FYI: FCC Denies MBA's Petition to Exempt "Servicing Calls" from TCPA

The Federal Communications Commission (FCC) recently denied the national Mortgage Bankers Association's (MBA) petition for exemption from the "prior express consent" requirement of the Telephone Consumer Protection Act (TCPA) for certain mortgage servicing calls and texts.

 

A copy of the FCC's Order denying the petition is available at:  Link to FCC Order

 

As you may recall, the TCPA and the FCC's implementing rules prohibit autodialed calls and texts "to wireless telephone numbers and other specified recipients except when made: (1) for an emergency purpose; (2) solely to collect a 'debt owed to or guaranteed by the United States'; (3) with the prior express consent of the called party; or (4) pursuant to a Commission-granted exemption."

 

As to the Commission granted exemption, the TCPA allows the FCC "to exempt from the consent requirement robocalls to a number assigned to a cellular telephone service that are not charged to the consumer, subject to conditions the Commission may prescribe 'as necessary in the interest of the privacy rights [the TCPA] is intended to protect.'" 

 

The FCC noted that it "only exercised this exemption authority in very limited and narrow circumstances—e.g., for time-sensitive messages relating to certain healthcare and financial transaction notifications", such as when there is "indication of fraudulent transactions or identity theft" but not for example "regarding account communications, payment notifications and Social Security disability eligibility."

 

In June of 2016, the MBA filed a petition seeking to exempt from the TCPA's prior express consent requirement non-telemarketing residential mortgage servicing calls to wireless telephone numbers. 

 

These "mortgage servicing" calls would include calls "to determine the reasons and nature of a delinquency and to counsel homeowners on their obligations and potential options," as well as calls "concerning whether a borrower has abandoned or vacated a property, discussing missing documentation needed to complete a loss mitigation application, and/or determining the homeowner's current perception of their financial circumstances and ability to repay the debt." 

 

The MBA explained at length how many of these communications "are required by other federal and state laws or regulations."  It also noted that "Congress recently directed the Commission to adopt rules to except from the consent requirement calls made solely to collect a debt owed to or guaranteed by the United States," and that "its requested exemption is necessary to ensure that calls to borrowers are treated uniformly in terms of the prior express consent needed to make the call, regardless of whether the federal government or a private entity owns or insures the mortgage loan." 

 

The MBA also suggested conditions and requirements for the communications, such as that the calls and texts be "free-to-end user," and that "mortgage servicers must state the name and contact information of the mortgage servicer; calls must not include any telemarketing, cross-marketing, solicitation, or advertising content; text messages and prerecorded calls must be concise; an easy means of opting out of future messages must be offered; and any such opt-out requests must be honored promptly."

 

The FCC disagreed.

 

Rather than simply making the "free-to-end user" feature a requirement, as requested, the FCC opined that it could not be certain how MBA's members "would comply with this requirement," or that "exempted

calls would not count against any plan limits on the consumer's voice minutes or texts."

 

Similarly, the FCC discounted and ultimately disregarded the needs of struggling homeowners all of the country, stating that "the public interest in and the need for the timely delivery of the calls described by MBA do not justify 'setting aside a consumer's privacy interests in favor of an exemption.'"

 

Attempting to explain itself, the FCC stated that, "[w]hile the calls MBA describes may help and be welcomed by some consumers, we cannot agree with MBA that they are particularly time-sensitive." 

 

In particular, the FCC noted, "the various federal agencies and state governments that MBA cites as requiring outbound mortgage servicing calls do not require telephone contact until a borrower is at least 20 to 36 days into the delinquency period," such that "these messages lack the urgency of robocalls to alert consumers to possible fraudulent credit card transactions on their accounts or data breaches of their identity, when seconds or minutes count."

 

The FCC further stated that, "[w]hile these calls may indeed be beneficial and desired by some consumers, mortgage servicers are free to autodial consumers without an exemption by simply relying on the prior express consent a consumer provides when including their wireless phone number on a mortgage application," and "may also obtain new consent by one of many available means, including by email."

 

In addition, the FCC rejected the MBA's request "to harmonize the practices of callers making calls regarding the collection of a debt owed to or guaranteed by a private entity with those of callers making calls regarding the collection of a debt owed to or guaranteed by the United States," stating that if Congress "had intended the exception to apply universally, regardless of who owned or guaranteed a debt, it easily

could have done so."

 

In sum, the FCC opined that it could not be certain that "the exempted calls would be free of charge to called parties."  Additionally, the FCC opined that mortgage servicers need not "be able to make or send non-time-sensitive robocalls, including robotexts, to consumers without first obtaining consumer consent." 

 

Therefore, the FCC denied the MBA'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

 

 

 

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FYI: Fla App Ct (2nd DCA) Holds Trial Court Erred In Denying Deficiency Judgment Due to 6-Day Stale Appraisal

The District Court of Appeal of Florida, Second District, recently reversed an order denying a claim for a post-foreclosure sale deficiency judgment, holding that the trial court abused its discretion by excluding from evidence an expert's testimony and report as to fair market value because the report was dated six days after the foreclosure sale.

 

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

 

A final judgment of foreclosure in the amount of $2.4 Million was entered against the borrower company and its principal.  A third party purchased the property at a foreclosure sale for $100.  The third party moved for a deficiency judgment, presenting evidence of the foreclosure judgment, the assignment of judgment, and the certificate of sale.

 

At the hearing on the motion for deficiency judgment, the purchaser offered into evidence, over objection, the testimony of its expert and an appraisal report that valued the subject property at $1.9 Million as of a date 6 days after the foreclosure sale.

 

The trial court sustained the objection, precluding any testimony as to fair market value, because it "deemed the expert's testimony and report irrelevant because the appraisal was conducted six days after the foreclosure sale 'making it impossible to calculate the deficiency.'"

 

Because the purchaser did not meet its burden of proving that a deficiency existed as of the date of the foreclosure sale, the trial court denied the motion for deficiency judgment. The purchaser appealed.

 

On appeal, reviewing the trial court's decision to exclude the expert's testimony under an abuse of discretion standard, the Appellate Court began by explaining that "[a] trial court may not reject expert testimony unless it is so 'incredible, illogical, and reasonable as to be unworthy of belief.'"

 

The Appellate Court then concluded that the trial court's exclusion of the expert's testimony and report, despite there being no dispute as to his qualifications, just because the report was dated six days after the foreclosure sale, was an abuse of discretion.

 

The Court reasoned that while "[i]t is well-settled that for purposes of calculating a deficiency judgment, the relevant date for determining the fair market value of the property is the foreclosure sale date," Florida law also "recognizes that a party seeking a deficiency judgment may provide testimony to link the value of property on the date of an appraisal to the value of property on the date of the foreclosure sale."

 

Because the Appellate Court could not agree that "the passage of a mere six days rendered [the] appraisal so devoid of probative vale as to be irrelevant, especially in light of the court's refusal to allow [the] expert to explain whether the intervening days affected the value of the property."

 

The Court noted that "[a]ny determination that a deficiency judgment should be denied must be supported by established equitable principles and the record must disclose sufficient facts and circumstances to support that judgment."

 

Accordingly, the Appellate Court reversed the trial court's order denying the motion for deficiency judgment, and remanded the case for further proceedings.

 

 

 

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

 

 

 

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FYI: 11th Cir Allows FCCPA Vicarious Liability Claim Against Non-Debt Collector Principal, Holds HOA Fines Are FCCPA "Debts"

The U.S. Court of Appeals for the Eleventh Circuit recently held that a fine imposed by a home owners association (HOA) for violating its governing documents is a "debt" for purposes of the Florida Consumer Collection Practices Act (FCCPA).

 

In addition, distinguishing rulings under the federal Fair Debt Collection Practices Act (FDCPA), the Court held that vicarious liability under the FCCPA is not limited to principals who are themselves debt collectors.

 

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

 

A husband and wife owned a home subject to an HOA's governing documents, which included the HOA's articles of incorporation, bylaws, and a recorded declaration of covenants and restrictions.  The governing documents conferred on the association the right to levy fines for violations of the declaration of covenants and restrictions, which became a lien of the subject property.

 

The HOA gave notice to the owners that they violated the governing documents by doing unapproved construction, relocating a fence and removing plants. After a hearing, the HOA levied the maximum $1,000 fine allowed by Fla. Stat. § 720.305(2).

 

The homeowners refused to pay the fine and sued the HOA, its management company and the association's attorney, alleging that five letters sent by them between May and December of 2013 violated the federal Fair Debt Collection Practices Act ("FDCPA") and the FCCPA.

 

The district court granted the motion for summary judgment filed by the HOA and its management company, holding that the HOA's fine was not a "debt" under the FCCPA and, in addition, that the HOA could not be held vicariously liable for its management company's FCCPA violations. The owners appealed.

 

On appeal, the Eleventh Circuit first addressed whether an HOA's fine is a "debt" for purposes of the FCCPA, rejecting the HOA's argument that the fine was not a debt because it arose under the governing documents.

 

The Court reasoned that both the FDCPA and its Florida state analogue, the FCCPA, require a threshold showing "that the debt must arise out of a consumer transaction." "[U]nder both statutes, a debt is 'any obligation or alleged obligation of a consumer to pay money arising out of a transaction in which the money, property, insurance, or services which are the subject of the transaction are primarily for personal, family, or household purposes, whether or not such obligation has been reduced to judgment."

 

The Eleventh Circuit then looked to its prior rulings distinguishing between a transaction arising from a consumer contract, which is debt under the FDCPA, from an obligation arising solely by operation of law, which is not.

 

As an example of a debt arising from a consumer contract, the Court cited Brown v. Budget Rent-A-Car Sys., Inc., in which it held that a rental company's attempt to collect $825 from a driver that rented a truck and had an accident is a debt under the FDCPA.

 

By contrast, in Hawthorne v. Mac Adjustment, Inc., the Eleventh Circuit held that an obligation to pay damages arising from an accident was not a debt under the FDCPA because no "'contract, business or consensual arrangement' existed between the torfeasor and the injured party." The Court summarized that "[i]n essence, our jurisprudence in this area of law can be distilled into the principle that FDCPA and FCCPA 'debts' arise from actual—as opposed to social—contracts."

 

The Eleventh Circuit rejected as unpersuasive, "contrary to our precedent and inconsistent with the remedial purpose of the FDCPA and FCCPA" the cases cited by the management company and HOA holding that government imposed fines are not "debts" because they dealt with "payment obligations that only arose by operation of law."

 

In the case at bar, however, the Court noted that "the homeowners' obligation arises from a contract — the governing documents — that explicitly treats HOA fines as assessments." The Court reasoned that the HOA's assessments "stem directly from the consensual home-purchase transaction. When a home buyer must contractually agree to pay homeowners' assessments in order to purchase a home, that home buyer takes on 'debts' for those assessments under the FCCPA."

 

The Eleventh Circuit found that because the governing documents provided that the fine would be deemed "an individual assessment," such "contractual language renders the fine in this case a 'debt' subject to the FCCPA." In addition, "[b]y agreeing to the terms of the governing documents, the homeowners acknowledged that a failure to comply with HOA requirements could result in a fine that would be deemed and treated as an individual assessment. Thus their obligation to pay an assessment for a claimed beach of the governing documents arose out of an underlying consumer transaction."

 

Thus, the Court held that the trial erred in dismissing the claims against the HOA and its management company "on the ground that the collection letters were not governed by the FCCPA."

 

The Eleventh Circuit also addressed the trial court's dismissal of the homeowners' claims against the HOA stemming from the HOA's two letters demanding payment of the fine and the HOA's attorney's three letters demanding payment of the fine and other fees.

 

First, the Court concluded that the trial court incorrectly held that the HOA was not liable under the FCCPA as it was not a "debt collector" because, unlike the FDCPA, the FCCPA is not limited to "debt collectors," but to any "person" collecting debts.

 

Second, the Eleventh Circuit held that the trial court incorrectly ruled that the association could not be vicariously liable for the FCCPA violations of its management company and attorney "because such vicarious liability only extends to principals who are themselves debt collectors." The Court acknowledged that although cases decided under the FDCPA have so held, such cases "rest on the observation that FDCPA liability is expressly limited to 'debt collectors … [but] the FCCPA has no such express limitation." Thus, cases dealing with vicarious liability under the FDCPA "are inapposite."

 

The Court concluded that whether the HOA here could be vicariously liable for the FCCPA violations of its agents was a question of Florida agency law, which the trial court did not address on summary judgment.

 

Accordingly, the Court declined to decide this issue on appeal and reversed the trial court's summary judgment in favor of the management company, vacated the summary judgment in the HOA's favor, and remanded to the district court for further proceedings.

 

 

 

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   |   Indiana   |   Maryland   |   Massachusetts   |   New Jersey   |   New York   |   Ohio   |   Pennsylvania   |   Texas   |   Washington, DC

 

 

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FYI: Fla Fed Ct Holds Servicer Could Not Invoke Jury Waiver in Mortgage

The U.S. District Court for the Middle District of Florida recently held that a mortgage servicer did not have standing to invoke a jury trial waiver in a mortgage when the servicer was not a party to the mortgage.

 

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

 

The borrowers entered into a mortgage loan agreement.  The borrowers alleged that the mortgage servicer placed at least 94 telephone calls to them seeking to collect money owed under the mortgage.  The servicer was not a party to the mortgage, but the borrower alleged that the servicer was a creditor under the Florida Consumer Collection Practices Act, Florida Statutes § 559.55(5) (FCCPA). 

 

The borrowers sued the servicer alleging that it violated provisions of the FCCPA and the federal Telephone Consumer Protection Act, 47 U.S.C. § 227(b)(1)(A) (TCPA).  The borrowers demanded a jury trial. 

 

The mortgage contained a waiver that stated:  "Borrower hereby waives any right to a trial by jury in any action, proceeding, claim, or counterclaim, whether in contract or tort, at law or in equity, arising out of or in any way related to this Security Instrument or the Note."  The servicer moved to strike the jury demand arguing that the language of the mortgage prohibits a jury trial. 

 

The District Court first examined whether the servicer had standing to enforce the jury trial waiver in the mortgage as a non-party to the contract.  The Court noted that borrowers cited three Southern District of Florida cases for the position that the servicer lacks standing to invoke the clause, among them Williams v. Wells Fargo Bank., 2011 WL 4901346 (S.D. Fla. Oct. 14, 2011).  There, the court denied a servicer's motion to strike a jury demand based on a mortgage jury trial waiver because the servicer was not party to the mortgage.

 

The District Court then noted that the servicer relied on cases that did not squarely address the issue of whether non-parties have standing to invoke jury trial waivers contained in a mortgage.  Consequently, the Court found that the servicer, as a non-party to the mortgage contract, did not have standing to invoke the jury trial waiver in the mortgage.

 

The Court then examined whether the servicer had standing to invoke the mortgage clause as a result of its status as a creditor.  The Court was not satisfied with the mere allegation in the complaint that the servicer was a creditor.  The Court noted that the servicer did not allege any facts or supply any documentation affirming this assertion.  More important to the Court, the servicer did not present any legal support for its conclusion that creditors are entitled to invoke a jury waiver in a mortgage. 

 

Considering the historical importance of jury trials,  and the general policy of "indulging every reasonable presumption against waiver," the District Court held that the servicer failed to meet its burden in showing that the borrowers' demand for jury trial should be stricken. 

 

Based on this analysis, the Court did not have a need to address the issue of whether the borrowers' TCPA and FCCPA claims against the servicer fell within the scope of the jury trial waiver.

 

Accordingly, the District Court denied the servicer's motion to strike the borrowers' demand for jury trial.

 

 

 

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   |   Indiana   |   Maryland   |   Massachusetts   |   New Jersey   |   New York   |   Ohio   |   Pennsylvania   |   Texas   |   Washington, DC

 

 

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