Saturday, November 24, 2018

FYI: 3rd Cir Holds Collection Letter Offering Payment Plan as "Discount" Could Violate FDCPA

A debt collector sent a letter to a consumer stating: "We can't change the past, but we can help with your future."  The letter contained three payment options that were described as "discounts," though one was merely a payment plan for the full balance.  The letter advised "[i]f you pay your full balance, we will report your account as Paid in Full. If you pay less than your full balance, we will report your account as Paid in Full for less than the full balance."

 

The consumer filed a complaint in the U.S. District Court for the Eastern District of Pennsylvania alleging the letter was false, deceptive, and misleading in violation of § 1692e of the federal Fair Debt Collection Practices Act.  The trial court granted the debt collector's motion to dismiss after determining the letter was not confusing or misleading.

 

On appeal before the U.S. Court of Appeals for the Third Circuit, the consumer argued the phrase "We can't change the past, but we can help with your future" was a false and deceptive promise of financial benefit because it could be interpreted to mean, inaccurately, that reporting a payment to a credit reporting agency would improve her credit score. 

 

Although the Court noted that "this might not be the most appropriate reading of the Letter," it agreed it could be so read by the least-sophisticated consumer.

 

A copy of the opinion is available at:  Link to Opinion

 

The consumer also contended the letter was false, deceptive, and misleading because it was unclear whether "we will report your account" meant it would be reported to the original creditor, the credit reporting agencies, or both.  The Court did not find this interpretation to be "bizarre or idiosyncratic," particularly given the prominent listing of the original creditor in the letter.

 

The Court also agreed with the consumer that "the letter could be misleading as to when a debtor's account will be reported as 'Paid in Full' or 'Paid in Full for less than the full balance' because all three of the options were described as "discounts."  Thus, a least sophisticated consumer could reasonably believe the payment plan option was, instead, a settlement option.

 

Finally, the consumer argued using "Paid in Full" in conjunction with "Paid in Full for less than the full balance" was misleading.  The Court again sided with the consumer, explaining that without clarifying language it was unclear that the reporting statuses were different, especially considering the capitalization of "Paid in Full" used in both phrases.

 

This case demonstrates just how carefully all letters must be reviewed to ensure there are no inadvertent inaccuracies or double meanings when read in a hyper-technical fashion.

 

 

 

Ralph T. Wutscher
Maurice Wutscher LLP
The Loop Center Building
105 W. Madison Street, 18th Floor
Chicago, Illinois 60602
Direct:  (312) 551-9320
Fax: (312) 284-4751

Mobile:  (312) 493-0874
Email: rwutscher@MauriceWutscher.com

 

Admitted to practice law in Illinois

 

 

 

Alabama   |   California   |   Florida   |   Georgia   |   Illinois   |   Massachusetts   |   New Jersey   |   New York   |   Ohio   |   Pennsylvania   |   Texas   |   Washington, DC

 

 

NOTICE: We do not send unsolicited emails. If you received this email in error, or if you wish to be removed from our update distribution list, please simply reply to this email and state your intention. Thank you.


Our updates and webinar presentations are available on the internet, in searchable format, at:

 

Financial Services Law Updates

 

and

 

The Consumer Financial Services Blog

 

and

 

Webinars

 

and

 

California Finance Law Developments

 

 

 

Sunday, November 18, 2018

FYI: Ill App Ct (1st Dist) Rejects Borrower's Attempt to Undo Foreclosure Based in Improper Service

The Appellate Court of Illinois, First District, held that a borrower's petition to vacate a final foreclosure order based on allegedly improper service filed six months after the borrower first participated in the foreclosure action was time-barred under the Illinois Mortgage Foreclosure Law ("IMFL").

 

Accordingly, the Appellate Court affirmed the ruling of the trial court dismissing the borrower's petition.

 

A copy of the opinion is available at:  Link to Opinion

 

In September 2015, the plaintiff mortgagee ("Mortgagee") instituted a foreclosure action against the defendant borrower ("Borrower") after she defaulted on her mortgage loan.  The Mortgagee served the Borrower via substitute service at the property. 

 

After the Borrower failed to respond to the complaint, the Mortgagee moved for default judgment and for entry of judgment of foreclosure in March 2016.  The Borrower did not appear at the hearing and the trial court granted the Mortgagee's motions. 

 

The Lender then mailed a copy of the notice of entry of default judgment to the Borrower at the property, and its sales office mailed a notice of foreclosure sale to the property.  A public sale was then held and the Mortgagee was the highest bidder.

 

In July 2016, the Mortgagee filed a motion to approve the sale and for a personal deficiency judgment against the Borrower, and again mailed a copy of the motion to the Borrower at the property.  On August 23, 2016, the Mortgagee presented its motion in the trial court, and an attorney appeared for the Borrower and asked the court to set a briefing schedule on the motion, which the trial court did.

 

On August 29, 2016, the Borrower's counsel filed an appearance, but never responded to the Mortgagee's motion.  On September 27, 2016, the trial court held a hearing at which it granted the Mortgagee's motion to approve sale.  The Borrower's counsel did not appear at the hearing.

 

On February 14, 2017, the Borrower filed a petition to vacate ("Petition") under 735 ILCS 5/2-1401 ("Section 2-1401").  The Borrower's primary argument was that the Mortgagee did not effectuate proper service on her, and therefore the underlying default judgment entered against her was void, rendering the foreclosure sale void. 

 

The Mortgagee moved to dismiss the Petition, and on July 11, 2017 the trial court granted dismissal based on "lack of jurisdiction," noting that the Borrower had failed to property serve the Mortgagee with the Petition.

 

On the same day, the Borrower refiled her Petition.  The Mortgagee again moved to dismiss arguing that 735 ILCS 5/15-1505.6 ("Section 15-1505.6") of IMFL, which allows a party 60 days from counsel's appearance on her behalf within which to file a motion to quash service, rendered the Borrower's Petition untimely.

 

The trial court agreed and dismissed the Petition, finding that Section 15-1505.6 barred the Borrower from attacking service. 

 

The Borrower appealed.  On appeal, the Borrower contended that the trial court erred in dismissing her Petition because the default judgment underlying the foreclosure was entered before counsel made any appearance on her behalf. 

 

Therefore, she argued, she did not waive any jurisdictional challenge to that judgment.  Instead, she claimed the waiver would have been prospective from her appearance, and not retroactive to the default judgment. 

 

The Appellate Court disagreed, holding that the "section 2-1401 petition was time-barred by section 15-1505.6(a) of the Foreclosure Law and, therefore, it was properly dismissed."

 

As you may recall, Section 15-1505.6(a) of IMFL generally "provides that, in a residential mortgage foreclosure proceeding, when a party moves to dismiss the cause or to quash service of process on the ground that the trial court lacked personal jurisdiction over her, she must do so within 60 days of either the date she first files an appearance or the date she first participates in a hearing without filing an appearance, whichever of these is earlier." 

 

"In other words, in the context of a residential foreclosure action, the moment a party files her appearance or even simply participates in any hearing, a 60-day clock begins to run, within which time she must object to personal jurisdiction," and "[t]he failure to do so results in the waiver of any objection to personal jurisdiction." 

 

Applying Section 15-1505.6 to the case, the Appellate Court determined that "it becomes clear the [Borrower's] section 2-1401 petition was time-barred." 

 

The Borrower first appeared in the case in August 23, 2016 when her counsel attended a hearing and asked the trial court to set a briefing schedule, which it did.  Additionally, the Borrower's attorney filed an official appearance six days later, on August 29, 2016.

 

However, the Borrower did not file her Petition until February 14, 2017, some six months later.  Thus, the Court held that under "section 15-1505.6(a), [the Borrower] failed to timely assert her challenge to the trial court's personal jurisdiction over her."

 

Accordingly, the Appellate Court affirmed the trial court's ruling dismissing the Borrower's Petition.

 

 

 

Ralph T. Wutscher
Maurice Wutscher LLP
The Loop Center Building
105 W. Madison Street, 18th Floor
Chicago, Illinois 60602
Direct:  (312) 551-9320
Fax: (312) 284-4751

Mobile:  (312) 493-0874
Email: rwutscher@MauriceWutscher.com

 

Admitted to practice law in Illinois

 

 

 

Alabama   |   California   |   Florida   |   Georgia   |   Illinois   |   Massachusetts   |   New Jersey   |   New York   |   Ohio   |   Pennsylvania   |   Texas   |   Washington, DC

 

 

NOTICE: We do not send unsolicited emails. If you received this email in error, or if you wish to be removed from our update distribution list, please simply reply to this email and state your intention. Thank you.


Our updates and webinar presentations are available on the internet, in searchable format, at:

 

Financial Services Law Updates

 

and

 

The Consumer Financial Services Blog

 

and

 

Webinars

 

and

 

California Finance Law Developments