Source: http://marylandbusinesslawdevelopments.blogspot.com/2015/09/
Timestamp: 2017-12-14 12:56:58
Document Index: 143554348

Matched Legal Cases: ['§ 12', '§1681', '§1681', '§1681', '§1681', '§1681', '§1681']

Maryland Business Law Developments: September 2015
(1) When a person signs an affidavit containing incorrect information, such person is generally on inquiry notice of any claim arising under such affidavit and the statute of limitations for such claim will not be tolled absent evidence of fraud or concealment or a fiduciary relationship between the party preparing the affidavit and the affiant; and
(2) To be liable for engaging in indirect false advertising regarding secondary mortgage loans and their availability under Md. Code Ann., Commercial Law § 12-403 (the "Secondary Mortgage Loan Law"), mere knowledge of false advertisements is not sufficient to violate the Secondary Mortgage Loan Law, a lender must do some act to bring about the false advertising.
In 2006 and 2007, three married couples (the "Borrowers") contacted realtors to express interest in selling their current homes and purchasing new ones. The realtors encouraged Borrowers to purchase a new home before selling their current home by obtaining home equity lines of credit ("HELOCs") against their current homes and then obtain a primary mortgage for the new home. The realtors referred Borrowers to Michelle Matthews, a loan officer for Propensity Mortgage Company, who informed Borrowers the HELOC strategy was a "common lending tool at Propensity."
Propensity Mortgage Company and Matthews, advertised in flyers on the website of some of the realtors, claiming that they could provide "Home Equity Lines and Loans (to make your client non-contingent)." Borrowers claimed they believed at all times that Matthews and Propensity were processing the HELOCs; however, Matthews referred the HELOCs to Suzanne Windesheim, a loan officer for National City Bank (now PNC Mortgage). The HELOCs were processed through National City Bank using false information contained in Borrowers' signed affidavits, allegedly added by Windesheim with Matthews' knowledge.
The Borrowers filed a putative class action lawsuit in the Circuit Court for Howard County, Maryland against National City and Windesheim alleging that National City and Windesheim engaged in indirect false advertising in violation of the Secondary Mortgage Loan Law through the actions of Propensity and Matthews.
Inquiry Notice: Borrowers argued that, because the information contained in the signed affidavits was false and because they were encouraged to sign without reading them, the statute of limitations had been tolled until the Borrowers had been contacted by counsel in 2010 and 2011 informing them that they may have been the victims of mortgage fraud. The Court, however, found no evidence to refute the fact that Borrowers were on inquiry notice of their claims in 2006 and 2007 when they closed their HELOCs and primary residential mortgages because: (1) Borrowers signed the affidavits containing the false information and there was no evidence National City Bank or Windersheim attempted to conceal the false information in the affidavits; and (2) neither National City Bank nor Windersheim owed Borrowers any fiduciary duties which would justify tolling the statute of limitations.
Secondary Mortgage and False Advertising: The Court determined that the plain meaning of "indirect" as used in the Secondary Mortgage Loan Law provided two reasonable interpretation as to how a lender could advertise "indirectly" – (1) "by making a false or misleading statement to a potential borrower that the same potential borrower then re-communicates to another potential borrower" or (2) "by having another party advertise false or misleading statements on the first party's behalf."
The Court looked to the legislative history and policy purpose of the Secondary Mortgage Loan Law and reasoned that, because it was meant to protect consumers, it was reasonable to conclude that the Maryland General Assembly intended to proscribe both definitions of "indirect." The current law removed the phase "to cause to be placed before the public" from a prior version of the law and therefore, the Court inferred, the General Assembly intended that to be guilty of a violation of the Secondary Mortgage Loan Law a person must "bring about the placing of a false or misleading statement before the public." The Court applied the second definition of advertising indirectly and determined that neither National City Bank nor Windesheim violated the Secondary Mortgage Loan Law and that "mere knowledge that another is falsely advertising" would not violate the Secondary Mortgage Loan Law.
The Court also held that Windesheim and National City Bank were not vicariously liable for indirect advertising in violation of the Secondary Mortgage Loan Law under a civil conspiracy theory because there was no evidence that Windesheim knew Matthews and Prosperity were falsely advertising that Prosperity, not National City Bank, would handle the HELOCs.
Labels: civil conspiracy, conspiracy, consumer protection, false advertising, fiduciary duty, Maryland Secondary Mortgage Loan Law, mortgages, statute of limitations, statutory interpretation, tolling
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White v. Green Tree Servicing, LLC (Maryland U.S.D.C.)
Holdings: (1) Fair Credit Reporting Act (''FCRA'') claims alleging provision of false information and failure to investigate such information were dismissed to the extent plaintiff premised her claim on a theory of negligence. (2) Plaintiff satisfied 12(b)(6) sufficiency standard by merely alleging she notified consumer reporting agency of disputed information.
Facts: In 2001, Plaintiff acquired property in Baltimore City with her former husband, becoming sole owner after a 2007 divorce. Five years later, servicing rights for the loan were transferred to Defendant. Following the June 1, 2013 date of transfer Plaintiff alleged she made every ensuing payment in full and on time.
In October 2013, Plaintiff attempted to refinance the loan through her personal bank, receiving approval and a commitment letter conditioned on Plaintiff resolving unrelated disputes on her credit report. Plaintiff fulfilled the conditions in January 2014, but Defendant soon thereafter reported to Plaintiff, Plaintiff’s personal bank, and the three major credit reporting agencies that she was no longer current on her mortgage payments. Pursuant to the FCRA, 15 U.S.C. §1681, et seq., on January 27, 2014, Plaintiff notified the reporting agencies and Defendant that she disputed Defendant’s reporting of late mortgage payments. One day later, Plaintiff’s bank denied her for final approval of the refinanced mortgage.
Defendant responded in February 2014, maintaining its position that Plaintiff was behind on her payments. Defendant thereafter issued several letters indicating it would investigate disputed payment information, but ultimately sent another statement in March 2014 informing Plaintiff she had fallen farther behind on her mortgage, incurring additional late fees.
In June 2014, Plaintiff filed in Circuit Court for Baltimore City, alleging violations of the Maryland Consumer Protection Act (''MCPA''), Debt Collection Act, (''MCDCA''), and Mortgage Fraud Protection Act, (''MMFPA''), contending Defendant failed to investigate or correct the payment information and that she suffered economic damages. Defendant moved to dismiss, arguing the complaint was preempted by the FCRA. Plaintiff thereafter amended her complaint to allege identical state claims but add FCRA claims. Defendant again moved to dismiss the common law claims as preempted by the FCRA, and to dismiss the FCRA claim because Plaintiff had failed to state a claim on which relief could be granted.
Analysis: The court began by explaining that the FCRA’s preemption provisions – 15 U.S.C. §1681t(b)(1)(F) as to state statutory claims and 15 U.S.C. §1681h(e) as to state common law claims – had been consistently interpreted to preempt claims arising from inaccurate information provided to credit reporting agencies. Accordingly, the court dismissed Plaintiff’s counts alleging violations of the MCPA, MCDCA and MMFPA as a result of Defendant’s purported materially false, misleading oral or written statements, omissions, or representations related to the Plaintiff’s loan status or mortgage lending process.
The court next moved to Plaintiff’s FCRA claims, which focused on Defendant’s provision of allegedly false information and failure to investigate the allegedly false information. To the former, Plaintiff alleged Defendant’s liability in defamation for making a series of false and misleading statements as to the late mortgage payments. Here, the court cited §1681h(e):
[No] consumer may bring any action …in the nature of defamation… with respect to the reporting of information against …any person who furnishes information to a consumer reporting agency, … based on information disclosed by a user of a consumer report to or for a consumer against whom the user has taken adverse action, based in whole or in part on the report except as to false information furnished with malice or willful intent to injure such consumer.
Accordingly, the court granted Defendant’s motion to dismiss the defamation claim in part and only to the extent the claim was premised on a theory of negligence.
Plaintiff’s second FCRA claim alleged that Defendant violated §1681s-2(b) by a failure to investigate allegedly false information for several months after it was informed of the disputed information. FCRA §1681s-2(b) imposed a duty to investigate disputed information after receiving notice [from a credit reporting agency]. Defendant moved to dismiss, arguing Plaintiff failed to explicitly allege that Defendant received such notice. Finding no controlling Fourth Circuit authority, the court looked to decisions of the U.S. Courts of Appeal for the Seventh and Ninth Circuits, indicating that under the FCRA a plaintiff triggered a defendant-furnisher’s duty to investigate by merely notifying the consumer reporting agency of a dispute. In the court’s view, all that was required to meet the Rule 12(b)(6) pleading sufficiency standard was plaintiff’s allegation that she notified the reporting agency of disputed credit information. As a result, Plaintiff’s second FCRA claim survived Defendant’s motion to dismiss.
Labels: consumer protection, credit regulation, Fair Credit Reporting Act, Maryland Consumer Debt Collection Act, Maryland Consumer Protection Act, Maryland Debt Collection Act, negligence, pleading standard