Antitrust Law Daily Wrap Up, STATE UNFAIR TRADE PRACTICES—E.D. Tenn.: Homeowners’ FDCPA and wrongful foreclosure claims against Bank of America can proceed, (Dec 13, 2013)

By Linda O’Brien, J.D., LL.M.

Two homeowners’ claims against a banking and financial services corporation for wrongful foreclosure and violations of Fair Debt Collection Practices (FDCPA) alleging lack of authority to enter into a loan modification and order a foreclosure sale of their property withstood dismissal, the federal district court in Chattanooga has decided (Amour v. Bank of America, December 10, 2013, Collier, C.). However, the homeowners’ claim under the Tennessee Consumer Protection Act (TCPA) was dismissed.

Gilbert and Monica Amour executed a deed in trust in 2007 that named the Mortgage Electronic Registration System (MERS) as the beneficiary and Taylor, Bean & Whitaker Mortgage Corp. (TB&W) as the mortgage lender. In 2009, MERS assigned the mortgage and deed in trust to BAC Home Loans Servicing, LP (BAC), which subsequently merged with Bank of America (BOA). After the merger, BOA began accepting the Amour’s mortgage payments. The Amours at some point contacted BOA about the possibility of a loan modification. Subsequently, BOA instituted a detainer action against the Amours and performed a non-judicial foreclosure sale of the Amours property. The Amours filed suit against BOA, alleging wrongful foreclosure under state (Tennessee) law, and violations of the FDCPA and the TCPA. BOA moved to dismiss the complaint.

The Amours contended that (1) the actual creditor of their mortgage loan was unknown; and questions remained as to (2) which if any of the entities ever had possession of the note signed by them, had authority to order the non-judicial sale under the note, had authority to modify the terms of the note, or had authority to perform a non-judicial foreclosure sale.

The court found that, under state law, a mortgage foreclosure was not required to be performed by the actual creditor, rather it may be performed by the holder of the instrument. The note signed by the Amours was endorsed in blank which rendered it payable to whoever had possession of it. The court determined that the Amours sufficiently raised questions as to who may be entitled to enforce the note and whether BOA had possession of the note at the time of the non-judicial sale to withstand a motion to dismiss.

The FDCPA was enacted to insure that debt collectors refrain from using abusive debt collection practices and promote consistent state action to protect consumers against debt collection abuses. The court noted that a creditor is “any person who offers or extends credit creating a debt or to whom a debt is owed” though it does not include any person that receives an assignment of a debt in default solely for the purpose of collecting that debt. In rejecting BOA’s argument that it is not a debt collector as defined in the FDCPA, the court found that BOA, as successor of BAC, was a debt collector for purposes of the FDCPA since the loan was in default at the time BOA received it by assignment. Additionally, the Amours alleged sufficient factual allegations that BOA lacked authority to enter into a loan modification and used false representations to collect a debt to support their FDCPA claim. Accordingly, the court determined that the motion to dismiss with respect to the wrongful foreclosure and FDCPA claims should be denied.

However, the Amours’ claim under the TCPA was dismissed by the court. The TCPA, which prohibits unfair and deceptive acts or practices affecting the conduct of any trade or commerce, did not apply to a lender’s conduct in mortgage foreclosure proceedings.

The case is No. 1:13-CV-144.

Attorneys: Peter C. Ensign (Law Office of Peter C. Ensign) for Gilbert T. Amour and Monica L. Amour. Daniel Ray Osborne (Bradley Arant Boult Cummings LLP) for Bank of America, N.A.

Companies: Bank of America, N.A.

Cases: StateUnfairTradePractices TennesseeNews