Antitrust Law Daily Wrap Up, STATE UNFAIR TRADE PRACTICES—D. Md.: Homeowner’s deceptive trade practices claims against Capital One dismissed, (Jan 16, 2014)

By Linda O’Brien, J.D., LL.M.

A homeowner failed to allege sufficient facts to pursue claims against a banking and mortgage services provider for engaging in unfair or deceptive trade practices by failing disclose materials facts regarding lender-placed insurance in violation of the Maryland Consumer Protection Act (MCPA), among other claims, the federal district court in Baltimore has ruled (Castle v. Capital One, N.A., January 15, 2014, Nickerson, W.). Accordingly, the mortgage service provider’s motion to dismiss was granted.

In 2009, homeowner Jane Castle obtained a mortgage loan from Capital One, N.A. secured by a deed of trust on her residence. The deed of trust required Castle to purchase hazard insurance on the property. She obtained a homeowners’ insurance policy which identified Capital One as having an additional interest in the property. The policy was in force until February 2012 when the policy lapsed due Castle’s inability to pay the premiums. The property was uninsured until March 2012 when she obtained new insurance. The policy limits were about three times greater than the amount of the mortgage loan. In April 2012, Castle received notification from Capital One that, as a result of the insurance coverage lapse, temporary insurance coverage was secured through American Security Insurance Company (ASIC) to cover the time of lapse. Castle was required to retain the ASIC insurance even though she obtained new insurance, the ASIC policy limits were more than three times greater than the loan amount, and the ASIC policy cost substantially more than either of the insurance policies obtained by Castle.

Castle filed a class action suit against Capital one, alleging that Capital One (1) unfairly or deceptively failed to disclose the details of its business arrangements with ASIC regarding lender-placed insurance; (2) received a financial benefit from inflated premium costs in the form of purported fees, unearned commissions, and rebates; and (3) imposed charges on borrowers unrelated to the provision of lender-placed insurance, in violation of the MCPA. Castle also claimed that, due to the charges regarding the ASIC policy, she was unable to make her loan payments and foreclosure proceedings were initiated against her. Capital One moved to dismiss the complaint.

The MCPA prohibits unfair and deceptive trade practices including any false or misleading statement or representation which deceives or misleads customers or fails to disclose a material fact that intends to deceive. Omissions are material under the MCPA if it is substantially likely that a customer would find the omitted information important in determining a course of action.

The court determined that Castle did not state claims with sufficient particularity under the MCPA. Her allegations that she reasonably relied on Capital One’s legal duty to service her loan fairly and without deception, and not to force borrowers into fictional defaults caused by duplicative lender-placed insurance were conclusory. Moreover, Castle failed to allege (1)the duty owed by Capital One that formed that basis of her reliance; (2) substantial inducement by Capital One’s failure to disclose its business arrangement with ASIC; or (3) how she would have acted differently if she had known of the business arrangement.

The case is No. WMN-13-1830.

Attorneys: Scott C. Borison (Legg Law Firm LLC) for Richard Castle. Robert A. Scott (Ballard Spahr LLP) for Capitol One, N.A.

Companies: Capital One, N.A.

Cases: StateUnfairTradePractices MarylandNews