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7th Circuit: “Stress and confusion” not an injury under the FDCPA
On March 11, the U.S. Court of Appeals for the Seventh Circuit held that a consumer’s alleged “stress and confusion” did not constitute a concrete and particularized injury under the FDCPA. The plaintiff alleged that the defendant debt collector violated the FDCPA when it directly communicated with her by sending a dunning letter related to unpaid debt even though she had previously notified the original lender that she was represented by counsel and requested that all debt communications cease. The district court granted the defendant’s summary judgment motion on the grounds that the debt collector could not have violated the FDCPA “without having actual knowledge of [the consumer’s] cease-communication request.”
On appeal, the 7th Circuit concluded that the complaint should be dismissed for lack of subject-matter jurisdiction because the plaintiff lacked standing. The 7th Circuit held that the consumer’s allegations—that the dunning letter caused her “stress and confusion” and “made her think that ‘her demand had been futile’”—did not amount to a concrete and particularized “injury in fact” necessary to establish Article III standing under the FDCPA. The court further noted that “the state of confusion is not itself an injury”—rather, for the alleged confusion to be concrete, “a plaintiff must have acted ‘to her detriment, on that confusion.’” Here, the consumer pointed only to a statutory violation and “failed to show that receiving [the debt collector’s] dunning letter led her to change her course of action or put her in harm’s way.” Additionally, the appellate court found the consumer’s argument that the dunning letter also “invaded her privacy,” raised for the first time on appeal, unpersuasive because she did not allege that injury in the complaint.
FHA removes LIBOR benchmark for adjustable-rate HECMs
On March 11, FHA issued Mortgagee Letter (ML) 2021-08 announcing changes for adjustable interest rate home equity conversion mortgages (HECMs) as the market transitions away from LIBOR. Among other things, ML 2021-08 (i) removes approval for using the LIBOR index for adjustable interest rate HECMs; and (ii) approves the use of the Secured Overnight Financing Rate (SOFR) index, permitting “mortgagees to commingle index types for newly originated annual adjustable interest rate HECMs when establishing the expected average mortgage interest rate using the U.S. Constant Maturity Treasury” and SOFR index. ML 2021-08 also states that LIBOR-based HECMs must close on or before May 3 to be eligible for FHA insurance.
Find continuing InfoBytes coverage on LIBOR here.
Agencies propose new flood insurance Q&As
On March 11, the FDIC, OCC, Federal Reserve Board, NCUA, and the Farm Credit Administration issued a notice and request for public comment on 24 proposed interagency questions and answers regarding the 2019 private flood insurance rule (covered by InfoBytes here). The new Q&As supplement interagency questions and answers proposed last year (covered by InfoBytes here), which were intended to reduce compliance burdens for lenders related to flood insurance laws. The new Q&As are designed to help lenders comply with private flood insurance provisions found in the Biggert-Waters Flood Insurance Reform Act of 2012, and address mandatory and discretionary acceptance of private flood insurance policies by lenders if such insurance is required. Comments on the proposed additions to the interagency Q&As are due 60 days after publication in the Federal Register.
California begins accepting applications for their Covid-19 rent relief program
On March 15, California launched their CA COVID-19 Rent Relief Program to aid landlords and renters who have unpaid rental debt due to Covid-19. In order to be eligible, a tenant must have “suffered a financial hardship” as a result of Covid-19 and have 80% or less of the area median income for their location. Landlords with eligible tenants may receive up to 80% of a tenant’s unpaid rent if they agree to waive the remaining 20%.
Nevada Dept. of Business and Industry extends work from home guidance
On March 15, the Nevada Department of Business of Industry, Division of Mortgage Lending extended its provisional guidance allowing licensed mortgage loan originators to work from home (previously covered here, here, and here) until June 30, 2021.
Michigan regulator urges institutions to protect stimulus payments from overdrafts, fees
On March 15, the Michigan Department of Insurance and Financial Services issued a bulletin “strongly” encouraging financial institutions to protect payments made to customers under the American Rescue Plan from overdrafts and fees. The bulletin further instructs that if a financial institution’s system automatically applies such a payment to a preexisting overdraft, the institution should reverse the application of the direct payment as promptly as possible.
Michigan regulators, business associations urge underserved businesses to apply for PPP loans
On March 15, the Michigan Department of Insurance and Financial Services, the Michigan Bankers Association, Community Bankers of Michigan, the Michigan Credit Union League and the National Business League urged minority-owned and other underserved businesses in Michigan to apply for forgivable loans through the Paycheck Protection Program (PPP) prior to the March 31, 2021 deadline. The announcement highlighted that community development financial institutions offer specialized support to underserved communities and can assist customers with limited or no credit history to obtain a PPP Loan.
Colorado governor extends suspension of regulatory statutes
On March 15, the Colorado governor issued an executive order extending numerous previous executive orders for 30 days. Among other things, the previous orders suspended certain aspects of Colorado statutes concerning foreign entity qualifications to conduct business in Colorado.
California delays implementation of tax treatment law for forgiven PPP loans
On March 12, California Governor Gavin Newsom issued a joint statement along with the California Senate president pro tempore and Assembly speaker related to the tax treatment of Paycheck Protection Program (PPP) loans. California intends to delay those portions of Assembly Bill 1577 that was signed into law on September 9, 2020 relating to forgiven PPP loans, pending detailed guidance from the U.S. Treasury Department regarding certain provisions in the American Rescue Plan Act.
4th Circuit affirms $10 million penalty for appraisal practices
On March 10, a divided U.S. Court of Appeals for the Fourth Circuit affirmed a district court’s summary judgment that an appraisal practice common before 2009 was unconscionable under the West Virginia Consumer Credit and Protection Act. According to the opinion, a class of borrowers filed a lawsuit against a lender and an appraisal management company, alleging the defendants relayed home value estimates provided by borrowers on their applications to appraisers and allegedly asked appraisers “to take another look” if the appraisal value came in lower than the estimated value. The plaintiffs claimed, among other things, that this practice constituted a breach of contract and unconscionable inducement under West Virginia law. Plaintiffs also filed a civil conspiracy claim against the defendants. The district court conditionally certified the class. It ultimately imposed a $9.6 million statutory penalty and awarded class members the appraisal fees paid as damages for breach of contract in an amount totaling nearly $1 million. However, no damages were awarded for conspiracy. The defendants appealed, arguing that summary judgment was wrongfully granted and that the class should not have been certified since individual issues predominated over common ones.
On appeal, the majority determined, among other things, that the acceptability of the challenged practice “shifted dramatically during the class period,” and that “[w]hat started out as a common (though questionable) practice became one that, in short order, was explicitly forbidden.” The majority determined the plaintiffs established their claim for unconscionable inducement, and that it “was unethical for Defendants to attempt to pressure or influence appraisers.” The majority also affirmed the district court’s ruling on the conspiracy claim. However, the appellate court concluded that the district court improperly granted summary judgment on the breach of contract claim and ordered the district court to reexamine whether breach of contract occurred and whether the plaintiffs suffered resulting damages.
The dissenting judge called the majority opinion “startling,” writing that “[t]his is an unjust punishment indeed for a company that followed a practice that was both customary and legal and only later modified to avoid potentially influencing appraisers.”