Ohio Supreme Court Holds Mortgage Servicing Not Subject to Consumer Sales Practices Act

Mortgage Servicing

On May 14, the Ohio Supreme Court held in response to two certified questions from a federal district court that the Ohio Consumer Sales Practices Act (CSPA) generally does not apply to mortgage servicers and servicing. Anderson v. Barclay’s Capital Real Estate, Inc., No. 2013-Ohio-1933, 2013 WL 2097556 (Ohio May 14, 2013). Specifically, the court held that residential mortgage servicing is not a “consumer transaction” subject to the CSPA. The court reasoned that mortgage servicing is a contractual agreement between the mortgage servicer and the financial institution that owns both the note and mortgage, and is carried out in the absence of a contract between the borrower and the servicer. Therefore the transaction does not meet an essential element of the statutory definition because it is not a sale, lease, assignment, award by chance, or other transfer of a service to a consumer. The court also held that a residential mortgage servicer is not a “supplier” subject to the CSPA. The statute defines “supplier” to include a seller, lessor, assignor, franchisor, or other person engaged in the business of effecting or soliciting consumer transactions, whether or not the person deals directly with the consumer. Because mortgage servicers are not part of the residential mortgage transaction and do not seek to enter into consumer transactions with borrowers, they are not “suppliers” under the law.