Eleventh Circuit Rules that Consumers Have the Right to Partially Revoke Consent to Automated Calls under the TCPA

By: Michael Esposito

The Eleventh Circuit Court of Appeals recently issued its opinion in Emily Schweitzer v. Comenity Bank, holding that the Telephone Consumer Protection Act, 47 U.S.C. sec. 227 et seq. (“TCPA”), allows consumers to partially revoke their consent to be called by an automated telephone dialing system. No. 16-10498 (Eleventh Cir. August 10, 2017).

In Schweitzer, Plaintiff was issued a credit card by Comenity Bank (“Comenity” or the “Bank”) in 2012 and, during the application process, provided a cellular phone number to the Bank. In 2013, Plaintiff failed to tender the required monthly credit card payments and, as a result, Comenity used an automated telephone dialing system to make hundreds of calls to Plaintiff on her cellular phone regarding the delinquency. During a call with a Comenity representative on October 13, 2014, Plaintiff informed the representative that Comenity could not call her in the morning and during the work day, because she was working and could not discuss the delinquency while at work. Subsequently, Plaintiff twice told a representative of Comenity to please stop calling her. Thereafter, Comenity did not call Plaintiff’s cellular phone using an automated telephone dialing system.

Ultimately, Plaintiff commenced a suit against Comenity for alleged violations of the TCPA. Specifically, Plaintiff claimed that during the October 13th conversation, she revoked her consent for Comenity to call her cellular phone using an automated telephone dialing system and asserted that Comenity violated the TCPA by placing over 200 calls using an automated system from October 2014 through March 2015. The district court granted summary judgment in favor of Comenity and reasoned that the bank “did not know and should not have had reason to know that [Plaintiff] wanted no further calls.” In addition, the district court stated that Plaintiff did not “define or specify the parameters of the times she did not want to be called” and, therefore, a reasonable jury could not find that Plaintiff revoked her consent to call her cellular phone. Plaintiff appealed.

On appeal, Comenity argued that the district court correctly granted summary judgment in its favor because the TCPA does not allow partial revocations of consent and, even if possible, a reasonable jury could not find that Plaintiff had expressly done so during the October 13th conversation. The Eleventh Circuit Court rejected Comenity’s arguments, finding that “[a]lthough the TCPA is silent on the issues of revocation, [its] decision in Osorio holds that a consumer may orally revoke her consent to receive automated phone calls.” See Osorio v. State Farm Bank, F.S.B., 746 F. 3d 1242, 1255 (11th Cir. 2014).

Further, the Eleventh Circuit explained that since the TCPA is silent as to partial revocations of consent, the analysis of the matter is governed by common law principles, which support its holding that the TCPA “allows a consumer to provide limited, i.e., restricted, consent for the receipt of automated calls.” Moreover, “[i]t follows that unlimited consent, once given, can also be partially revoked as to future automated calls under the TCPA.” In support of its conclusion, the Eleventh Circuit reasoned that it is “logical that a consumer’s power under the TCPA to completely withdraw consent and thereby stop all future automated calls . . . encompasses the power to partially withdraw consent and stop calls during certain times.” Although the Eleventh Circuit noted the district court’s concern that partial revocations may create challenges for both callers and parties attempting to present evidence in support of TCPA claims, it held that any such complications do not warrant limiting a consumer’s rights under the TCPA.

Second, with regard to Comenity’s argument that a reasonable jury could not find that Plaintiff’s statements made during the October 13th conversation constituted a partial revocation of consent under the TCPA, the Eleventh Circuit ruled that the “issue is close” and concluded that the matter of partial revocation was for the jury to evaluate. In reaching its conclusion, the Eleventh Circuit found that summary judgment was not warranted since reasonable minds might differ on the inferences arising from Plaintiff’s request not to be called “in the morning and during the work day.”

This decision is significant because the Eleventh Circuit has expanded the consumer’s right to revoke consent under the TCPA to include partial revocations. Based on this decision, debt collectors conducting business within the Eleventh Circuit will need to update their automated dialing systems to incorporate such partial revocations.

Ninth Circuit Holds that Consumer Alleging FCRA Claim Against Spokeo Sufficiently Pled a Concrete Harm to Article III Standing

By: Wayne Streibich,Francis X. CrowleyCheryl S. Chang, Diana M. Eng and Nadia D. Adams

In Thomas Robins v. Spokeo, Inc., No. 11-56843 (9th Cir. Aug. 15, 2017) (“Spokeo III”), the United States Court of Appeals for the Ninth Circuit unanimously ruled that Thomas Robins (“Robins”), who accused Spokeo, Inc. (“Spokeo”) of violating the Fair Credit Reporting Act (the “FCRA”) by allegedly reporting inaccurate information about him on its website, claimed a sufficiently concrete injury to confer standing under Article III of the U.S. Constitution.

Background

Spokeo operates a website that compiles consumer data and builds individual consumer profiles containing details about a person’s life, including age, contact information, level of education, marital status, employment status and wealth. Spokeo also markets its services to businesses as a way to learn about prospective employees. Robins sued Spokeo for willful violations of the FCRA, which, among other things, requires credit reporting agencies to take steps to ensure the information they provide to potential employers is accurate. 15 U.S.C. § 1681 et seq. Robins alleged Spokeo published an inaccurate report about him on its website, including that he was wealthy and had a graduate degree when in fact, he was struggling to find work.

Initially, the district court dismissed Robins’s suit based on its determination that Robins lacked standing to sue under Article III of the U.S. Constitution because Robins had not adequately pled that the alleged violation caused him an injury-in-fact. Id. at p.6. Robins appealed and the Ninth Circuit reversed on the basis that Robins established a sufficient injury-in-fact because he alleged that Spokeo violated specifically his statutory rights, which Congress established to protect against individual rather than collective harms. Robins v. Spokeo, Inc. (Spokeo I), 742 F.3d 409, 413-14 (9th Cir. 2014) (emphasis added).

The United States Supreme Court Decision

On Certiorari review, the United States Supreme Court vacated the Spokeo I opinion, because although it agreed with the Ninth Circuit’s analysis and determination that Robins established an alleged injury sufficiently particularized to him, the Ninth Circuit’s standing analysis was incomplete. Spokeo, Inc. v. Robins (Spokeo II), 136 S. Ct. 1540 (2016). The Supreme Court held that a bare procedural statutory violation is insufficient to establish a concrete injury-in-fact to confer standing. Id. at 1548-49 (internal citations omitted). In Spokeo II, the Supreme Court reasoned that the reporting of an incorrect zip code, absent another misrepresentation, was unlikely to present any material risk of real harm. Id. at 1550. Thus, the Supreme Court remanded the case to the Ninth Circuit with instructions for it to consider whether, in addition to a particularized injury, Robins also sufficiently pled a concrete injury. Spokeo III at p.7.

The Ninth Circuit’s Decision on Remand

On remand, the Ninth Circuit held that Robins had alleged injuries that were sufficiently concrete for purposes of Article III, and because the alleged injuries were previously determined to be sufficiently particularized, Robins adequately alleged all of the elements necessary to establish Article III standing. Id. at p.2. In reaching its conclusion, the Ninth Circuit conducted a two-fold analysis.

First, it considered whether Congress established the FCRA to protect consumers’ concrete interest in accurate credit reporting about themselves, and held that it did. The Ninth Circuit further noted the “ubiquity and importance of consumer reports in modern life” and held that the “real-world implications of material inaccuracies in those reports seem patent on their face.” Id. at p.12.

Second, the Ninth Circuit considered whether the FCRA violations that Robins alleged actually harmed or created a “material risk of harm” to his concrete interest in accurate crediting reporting about himself. Id. at p.15. (Internal citations omitted). The Court noted that Robins’s allegations were not minor and could be deemed a real harm because Robins specifically alleged that Spokeo falsely reported—and published—several inaccurate facts including his marital status, age, employment status, educational background and level of wealth. Id. at p.16. Further, even though some of the inaccuracies could be considered flattering and the likelihood to harm could be debated, the inaccuracies alleged did not strike the Court as mere “technical violations” outside the scope of what Congress sought to protect with the FCRA. Id. (Internal citations omitted).

Importantly, however, the Ninth Circuit reiterated that Spokeo II “requires some examination of the nature of the specific alleged reporting inaccuracies to ensure that they raise a real risk of harm to the concrete interests that [the] FCRA protects.” Id. at p.17. The Ninth Circuit cautioned that not every minor inaccuracy would cause real harm. Id. at p.16. Thus, not every FCRA violation premised on some inaccurate disclosure of Robins’s information is sufficient. Id. at pp.16-17.

Conclusion

The Ninth Circuit’s decision is significant for several reasons. First, while declining to express an opinion on the circumstances in which alleged inaccuracies of the kind pled by Robins would or would not cause concrete harm, the Court held that the allegations of Robins’s FCRA class action complaint, which are premised on a “material risk of harm” to his employment opportunities, should proceed past the initial pleading stage. Second, because the Ninth Circuit did not set a bright-line rule for what information necessarily establishes a “concrete injury” and declined to comment on whether Robins would have alleged a concrete injury had Spokeo merely produced, but not published the information, businesses will operate (and litigate) in a gray area until a case law framework for “concrete injury” is established.

Mr. Streibich would like to thank Cheryl Chang, Diana Eng, and Nadia Adams for their assistance in developing this Alert.

Eleventh Circuit Clarifies Meaning of Consummation of Transaction in Dismissing Borrowers’ TILA Right of Rescission Claim

By: Anthony Yanez

In Woide v. Federal Nat’l Mortg. Ass’n, the United States Court of Appeals for the Eleventh Circuit held that consummation of a contract for purposes of asserting a right of rescission under the Truth in Lending Act (“TILA”) occurs when a borrower signs the pertinent loan documents. Woide v. Federal Nat’l Mortg. Ass’n., 2017 WL 3411701 (11th Cir. Aug. 9, 2017).

Background

On December 7, 2011, Federal National Mortgage Association (“Fannie Mae”) filed a foreclosure lawsuit against Charles and Susannah Woide (“Plaintiffs”) in state court after they defaulted on their mortgage. On April 1, 2015, the Plaintiffs notified Fannie Mae by mail that they were rescinding the mortgage pursuant to Section 1601-1667f of TILA. Subsequently, Plaintiffs filed a lawsuit in the Middle District of Florida[1] against Fannie Mae and the law firms that handled their foreclosure action seeking a declaratory judgment that Plaintiffs rescinded their mortgage obligation under TILA and requesting that Fannie Mae disgorge all monies that it allegedly unlawfully retained under Plaintiff’s mortgage.

Congress enacted TILA in 1968, as part of the Consumer Credit Protection Act, Pub.L. No. 90-321, 82 Stat. 146 (1968) (codified as amended at 15 U.S.C. §§ 1601-1616), “to assure a meaningful disclosure of credit terms so that the consumer will be able to compare more readily the various credit terms available to him and avoid the uninformed use of credit.” 15 U.S.C. § 1601(a). Regulation Z implements requirements under TILA and provides that “[c]onsummation means the time that a consumer becomes contractually obligated on a credit transaction.” 12 C.F.R. § 226.1(a); 12 C.F.R. § 226.2(13).

“Under TILA, a debtor may rescind a mortgage ‘until midnight of the third business day following the consummation of the transaction or the delivery of the information and rescission forms . . . , whichever is later . . . .’” Smith v. Highland Bank, 108 F.3d 1325, 1326 (11th Cir. 1997) (per curiam) (quoting 15 U.S.C. § 1635(a)). In the event that the debtor never receives the information and disclosures required by TILA, the “right of rescission shall expire three years after the date of consummation of the transaction,” 15 U.S.C. § 1635(f), which TILA defines as “the time that a consumer becomes contractually obligated on a credit transaction.” 12 C.F.R. § 1026.2(a)(13).

All Defendants moved to dismiss Plaintiff’s complaint, and the district court granted the motion to dismiss, holding that the Plaintiffs’ right of rescission expired three years after they consummated the note and mortgage, which was on December 28, 2010. The district court determined the consummation date to be December 28, 2007, which was the date that Plaintiffs had signed the note and mortgage, and then added three years to that date as the bright-line rescission deadline under TILA. Thus, the district court held that the Plaintiffs’ right of rescission letter, dated April 1, 2015, was ineffective as a matter of law. Further, since the district court determined that all of Plaintiffs’ claims derived from their legally ineffective rescission of the mortgage obligation under TILA, the district court dismissed the complaint with prejudice because any amendment would be futile. See Woide v. Federal Nat’l Mortg. Ass’n, 2016 WL 4567132 (M.D. Fla. Sept. 1, 2016). Plaintiffs appealed.

 Eleventh Circuit’s Decision

The Eleventh Circuit affirmed the district court’s dismissal, finding that the district court correctly determined that the Plaintiffs’ right to rescind under TILA expired in 2010 and that the Plaintiffs’ alleged notice of rescission could not have legally rescinded their mortgage obligation in 2015. Relying on Bragg v. Bill Heard Chevrolet, Inc., 374 F. 3d 1060, 1065 (11th Cir. 2004) and the plain language of Regulation Z, the Eleventh Circuit explained that “consummation occurs when the consumer signs the offered contract, not when the contract becomes binding under state law.” See Bragg, 374 F.3d at 1066-1068. The Plaintiffs contended that their note and mortgage never became binding under Florida law and that their mortgage obligation was never consummated within the meaning of TILA. The Eleventh Circuit rejected this argument because the issue of whether a contract was formed under state law is irrelevant to whether consummation occurred under TILA. Specifically, the Eleventh Circuit found that the question of consummation is governed by federal law, and federal law explains that the right to rescind accrues from the date that the borrower signs the operative loan documents, which, in this case, occurred in 2007.

Ultimately, because the Plaintiffs became obligated under the note and mortgage by signing the loan documents in 2007, all of their claims, which were based on their attempted rescission in 2015, were without merit. Accordingly, the Eleventh Circuit held that the district court did not err in dismissing the case with prejudice without granting leave to amend because a more carefully drafted complaint would not have stated a claim against the Defendants.

 Conclusion

This decision reaffirms the long established principle that a borrower’s right of rescission lasts no more than three years from a loan closing if that borrower never receives the information and disclosures required by TILA at the closing. Lenders and servicers should also be aware that federal law, and not state law, controls when the rescission right accrues.

[1] The Plaintiffs also asserted claims under the Fair Debt Collection Practices Act, (“FDCPA”), 15 U.S.C. §§ 1692–1692p, and the Florida Consumer Collection Practices Act (“FCCPA”), Fla. Stat. §§ 559.55–559.785 on the grounds that the Defendants attempted to collect on their mortgage debt despite Plaintiff’s claim of “rescission.”

District Court of New Jersey Holds No Duty Under FDCPA to Warn of Tax Consequences for Debt Settlement

By: Jonathan M. Robbin and Kyle E. Vellutato

In a case of first impression in the Third Circuit, Vincent Carieri v. Midland Credit Management, Inc., No. 17-0009 (D.N.J. June 26, 2017), the District Court of New Jersey held that that a debt collector does not have a duty to notify a debtor of potential tax consequences for settling a debt at a discount under the Fair Debt Collection Practices Act, 15 U.S.C. § 1692 et seq. (“FDCPA”).

As satisfaction for a debt in the amount of $4,491.47, Midland Credit Management, Inc. (“MCMI”) sent a notice to Carieri offering various debt settlement payment options resulting in savings from continued payments under the terms of the loan (the “Notice”).  Specifically, the Notice offered to extinguish the debt if a discounted total payoff was received by a certain date, resulting in savings of 40 percent (or $1,796.58). Carieri’s complaint alleged that the Notice violated the FDCPA by failing to inform the debtor of the potential tax consequences posed by the savings from the discounted payoff of the debt.[1]

In considering MCMI’s motion for judgment on the pleadings, the Court turned to other federal courts including the Second Circuit for guidance on whether the FDCPA expands a debt collector’s duties with regard to notifying a debtor of tax consequences of debt settlement. Specifically, the Court held that as in Altman v. J.C. Christensen & Assocs., Inc., 786 F.3d 191 (2d Cir. 2015), the Notice did not violate the FDCPA, even though the letter did not warn of potential tax consequences.

The Court granted MCMI’s dispositive motion, and confirmed that a debt collector’s failure to advise a debtor of the tax consequences for a discounted payoff does not serve as a basis for a claim under the FDCPA.[2]

[1] Although Carieri attempted to raise a second FDCPA violation purportedly posed by the Notice in his opposition to the dispositive motion under review, Chief Judge Jose Linares denied Carieri’s attempt to expand his claims, offering a stern reminder to plaintiffs that untimely efforts to amend pleadings—to survive disposition or otherwise—will be barred. Nonetheless, in dicta, the Court roundly rejected Carieri’s last-ditch effort to amend finding that the Notice was misleading to the least sophisticated consumer.

[2] The Court also relied upon the following cases in reaching his decision: Smith v. Nat’l Enter. Sys., Inc., No. 15-541, 2017 WL 1194494 (W.D. Okla. Mar. 30, 2017); Rigerman v. Forster & Garbus LLP, No. 14-1805, 2015 WL 1223760 (E.D.N.Y. Mar. 16, 2015); Landes v. Cavalry Portfolio Servs., LLC, 774 F. Supp. 2d 800 (E.D. Va. 2011); Schaefer v. ARM Receivable Mgmt., Inc., No. 09-11666, 2011 WL 2847768 (D. Mass. July 19, 2011), and rejected the holding in Ellis v. Cohen & Slarnowitz, LLP, 701 F. Supp. 2d 215, 219-20 (N.D.N.Y. Mar. 26, 2010).

 

Second Circuit Holds That TCPA Does Not Permit Consumer to Unilaterally Revoke Consent for Telephone Contact Provided in Binding Contract

By: Diana M. Eng and Andrea M. Roberts

In Reyes v. Lincoln Automotive Financial Services, the United States Court of Appeals for the Second Circuit recently held that the Telephone Consumer Protection Act (“TCPA”) does not permit a consumer to unilaterally revoke consent to be contacted by telephone when such consent is given as bargained-for consideration in a binding contract. Reyes v. Lincoln Automotive Fin. Servs., 2017 WL 3675363 (2d Cir. June 22, 2017).

Background

In 2012, Plaintiff-Appellant, Alberto Reyes, Jr. (“Plaintiff”), leased a car which was financed by Defendant-Appellee, Lincoln Automotive Financial Services (“Lincoln”). The lease contained a provision which expressly permitted Lincoln to contact Plaintiff. Plaintiff stopped making payments under the lease and, as a result, Lincoln called Plaintiff in an attempt to cure his default. Plaintiff disputed his balance on the lease and alleged that he requested that Lincoln cease contacting him. Despite Plaintiff’s alleged revocation of consent, Lincoln continued to call Plaintiff. As such, Plaintiff filed a complaint in the Eastern District of New York alleging violations of the TCPA.

The TCPA was enacted to protect consumers from “unrestricted telemarketing” which could be “an intrusive invasion of privacy.” See Mims v. Arrow Fin. Servs., LLC, 565 U.S. 368, 371 (2012) (internal citations omitted). Under the TCPA, any person within the United States is prohibited from “initiat[ing] any telephone call to any residential telephone line using an artificial or prerecorded voice to deliver a message without the prior express consent of the called party.” 47 U.S.C. 227(b)(1)(B).

Lincoln moved for summary judgment to dismiss the complaint, and the district court granted the motion, holding that (1) Plaintiff had failed to produce sufficient evidence to establish that he revoked his consent to be contacted and (2) the TCPA does not permit a party to a legally binding contract to unilaterally revoke bargained-for consent to be contacted by telephone. Plaintiff appealed both rulings.

The Second Circuit’s Decision

The Second Circuit affirmed the district court’s holding that under the TCPA, a consumer cannot unilaterally revoke its consent to be called when such consent was part of a bargained-for exchange.[1] In assessing whether a party can revoke prior consent under the TCPA, the Second Circuit agreed with the holdings of its sister courts that a party can revoke prior voluntary or free consent under the statute. See Gager v. Dell Financial Services, 727 F.3d 265 (3d Cir. 2013) (plaintiff permitted to revoke consent, where consent was provided in an application for a line of credit); Osorio v. State Farm Bank F.S.B., 746 F.3d 1242 (11th Cir. 2014) (plaintiff could revoke consent, where consent was provided in an application for auto insurance). The Second Court noted, however, that unlike in Gager and Osorio, Plaintiff’s consent was not provided gratuitously. Rather, Plaintiff’s consent was included as an express provision of a contract with Lincoln. Accordingly, the Second Circuit drew a distinction between the definition of consent under tort and contract law. Specifically, in tort law, the term “consent” is defined as a “voluntary yielding to what another purposes or desires.” Black’s Law Dictionary (10th ed. 2014). However, under contract law, “consent to another’s actions can ‘become irrevocable’ when it is provided in a legally binding agreement, in which case any ‘attempted termination is not effective.’” See Restatement (Second) of Torts 892A(5) (Am. Law Inst. 1979); see also 13-67 Corbin on Contracts 67.1 (2017).

The Second Circuit also determined that a contractual term need not be “essential” to be enforced as part of a binding agreement and that contracting parties are bound to perform on the agreed upon terms; a party who agreed to a valid term in a binding contract cannot later renege on that term or unilaterally declare that it no longer applies simply because the contract could have been performed without it. “[R]eading the TCPA’s definition of ‘consent’ to permit unilateral revocation at any time, as [Plaintiff] suggests, would permit him to do just that,” and the Second Circuit could not “conclude that Congress intended to alter the common law of contracts in this way.” (citation omitted).

Conclusion

This decision is significant, as it addressed the novel issue of whether consent that is given as part of a bilateral contract may be unilaterally revoked by a consumer under the TCPA. Based on Reyes, financial institutions that have consent provisions in binding contracts with consumers have a powerful defense against TCPA claims. In practice, if a contract with a consumer contains an express consent provision, the financial institution would need to agree to the consumer’s request to revoke. Financial institutions should also be cognizant that a consumer, who provides consent to be called in an application, may unilaterally revoke such consent.

[1] The Second Circuit also held that the district court erred in finding that no reasonable jury could find that Plaintiff revoked his consent, as Plaintiff had introduced sworn testimony of revocation. However, this error does not impact the ruling that Plaintiff nevertheless cannot unilaterally revoke his consent under the TCPA when such consent is part of a binding contract.

Florida Second District Court of Appeal Ruling Highlights the Possible Pitfalls of Relying on Prior Servicer Records

By: Michael R. Esposito

Florida’s Second District Court of Appeal (“Second District Court”) recently held that a mortgagee failed to demonstrate it satisfied the condition precedent in a residential mortgage foreclosure. Allen v. Wilmington Trust, N.A., 2D15-2976, 2017 WL 1325896 (Fla. 2d DCA 2016). In Allen, the underlying mortgage contained the standard provision which requires a lender/servicer to notify the borrower of a default prior to the loan being accelerated and a foreclosure filed. In addition to the foregoing provision, the mortgage specified that any notice mailed in relation to the instrument “shall be deemed to have been given to [b]orrower when mailed by first class mail or when actually delivered to [b]orrower’s address if sent by other means.” Prior to the commencement of the action, a notice of default was mailed to the borrower by the prior loan servicer, EMC Mortgage Corporation (“EMC”), in accordance with the provision. Thereafter, Wilmington Trust, N.A. (“Wilmington”) filed a complaint on or about November 21, 2012, seeking foreclosure of the subject mortgage. In response to the lawsuit, the borrower denied Wilmington satisfied all conditions precedent to filing the lawsuit and raised an affirmative defense that asserted Wilmington failed to establish that a notice of default was provided as required by the mortgage.

During the bench trial, a corporate representative of the current servicer testified on behalf of Wilmington. The witness testified as to the boarding process used to verify the accuracy of the records of EMC and specified the related business records included a notice of default that was addressed to the borrower and dated March 12, 2010. Further, the witness testified that because the letter existed, it had been sent to the borrower and there were no records indicating the notice was returned as undeliverable. More importantly, the witness confirmed the business records associated with the loan did not specifically show the notice was actually mailed to the borrower and she was unable to testify as to EMC’s mailing procedures. In response, the borrower objected to the witness’ testimony that EMC mailed the notice and argued Wilmington failed to establish the appropriate foundation for the testimony since she was unfamiliar with the prior servicer’s procedures. Despite the trial court’s denial of the objection, the borrower argued at the close of the bench trial that Wilmington neglected to demonstrate it satisfied the condition precedent of mailing the notice of default. Ultimately, the trial court held the witness’ testimony as to the boarding process was sufficient to show Wilmington satisfied the condition precedent and entered a final judgment of foreclosure in favor thereof.

In reviewing the matter, the Second District Court held the trial court incorrectly relied on the boarding process to prove the notice of default was actually mailed. Although the witness’ testimony as to the boarding process was sufficient to support the admission of the notice of default, the Second District Court concluded that the testimony and evidence proffered failed to establish the notice of default was mailed to the borrower. In support of its conclusion, the Second District Court cited to Burt v. Hudson & Keyse, LLC, 138, So. 3d 1193 (Fla. 5th DCA 2014) and held that while the notice of default was dated, it did not contain any proof that the notice was mailed to the borrower. Without proffering further evidence of proof of regular business practice, an affidavit swearing that the notice of default was mailed, or a return receipt, Wilmington was only able to rely upon the testimony of its witness, who was unable to show personal knowledge of EMC’s general practice in mailing letters. As a result, the Second District Court reversed and remanded the action for dismissal since Wilmington was unable to demonstrate the notice of default was mailed pursuant to an established business procedure of EMC and, therefore, could not prove the required condition precedent was satisfied.

This case highlights the litigation risks associated with service transferred loans and the importance of current loan servicers obtaining all relevant business records and/or education on prior servicer policies and procedures.

U.S. Supreme Court Excludes Banks Collecting Purchased Delinquent Debt from Definition of “Debt Collector” under the FDCPA

By: Diana M. Eng and Louise Marencik

Banks and other consumer finance firms that purchase delinquent debt and then collect on their own behalf are not “debt collectors” under the Fair Debt Collection Practices Act. However, this limitation still does not apply to those institutions that collect on behalf of another.

In a unanimous decision in Henson et al. v. Santander Consumer USA Inc., the United States Supreme Court held that the Fair Debt Collection Practices Act (“FDCPA”) does not apply to banks and other consumer finance firms that purchase and then collect on defaulted debt that they own. No. 16-349, ____ U.S. ____ (2017).

Please click here for the full alert.