover financially. Before filing the foreclosure case, however, the mortgagee reportedly offered the couple a loan modification plan. It was the terms of this plan that really incensed the court. The proposal included terms, such as a waiver, that the court felt would make it impossible for the borrowers to take measures to try and save their home if they defaulted on payments in the future. The court referred to the waiver as, “highly questionable, unconscionable, unreasonable and overreaching.” Quoth the Judge Jeffrey Spinner: “Upon reviewing the totality of the circumstances herein, this Court is driven to the inescapable conclusion that Plaintiff has, by way of calculation and pre-meditation (as evidenced by the terms of its carefully crafted Agreement), created a scenario whereby it is a virtual certainty that Defendants will ultimately be irreparably damaged and further, by way of the Agreement, has gone to extraordinary lengths in an attempt to insulate itself from liability while at the same time ensuring that it will not sustain any pecuniary loss and that all cost will be borne by Defendants”. Believing it was authorized by the state mandatory settlement conference rules that require the parties to negotiate in good faith, the judge awarded the borrowers $100,000 in damages, wiped out the late charges and refused to pay the legal fees for the plaintiff.

Borrower’s self serving statement not enough to rebut the presumption of delivery of the Notices of the Right to Cancel.

The Third Circuit has weighed in on the quantum of proof necessary to carry a TILA claim centering on a creditor’s failure to provide two copies of the notice of the right to cancel. In Jobe v. Argent Mortg. Co., LLC, 09-3677, 2010 WL 1255683 (3d Cir. Apr. 2, 2010) the Third Circuit found for the creditor based on the consumers’ failure to offer sufficient to rebut the presumption of delivery. The consumers argued that despite signing a written acknowledgement that they received two copies there was a question of fact precluding summary judgment. See, 15 U.S.C. § 1635© (“written acknowledgment of receipt of any disclosures under [TILA] * * * create(s) a rebuttable presumption of delivery thereof”). The district court found otherwise and was affirmed by the Third Circuit. Applying the de novo standard of review, the reviewing court was not persuaded by their testimony that they did not receive the requisite number of copies. This was rebutted by their signed acknowledgement and the closing agent’s testimony that he always followed all applicable procedures and provided the relevant number of copies to borrowers at closings. At their depositions, plaintiffs testified that they could not remember what was given to them at the closing. Per the court the standard is: “Where a borrower’s testimony is self-serving and unreliable, such testimony has been found insufficient to rebut a presumption of delivery”.