Antitrust Law Daily Wrap Up, STATE UNFAIR TRADE PRACTICES—M.D. Tenn.: Tennessee statute did not apply to homeowners’ claims against lender, (Jul 28, 2014)

By Linda O’Brien, J.D., LL.M.

Two homeowners could not bring a Tennessee Consumer Protection Act claim against a mortgage lender for allegedly making false and misleading statements regarding the status of their loan modification application, since the Act did not apply to mortgage foreclosures or the credit terms of a transaction, the federal district court in Nashville has ruled (Silvestro v. Bank of America, N.A., July 25, 2014, Campbell, T.).

In 2008, Darice Silvestro and his spouse contacted Bank of America to inquire about federal programs to modify their existing mortgage loan and began the loan modification application process. From 2008 to 2010, they pursued the loan modification and were advised by Bank of America representatives that the application process was progressing. In 2010, Bank of America notified the Silvestros that their loan application was denied; however, they could appeal the denial and their application would be reinstated. The bank also advised the Silvestros that they could make reduced mortgage payments while their application was under review. The Silvestros continued to pursue the loan modification until 2011, when they were informed that their application had been declined and the reduced payments would no longer be accepted.

After the bank sent delinquency notice and notice of foreclosure, the Silvestros filed suit, alleging violations of the Tennessee Consumer Protection Act (TCPA), among other claims. The plaintiffs alleged that they submitted documents, made reduced mortgage payments, reapplied for the loan modification, filed appeals, and attempted to finalize their loan modification, in reliance on the bank’s misrepresentations concerning the status of the loan modification application. Bank of America moved for dismissal.

The court found that the TCPA did not apply to the plaintiffs’ loan modification application. The TCPA prohibits unfair or deceptive acts or practices affecting the conduct of any trade or commerce. The plaintiffs contended that Bank of America violated the TCPA, which prohibits “causing confusion or misunderstanding with respect to the authority of a representative to negotiate the final terms of a consumer transaction.

The court noted that the TCPA did not apply to mortgage foreclosures pursuant to the ruling in Malone v. U.S. Bank National Ass’n, 2013 WL 392487 (2013). Although the plaintiffs’ complaint was not solely about a mortgage foreclosure, the TCPA was also inapplicable to “credit terms of a transaction.” In dismissing the plaintiffs’ TCPA claim, the court determined that, since the plaintiffs’ renegotiation of their loan involved the credit terms of a transaction, the TCPA did not apply.

The case is No. 3-13-0066.

Attorneys: David L. Cooper (Law Office of David L. Cooper, PC) for Darice E. Silvestro. Colby B. Stevenson (McGuire Woods, LLP) for Bank of America, N.A.

Companies: Bank of America, N.A.

Cases: StateUnfairTradePractices TennesseeNews