New Class Action Lawsuit Against Mortgage Servicer Real Time Resolutions Claims Threats to Harm Credit Ratings Broke the Law/Westbrook Law of Grand Rapids, Michigan

Mortgage loan servicers typically collect and process payments for mortgage loans on behalf of the owners of those loans. If your loan statements come from Ocwen, Nationstar (now using the quizzical alias “Mr. Cooper”), or Seterus, just to name a few, you are dealing with a servicer. Real Time Resolutions, Inc., another servicer, is the latest target of a consumer class-action lawsuit filed by Westbrook Law PLLC in the United States District Court for the Western District of Michigan, Bushouse v. Real Time Resolutions, Inc.

The new lawsuit alleges that Real Time violated federal and state law through its routine practice of threatening consumers with reporting obsolete, negative credit information about them. Whereas the law does not allow credit reporting of most negative items that are past seven years old, 15 U.S.C. § 1691c(a), the complaint alleges that Real Time continues to threaten negative reporting well beyond the seven-year mark. This practice, which could frighten consumers into paying obsolete debts they no longer have any legal obligation to pay, is alleged to violate the Fair Debt Collection Practices Act, 15 U.S.C. § 1692e; the Michigan Occupational Code, M.C.L § 339.915; and the Michigan Mortgage Brokers, Lenders, and Servicers Licensing Act, M.C.L. § 445.1672. The plaintiff seeks damages for herself and other Michigan citizens who received the threatening communications.

Our expertise in credit reporting law–i.e., the federal Fair Credit Reporting Act–and consumer collection law informed this lawsuit and many others on behalf of Michigan consumers. If you have concerns about whether a practice by a debt collector or mortgage servicer is fair or lawful, contact us for a consultation.

TJW

Certification Granted in FDCPA Class Action Babbitt v. ClearSpring Loan Services, Inc./Westbrook Law of Grand Rapids, Michigan

Today, the United States District Court for the Western District of Michigan issued an order granting class certification in a Fair Debt Collection Practices Act (“FDCPA”) case against default mortgage servicer ClearSpring Loan Services, Inc.  Westbrook Law PLLC member Theodore J. Westbrook, along with veteran consumer lawyer Phillip C. Rogers, were appointed class counsel.

The case, filed by Mr. Westbrook in late 2015, alleges that ClearSpring engaged in a pattern and practice of violating the FDCPA through failing to disclose on its monthly loan statements that ClearSpring was a debt collector.  The FDCPA, 15 U.S.C. Section 1692e(11), specifically requires all debt collectors to make such a disclosure in each communication with a debtor, in an effort to minimize consumer confusion.  As a default mortgage servicer–a company that obtains the right to collect payments after the loan is delinquent or otherwise in default–ClearSpring is a debt collector that must comply with the FDCPA.

The specialized default servicing industry has been growing along with large lenders’ eagerness to offload non-performing loans.  With it, the likelihood of servicers failing to understand or comply with debt collection laws may also be on the rise.  As more class actions are certified, industry players will be forced to bring their practices in line with the strict requirements of the FDCPA.

Spokeo v. Robins/Westbrook Law of Grand Rapids, Michigan

Many laws designed to protect individuals from corporate abuses rely in part on the imposition of “statutory damages.”  This typically means that if the plaintiff can show a violation of the law, there is some minimum amount of money that must be awarded.  These are exceptions to the general rule that a plaintiff’s recovery is limited to the amount of actual damages proven.

Statutory damages are an important part of the enforcement mechanisms in the Fair Debt Collection Practices Act (“FDCPA”), Fair Credit Reporting Act (“FCRA”), Real Estate Settlement Procedures Act (“RESPA”), Truth in Lending Act (“TILA”) and many other consumer protection laws.  This is because the availability of statutory damages acts as a deterrent to violations of the law that are destructive, but whose economic impact on any individual may be difficult to prove or speculative.  For example, where a statute such as the FCRA or FDCPA gives a consumer the right to receive certain information, a company’s failure to comply might not give rise to any provable “actual” damages.  Enforcement of those rights then depends upon statutory damages.

The United States Supreme Court was presented with a  far-reaching challenge to statutory damages in the recent case Spokeo v. Robins.  In that case, the plaintiffs in a class action had alleged that a web site used for personal investigations and background checks had violated the Fair Credit Reporting Act by failing to maintain procedures to ensure accuracy of its reports.  The plaintiff class sought statutory damages under the FCRA.  The defendant argued that because the plaintiff had not shown any “actual damages,” he lacked “standing” to bring the lawsuit under Article III of the Constitution–even though the FCRA itself provides for a cause of action that seeks only statutory damages.  Without standing, the plaintiff’s case could not be maintained.

The Spokeo case was on appeal from the United States Court of Appeals for the Ninth Circuit, which had held that violation of the FCRA itself was enough of an “injury” to satisfy the Article III standing requirements.  The United States Supreme Court disagreed in part, finding that the Ninth Circuit had failed to correctly analyze whether a “concrete” injury had been adequately alleged by the plaintiff.  The Court remanded the case for a new determination of this issue.

On its face, the Spokeo decision might appear harmful to the interests of consumers, given that many important protections in the FCRA, FDCPA, RESPA and TILA are only effectively enforceable through statutory–not actual–damages.  However, within the Court’s opinion are indications that those protections remain viable.  For example, the opinion acknowledges that a consumer’s injury need not be “tangible” in order to provide a basis for Article III standing.  It also notes that “risk of real harm” can satisfy the injury requirement for standing.  This is an especially important note in the context of statutes giving consumers the right to accurate information, where the failure to provide that information creates a real risk of harm.

In the coming months and years, it is expected that many corporations will rely on and attempt to expand on Spokeo to constrain consumer rights.  Vigilant consumer advocates should be cognizant of this and work to ensure that the courthouse doors are not closed to their clients.