In Contee v. Rushmore Loan Management Services LLC, et al., No. 23-cv-00588-BAH (D. Md. Sept. 19, 2024), in denying a loan servicer’s motion to dismiss, the Maryland federal district court held that charges for vague “recoverable corporate advances” could plausibly be a misleading or deceptive debt collection practice under the Fair Debt Collection Practices Act, 15 U.S.C. § 1692, et seq. (“FDCPA”). The Court held that, although itemization is not expressly required, it may be misleading to the least sophisticated consumer not to do so.
A copy of the opinion is available here.
Background
Following Borrower’s default and bankruptcy, Borrower entered into a settlement agreement with a prior loan servicer, where he reinstated his loan, including paying certain recoverable corporate advances.
Borrower later defaulted again, and new loan servicer (New Loan Servicer) charged “recoverable corporate advances,” which appeared on his monthly mortgage statements. Borrower disputed these charges under a Notice of Error explaining that he previously cured such arrearages as part of his bankruptcy settlement. New Loan Servicer responded that the recoverable corporate balance “includes the amounts the lender has advanced to protect its interest in the property” including the cost of “property inspections, property preservation, and legal counsel to protect its security interest.” Op. at p. 2. New Servicer provided a generalized breakdown of such fees, and continued to charge for such “recoverable corporate advances.”
Borrower filed suit, including class claims, asserting that New Loan Servicer’s billing of fees under “recoverable corporate advances” prevented him from assessing the validity of the debt, and asserted that such practice violated state and federal collection laws, including 15 U.S.C. §§ 1692e and 1692f under the FDCPA, and Md. Code, Commercial Law §§ 14-202, 13-301(14)(iii), of the Maryland Consumer Debt Collection Practices Act (MDCPA), and Maryland Consumer Protection Act (MCPA), respectively.
Discussion
Analyzing Borrower’s claims under 15 U.S.C. § 1692e of the FDCPA, which forbids the use of “false, deceptive, or misleading representations” in the collection of a consumer debts, and applying the “least sophisticated consumer standard,” the Court determined that Borrower stated a plausible claim against New Loan Servicer related to its collection of vague “recoverable corporate advances.” The Court observed that “while [New Loan Servicer] and other debt collectors may not have an affirmative, specific legal duty to itemize, they are nevertheless obligated to avoid practices that would mislead an unsophisticated consumer, which may necessitate proper and sufficient itemization.” Op. at 10.
To that end, the Court determined that Borrower plausibly alleged that the vague “recoverable corporate advances” were materially misleading as to the character and status of his debt, and obscured whether New Loan Servicer was charging him for amounts previously paid under his bankruptcy settlement. The Court noting other opinions allowing such claims to proceed, because generic charges for “corporate advances” or “recoverable corporate advances” obscures the Plaintiff’s ability to knowingly assess the validity of the debt.
Although New Loan Servicer later provided an itemization, the Court determined that Borrower had established a plausible claim that such charges were misleading, given that Borrower had already expended time, money, and effort, including hiring an attorney, to clarify what the unexplained charge meant, and what he was obligated to pay.
As to such itemization, the Court noted that it required correlation and additional analysis with older payment history documents from the prior servicer, and did not match the dates of the charges from the prior servicer. Consequently, the Court indicated that it was “reasonable to conclude that a ‘naïve’ consumer would be baffled and confused by this web of statements, spanning several years and all concerning a charge they had no reason to expect was still owed.” Accordingly, the Court determined that, “from the perspective of the least sophisticated consumer, [New Loan Servicer]’s practices related to the charging of generic corporate advances are misleading or deceptive.”
As to Borrower’s claim under the §1692f, which prohibits collection using “unconscionable or unfair means,” the Court determined that because Borrower did not allege a §1692e claim distinct from his 1692e claim, “relief under §1692f is not available to him.”
As to the state law claims, because a violation of the FDCPA constituted a violation of the MDCPA, which in turn constituted a violation of the MCPA, such claims also survived the motion to dismiss.
Accordingly, the Court dismissed only the §1692f claims, while denying the motion to dismiss the §1692e claims and state law claims.