Certification Granted in FDCPA Class Action Babbitt v. ClearSpring Loan Services, Inc.

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.

Foreclosure as Debt Collection

Michigan law is notoriously unfavorable to homeowners facing foreclosure.  Homeowners who have been unfairly treated by lenders, mortgage servicers or foreclosure lawyers have been denied relief in Michigan’s courts time after time, as the traditional legal theories used to combat wrongful foreclosures have slowly eroded.

One frequently neglected tool in the homeowner’s arsenal is the federal Fair Debt Collection Practices Act (“FDCPA”), which restricts the foreclosure activities of attorneys and default mortgage servicers.  The FDCPA, long used by consumer protection lawyers against debt collectors, also prohibits many types of misleading, deceptive and unfair activities by these servicers and foreclosure lawyers.  The Sixth Circuit confirmed the applicability of the FDCPA to foreclosure activity in the important case  Glazer v. Chase Home Finance LLC, paving the way for consumer lawyers to hold foreclosing parties accountable for money damages and attorney fees.  Thus, while the FDCPA may not preserve the homeowner’s property rights in cases of wrongful or unfair foreclosure, it may be used to obtain restitution for the homeowner’s economic losses and mental anguish.

Contact us if you have experienced wrongful, unfair or deceptive conduct in connection with a foreclosure on your home.  We may be able to help.

TJW