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  • Court rejects mortgage company’s motions to dismiss in two separate TCPA actions

    Courts

    On August 2, the U.S. District Court for the District of New Jersey denied a mortgage company’s motions to dismiss in two putative class actions (opinions available here and here) alleging violations of the Telephone Consumer Protection Act (TCPA) for unsolicited phone calls. In both cases, the mortgage company requested the court dismiss the action or, in the alternative, stay the proceedings pending guidance from the FCC regarding what constitutes an automatic telephone dialing system (autodialer) in light of the D.C. Circuit decision in ACA International v. FCC. (Covered by a Buckley Sandler Special Alert; InfoBytes coverage on the FCC’s notice seeking comment on what constitutes an autodialer, available here.) In each of the actions, consumers allege the company violated the TCPA by placing unsolicited calls to their phones using an autodialer. In denying both motions, the judge rejected the company’s argument, in one case, that it was not using “a random or sequential number generator” because the preloaded numbers belonged to the company’s customers rather than members of the public, reasoning that just because the population of numbers which may be dialed are pre-selected does not make the calling system, the next number being dialed, less random. Moreover, in the second case, the judge rejected the company’s assertion that written consent was not needed because the calls were placed to a number of customers with existing debt. The court noted the calls were regarding refinancing services and “calls to customers soliciting refinance are ‘telemarketing’ calls for a new product requiring prior express written consent under the TCPA.” As for the requests to stay the proceedings, the court held in both cases that it is unnecessary to stay the case because “whatever guidance the FCC may issue in the future will not alter the statutory definition of an [autodialer]” or previous unchanged FCC guidance pursuant to which the court decided the motions to dismiss.

    Courts ACA International TCPA Autodialer Class Action

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  • District court dismisses FDCPA suit, rules least sophisticated debtor would not be misled by placement of dispute language

    Courts

    On July 18, the U.S. District Court for the District of New Jersey dismissed a class action lawsuit alleging a debt collector failed to provide clear instructions that debt disputes must be submitted in writing in order to be valid as required under the Fair Debt Collection Practices Act (FDCPA). According to the opinion, the plaintiff claimed that the debt collection company misled her into believing she could orally dispute her debt by placing phrases such as “Should you have any questions regarding this account, please feel free to call us” on a debt collection notice she received. However, the debt collector argued that instructions in the notice, which provided the consumer with her rights under the FDCPA, could not be overshadowed or contradicted by including a phone number. The court agreed, referencing two 3rd Circuit cases as precedent, and stated that “merely providing contact information and encouraging a telephone call are insufficient standing alone to undermine an otherwise clear validation notice.” In this instance, the notice “only invites her to call if she has general questions regarding the account.” Furthermore, according to the judge, even the least sophisticated debtor would not be misled by a phone number listed separately from dispute instructions.

    Courts FDCPA Debt Collection Class Action

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  • Court preliminarily approves $11.2 million settlement for post-payment interest charges on FHA mortgages

    Courts

    On July 5, the U.S. District Court for the Southern District of Iowa preliminarily approved a $11.2 million settlement in a proposed class action against a national bank for allegedly improperly charging interest on pre-paid FHA-insured mortgages. According to the complaint filed in 2016, the bank charged post-payment interest on FHA-insured mortgages without providing the proper disclosures required by FHA. Specifically, the complaint alleges that the bank did not use the FHA-approved form to provide the disclosures to consumers. The settlement requires the bank to place $11.2 million in an escrow account for class distributions; settlement expenses; and attorneys’ fees, which, according to settlement documents, will not exceed 28 percent. The court found that the settlement fell “within the range of reasonableness” and met the requirements for preliminary approval.

    Courts Class Action Settlement FHA Prepayment Mortgages

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  • Court dismisses “convenience fee” action against bank for lack of damages

    Courts

    On June 25, the U.S. District Court for the District of Maryland dismissed a proposed class action alleging a national bank violated the Maryland Credit Grantor Closed End Credit (CLEC) law by charging “convenience fees” in connection with secured vehicle financing. According to the opinion, after the consumer defaulted on vehicle payments, the bank repossessed the consumer’s vehicle and demanded the consumer pay the deficiency balance. In August 2017, the consumer, on behalf of herself and others similarly situated, filed a class action against the bank for allegedly charging convenience fees in connection with over 500 retail installment sales contracts for vehicles governed under the CLEC. Upon removal to federal court, the consumer sought to amend her complaint to replace the CLEC claim with a breach of contract claim based on the same violation in her original complaint and the bank sought dismissal of the claim. The court granted the bank’s motion to dismiss, concluding that even if the bank did charge a convenience fee in violation of the CLEC, the bank (i) did not collect payments in excess of the original principle amount of the loan; and (ii) did not seek a deficiency judgment against the consumer. Additionally, the consumer did not seek injunctive or declaratory relief. Therefore, the court held that the consumer is not entitled to damages under CLEC and her corollary breach of contract claim is “futile and must be dismissed.”

    Courts Class Action Fees Auto Finance Damages

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  • District Court grants preliminary approval of TCPA class action settlement

    Courts

    On June 25, the U.S. District Court for the Northern District of California issued an order preliminarily approving a class action settlement between class members and a student loan management enterprise (defendants) accused of violating the Telephone Consumer Protection Act (TCPA) by using an automatic telephone dialing system (ATDS) to place calls to cellular telephones without receiving prior express written consent. Specifically, the plaintiff alleged that the defendants used a phone number previously used by the Department of Education (Department) to contact borrowers and which was listed on the Department’s forms, website, and billing statements, so that when class members returned calls under the impression that they were contacting the Department, the defendants collected and stored the phone numbers. The plaintiff further alleged that the stored numbers were used by the defendants to place calls using an ATDS for the purpose of “mislead[ing] class members into paying for student loan forgiveness and payment programs that were otherwise offered for free by the federal government.” According to the order, preliminarily approval of the settlement prevents possible further litigation and, given the current “‘wind-down’ mode” of one of the defendants, prevents a risk that class members seeking relief would be unable to collect on a large judgment. Under the terms of the settlement, the defendants have agreed to establish a $1.1 million settlement fund, as well as to injunctive relief that prohibits the defendants from using an ATDS to contact individuals without first receiving prior written consent.

    Courts Student Lending Settlement TCPA Class Action

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  • Auto finance company agrees to $19.7 million preliminary class action settlement over extra lease fees

    Courts

    On June 15, the lead plaintiff filed a motion in the U.S. District for the Southern District of Florida for preliminary approval of an approximately $19.7 million class action settlement between a group of consumers and an auto finance company over allegations that extra fees were charged beyond the set purchase option price disclosed in certain vehicle lease contracts. According to the motion, the lead plaintiff alleged that after he chose to purchase his vehicle at the end of his lease term and he was charged extra third-party fees not included in his original lease contract. The class action complaint alleges violations of the Consumer Leasing Act and breach of contract. The settlement class consists of consumers nationwide who entered into certain lease contracts with the company, purchased their leased vehicle after June 4, 2009, and that were required to pay a documentary or dealer fee not disclosed in the lease contract, which allegedly averages about $238 per consumer. The settlement would allow prospective opt-in members to submit a claim for repayment of 100% of the extra fees charged. The $19.7 million settlement figure was determined using a statistically significant sample of the transactional records available and includes up to $2.95 million in attorneys costs and fees. The settlement is awaiting the court’s approval.

    Courts Class Action Auto Finance Consumer Leasing Act

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  • 8th Circuit affirms $17 million class settlement for retailer data breach

    Courts

    On June 13, the U.S. Court of Appeals for the 8th Circuit affirmed the district court’s ruling approving a $17 million class settlement to resolve consumer claims related to a 2013 data breach, which resulted in the compromise of at least 40 million credit cards and theft of personal information of up to 110 million people. The settlement, which consists of $10 million in consumer redress and almost $7 million in plaintiffs’ attorney fees, was preliminarily approved in 2015 by the district court (previously covered by InfoBytes here) but was remanded back to the court by the 8th Circuit for failing to conduct the appropriate pre-certification analysis. After the district court recertified the class, two settlement challengers appealed, arguing that the class was not properly certified as there were not separate counsel for the subclasses and that the court erred in approving the settlement because the award of attorney’s fees was not reasonable. The appellate court disagreed, holding that no fundamental conflict of interest required separate representation for named class members and class members who suffered no actual losses. The court also concluded that the 29 percent in total monetary payment to the plaintiffs’ attorneys was “well within the amounts [the court] has deemed reasonable in the past” and therefore, the district court did not error in its discretion.

     

    Courts Appellate Eighth Circuit Class Action Data Breach Privacy/Cyber Risk & Data Security

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  • Court denies plaintiff’s motion for summary judgment in TCPA action, questions accuracy of report citing number of robocalls

    Courts

    On May 21, the U.S. District Court for the Southern District of California denied a plaintiff’s motion for summary judgment against a solar company that she claimed made multiple unwanted robocalls to her cell phone, holding that questions remained about the accuracy of a report identifying the number of illegal calls the company allegedly placed. The plaintiff filed a putative class action complaint asserting that the company, in order to market products and services, violated the Telephone Consumer Protection Act (TCPA) when it used a “predictive dialer” to contact cell phone numbers the company bought from third parties. The plaintiff further claimed that none of the alleged call recipients had provided prior express consent to receive the calls, and that an expert retained by the plaintiff found that the company had made 897,534 calls to 220,007 unique cell phones. After the class was certified, the plaintiff moved for summary judgment, requesting that class members be awarded damages available under the TCPA of $1,500, or $500 per call.

    While the court determined that there is no argument as to the plaintiff’s TCPA claim concerning whether the company made telemarketing calls (and failed to receive prior express consent), a dispute remained over whether the plaintiff had “carried its burden of demonstrating” that the high number of calls cited in the report were actually made. First, the court stated that, because the company “stipulated that the [p]laintiff’s expert in fact reached a certain conclusion, it does not follow that [the company] stipulated to the accuracy of the conclusion.” Second, the court held that, since a reasonable jury could find the report’s “conclusions are flawed for any number of reasons,” a fact issue as to the report’s accuracy remained. A settlement conference has been set for June 6.

    Courts TCPA Class Action Robocalls Privacy/Cyber Risk & Data Security

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  • 11th Circuit holds national bank did not waive arbitration for unnamed plaintiffs

    Courts

    On May 10, the U.S. Court of Appeals for the 11th Circuit held that a national bank did not waive its right to arbitration with respect to the unnamed plaintiffs in five class actions. The decision stems from multiple class action filings against that bank and over a dozen other banks in 2008 and 2009, alleging unlawful overdraft practices. In late 2009, the actions were consolidated and the bank filed answers to the five complaints, in each answer stating, “[a]bsent members of the putative classes have a contractual obligation to arbitrate any claims they have against [the bank].” The bank originally chose to not move for arbitration against the named class members, but after the Supreme Court decision in AT&T Mobility LLC v. Concepcion, the bank filed a motion to compel the named plaintiffs to arbitrate. The appellate court affirmed the district court’s denial of the motion. The bank then moved to compel arbitration against the unnamed class members, which the district court denied and the appellate court vacated, holding that the lower court lacked jurisdiction to rule on the arbitration obligations without a class certification. After the district court granted class certification, the bank moved to compel arbitration against the unnamed class members again and the district court denied the motion, holding that the bank “acted inconsistently with its arbitration rights” during the precertification litigation efforts.

    In vacating the district court’s decision, the appellate court concluded that the bank had not acted inconsistently with respect to the unnamed plaintiffs and had expressly stated it wished to preserve arbitration rights against those class members when the matter became ripe. The panel vacated the district court’s order and remanded for further proceedings.

    Courts Arbitration Eleventh Circuit Appellate Overdraft Class Action

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  • Court holds lenders may not require borrowers to use an affiliated appraisal management company under RESPA; denies class certification

    Courts

    On February 7, a magistrate judge of the U.S. District Court for the Northern District of Georgia recommended denial of a motion for class certification in a case alleging that a mortgage lender, an affiliated appraisal management company (AMC), and the individual owner, through trusts, of both the lender and the AMC committed RESPA violations. The plaintiffs alleged that the individual owner received a thing of value, i.e, profit distributions from the AMC, that were generated from the lender’s referrals to the AMC in violation of Section 8(a) of RESPA, notwithstanding the exemption for affiliated business arrangements, (i) because no disclosure of the affiliation was provided to the borrowers, or (ii) because, even when a disclosure was provided, the borrowers were required to use the AMC.

    While reviewing whether the class would have standing, the court disagreed with the defendant’s assertion that the affiliated business arrangement exemption under Section 8(c)(4) of RESPA, which generally bans the required use of an affiliate, but permits a lender to impose its choice of an attorney, credit reporting agency, or real estate appraiser to represent the lender’s interest, should be interpreted to permit the mortgage lender’s required use of an affiliated AMC. The defendants argued that allowing a consumer to shop for an appraisal management company would be inconsistent with TILA and Regulation Z, whose official commentary to Section 1026.37(f)(2) lists “appraisal management company fee” as an example of an item that may be disclosed under “services you cannot shop for” in the Good Faith Estimate.  The court rejected that assertion, stating that there are multiple settlement services the lender may require the consumer to use which do not run afoul of RESPA or TILA and that Section 8 is only implicated where there is a kickback involved. The court further examined the plain meaning of Section 8(c)(4) and determined that, from a statutory interpretation perspective, an appraiser and an appraisal management company are not “one and the same.”

    Additionally, the court disagreed with the defendants argument that the plaintiffs’ payment to the AMC was covered under the exception in Section 8(c)(2) of RESPA because the payment was not a “thing of value” under Section 8(a). In rejecting the defendants’ argument, the court noted the kickback at issue is the profit ultimately paid to the individual owner, not the plaintiffs’ payment to the AMC, and the defendants did not present any authority that the exception applies when the payment is for ownership interest.

    The court ultimately recommended the denial of the class certification because plaintiffs did not demonstrate that ascertaining the class was administratively feasible, including the problem of ascertaining which loans were federally related mortgage loan and which were not. The court also concluded that, given the number of individual inquiries in the case, the requirement that common question of law and fact predominate was not satisfied. 

     

     

    Courts RESPA Affiliated Business Relationship Kickback Class Action

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