Earlier this summer we explained here that the Third Circuit's decision in Kaymark spelled Fair Debt Collection Practices Act trouble for mortgage lenders and servicers who make statements seeking to recover estimated fees and costs.
We examined these risks in a recent webinar as well. If you would like to view the webinar, please click here: View Webinar
The U.S. District Court for the Middle District of Pennsylvania, citing Kaymark, recently held a mortgage servicer liable under the FDCPA for a reinstatement letter made by its foreclosure counsel, which included fees and costs that had not been incurred.
Word Placement Matters When Describing 'Anticipated' Fees
The borrower defaulted on her mortgage loan. Following the default, servicing was transferred. At some point, the decision does not tell us exactly when, a foreclosure action was started.
The borrower, through counsel, requested the amount needed to reinstate her mortgage. Foreclosure counsel sent the borrower's attorney a letter that included the following statement: "REINSTATEMENT AMOUNT ANTICIPATED GOOD THROUGH 9/20/2013″ and then went on to list attorneys fees and costs that had not actually been incurred.
The borrower sued the mortgage servicer and foreclosure attorney alleging that the reinstatement letter's demand for payment of unincurred fees and costs was false and deceptive in violation of FDCPA § 1692(e)(2), (e)(10) and sought to collect amounts not authorized by any agreement or law in violation of FDCPA § 1692 f(1).
The Court began by noting Kaymark applied the FDCPA's "least sophisticated consumer" standard to communications, even when they are transmitted to a consumer's attorney and not to the consumer.
Using this standard, it concluded that when such a consumer read the reinstatement letter she would not understand that the fees and costs had not been incurred. First, because the word "anticipated" was not placed next to each fee and cost that had not been incurred. And second, because "anticipated" was placed immediately prior to "good through 9/20/2013″ which "speaks to the date that payment was due, not the amount of the fees."
In an earlier decision involving the same foreclosure counsel, the Court noted a similar communication escaped FDCPA liability because "the word 'anticipated' was written in parentheses next to each and every unincurred fee — six times in total."
Our Webinar Explores the Use and Misuse of Anticipated Fees
Providing statements of the amount due or of the amount required to cure a default – such as in Notices of Intention to Foreclose, periodic statements, and the like — is risky for mortgage servicers under the Kaymark decision. And as we predicted earlier this year, Kaymark impacts how a mortgage servicer can include unincurred fees and costs in its communications with defaulted borrowers, at least in the Third Circuit (Delaware, New Jersey, Pennsylvania and the Virgin Islands).
Now available is a rebroadcast of our popular July 9, 2015 presentation, in which we examine Kaymark and its implications for the mortgage industry.
If you would like to view the webinar, please click here: View Webinar
Ralph T. Wutscher
Maurice Wutscher LLP
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