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Eleventh Circuit Scrapes Hunstein Opinion

On April 21, 2021, the Eleventh Circuit Court of Appeals issued a decision in the case of Hunstein vs. Preferred Collection and Management Services. The Court found that the debt collector’s use of a third-party mail vendor violated the Fair Debt Collection Practices Act. This ruling resulted in an increase in lawsuits against debt collectors (third-party agencies) and raised similar compliance concerns for creditors under the Florida Consumer Collections Practices Act. A copy of our original summary of this Court opinion can be found here.

On Wednesday, November 17, 2021, the Eleventh Circuit Court of Appeals issued an order vacating the previous decision. Additionally, the Court issued an order to rehear the case before the full Court panel. The original case was heard before a panel of three judges. Now the case will go before the full panel of judges. The rehearing date has not been set.

The effect of the Court’s action is that the prior opinion of the court is no longer valid and does not have authority over lower courts. We will continue to monitor this matter and will provide updates as this case moves forward.

Supreme Court Blocks Biden Administration’s Eviction Moratorium

On August 26, 2021, the United States Supreme Court in a 6-3 ruling, blocked the latest Centers for Disease Control (CDC) Eviction Moratorium, finding that the CDC exceeded its authority. A majority of the Court held that only Congress can allow for such a ban on evictions.

As you may recall, this latest moratorium was imposed on August 3, 2021, by the CDC and was scheduled to expire on October 3, 2021. It prevented residential evictions for the non-payment of rent in counties that had substantial or high transmission levels. After applying the formula provided by the CDC in determining whether a county was experiencing substantial or high transmission levels, it was determined that the moratorium applied to over 90% of the United States.

Now, based on this ruling from the Supreme Court, unless a state has its own eviction moratorium, residential evictions for the non-payment of rent can resume. Currently, Florida and Georgia do not have state-wide moratoriums on residential or commercial tenant evictions.

If you have any questions or concerns about this ruling, its application to mortgage foreclosures, or any other matters related to creditor’s rights, please do not hesitate to reach out to one of the attorneys at Sorenson Van Leuven, PLLC.

New CDC Eviction Moratorium

On August 3, 2021, the Biden Administration and the Centers for Disease Control (CDC) announced that it is imposing a new moratorium on residential evictions for non-payment of rent. This new moratorium is scheduled to last two months and expire on October 3, 2021. Unlike the prior eviction moratorium that was nationwide and expired on July 31, 2021, this new moratorium is limited to counties that are experiencing substantial or high levels of COVID-19. Based upon various news reports, this new moratorium will apply to almost 90% of the U.S. population.

In determining whether a county is experiencing substantial or high transmission levels, the CDC intends to look at the number of new cases reported per 100,000 residents over a seven-day period and the positivity rate of that county. If the number of new cases in a county in the prior seven days, divided by the population of the county, then multiplied by 100,000 is between 50.99 and
99.9 and the percentage of positive tests in the prior seven days, divided by the total number of tests in the prior seven days is between 8% and 9.99%, then that county is experiencing substantial transmission levels and residential properties in that county are subject to this new CDC eviction moratorium. If the number of new cases in a county in the prior seven days, divided by the population of the county, then multiplied by 100,000 is 100 or greater and the percentage of positive tests in the prior seven days, divided by the total number of tests in the prior seven days is greater than 10%, then that county is experiencing high transmission levels and residential properties in that county are subject to this new CDC eviction moratorium.

For a tenant to be protected under this new moratorium, they must not only live in a county that is experiencing substantial or high COVID-19 infection levels, but they must also file a declaration under penalty of perjury setting forth the following:

  1. The tenant has used best efforts to obtain government assistance for housing,
  2. The tenant earned no more than $99,000.00 or $198,000.00 if filing jointly for the tax year 2020 or received a stimulus check,
  3. The tenant is unable to pay rent,
  4. The tenant is using best efforts to make partial rent payments, and
  5. The eviction will make the individual homeless or forced into a close-
    quarters living situation.

Presently, every county in the State of Florida is experiencing either substantial or high transmission levels, so the CDC eviction moratorium will apply in every county in Florida. In the State of Georgia, every county except Lincoln, Quitman, Webster, and Glascock is experiencing substantial or high transmission levels. The counties in which this applies is subject to change, so if you are dealing with an eviction in a particular county, you should check for up-to-date data.

If you have any questions or concerns about the new moratorium, its application to mortgage foreclosures or any other matters related to creditor’s rights, please do not hesitate to reach out to one of the attorneys at Sorenson Van Leuven, PLLC.

CFPB Confirms Effective Date for Debt Collection Rules

Yesterday, the Consumer Financial Protection Bureau (CFPB) announced that the two final rules under the Fair Debt Collection Practices Act will take effect on November 30, 2021. Previously, the CFPB issued a proposal to move the effective date to January 29, 2022, to give third-party debt collectors more time to implement the new rule due to the pandemic. The CFPB has now determined that an extension is unnecessary. While the rule is aimed at third-party debt collection, the rule does have some impact on creditors who work with third-party debt collectors.

Should you have questions about the two final rules or how it impacts your organization, please do not hesitate to contact a lawyer at Sorenson Van Leuven.

Update on New CFPB Rule and CDC Eviction Moratorium

On Monday, June 28, 2021, the Centers for Disease Control and Prevention (CDC) issued final amendments to the Federal mortgage servicing rules. Pursuant to the Consumer Financial Protection Bureau (CFPB), these amendments are designed to facilitate a smooth transition in the housing market and mortgage servicing industry as federal foreclosure protection is scheduled to expire on July 31, 2021.

The amendments take effect on August 31, 2021, and cover loans on principal residences. The changes generally exclude small servicers, so many credit unions will be exempt. These amendments have sunset provisions or expirations, with some expiring on January 1, 2022, and others expiring on October 1, 2022.

The rule will require services to increase their efforts to reach borrowers and work with those borrowers to avoid foreclosure. The rule will allow foreclosures to start if: (1) the borrower has abandoned the property; (2) the borrower was more than 120 days behind on their mortgage before March 1, 2020 (and they are still behind by at least 120 days); (3) the borrower is more than 120 days behind on their mortgage and has not responded to specific required outreach from the mortgage servicer for 90 days; or (4) the borrower has been evaluated for all options other than foreclosure and there are no available options to avoid foreclosure.

For those attending the SVL SourcExpo (July 21st through July 23rd), we will cover these amendments in more detail. Information on the SVL SourcExpo can be found here: https://svllaw.com/sourcexpo-2021/

Additionally, on Tuesday, June 29, 2021, the United States Supreme Court voted 5 to 4 to keep in place the CDC eviction moratorium. That means that legal attempts to stop the eviction moratorium have failed, as the CDC has indicated that it will not extend the moratorium past July 31, 2021.
Should you have questions about the amendments to the mortgage servicing rules or the CDC eviction moratorium, please reach out to a lawyer at SVL.

Extension of Fannie Mae Single-Family Foreclosure Moratorium

The Federal Housing Finance Administration (FHFA), an independent federal agency that oversees Fannie Mae and Freddie Mac, has announced that it is extending its moratorium on residential mortgage foreclosures through July 31, 2021. This moratorium was scheduled to expire on June 30, 2021. This applies to all residential mortgage loans that are owned by Fannie Mae and Freddie Mac, and prevents any servicer from seeking to file a foreclosure or complete a foreclosure on any residential property that is occupied.

In addition, the Biden Administration has extended its moratorium on foreclosures for federally backed mortgages (loans insured by HUD, VA and USDA) through July 31, 2021. The moratorium on federally backed loans, which has been in place since March 2020 and extended on several occasions, was also scheduled to expire on June 30, 2021.

Lastly, the Centers for Decease Control (CDC) announced that it has extended its nationwide moratorium on residential tenant evictions through July 31, 2021. Much like the foreclosure moratoriums on federally backed loans, the moratorium on evictions was scheduled to expire on June 30, 2021. In announcing this extension, the CDC has also stated that this will be the last extension of its moratorium.

If you have any questions or concerns about these moratoriums, or any other matters related to creditor’s rights, please do not hesitate to reach out to one of the attorneys at Sorenson Van Leuven, PLLC.

Recent Eleventh Circuit Opinion Raises Concerns for Debt Collectors

On April 21, 2021, the Eleventh Circuit Court of Appeals issued a decision in the case of Hunstein vs. Preferred Collection and Management Services. This opinion raises several issues and, in our opinion, could lead to litigation claims against debt collectors and creditors, including Credit Unions.

The original lawsuit was filed under the Fair Debt Collections Practices Act (FDCPA) and the Florida Consumer Collections Practices Act (FCCPA). The claim was brought by Mr. Hunstein, alleging that the debt collector violated the FDCPA and the FCCPA when it conveyed information about his delinquent debt to a third-party mail vendor used by Preferred Collection and Management Services to send out routine collection letters. The district court dismissed the lawsuit, finding that the consumer failed to state a cause of action under the FDCPA. On appeal, the Eleventh Circuit reversed that decision.

The Eleventh Circuit Court’s sole focus is on the FDCPA, which would not apply to Credit Unions collecting their own debt. Its decision does not address the claim under the FCCPA, which would apply to Credit Unions. The statutory language at issue under the FDCPA is Section 1692c(b) that provides “a debt collector may not communicate, in connection with the collection of any debt, with any other person other than the consumer, his attorney, a consumer reporting agency if otherwise permitted by law, the creditor, the attorney of the creditor, or the attorney of the debt collector[.]” The Eleventh Circuit found that a communication in connection with the collection of any debt with a third-party mail vendor could violate the Act if that communication is in connection with the collection of any debt. Mr. Hunstein’s allegation was that the communication from the debt collector to its mail vendor included the amount of the debt, the entity to which the debt was owed, and the fact that the debt was related to his son’s medical treatment. The Eleventh Circuit ruled that if the communication to the mail provider contained this information, then it was a communication in connection with a debt that violated 1692c(b).

This ruling will have a significant impact on debt collectors (third-party agencies). How they deal with this new risk could significantly change their process and cost structure. In fact, the Eleventh Circuit recognizes that its decision will severally impact third-party debt collectors but emphasized that the problem needs to be addressed by Congress.

It is hard to determine how this will impact Credit Unions or other creditors at this time. The court did not address the FCCPA claim, as that was not addressed at the lower court level, except for the fact that once the FDCPA claim was dismissed (the one involving a federal statute), that eliminated jurisdiction for the federal court to consider the FCCPA claim. Now that the FDCPA claim is back before the lower court, the court will have to consider the FCCPA claim as well.

The FCCPA does not have the same statutory language as the FDCPA. The complaint filed by the consumer, Mr. Hunstein, alleges violation of Section 559.72(5), which provides as follows:

Disclose to a person other than the debtor or her or his family information affecting the debtor’s reputation, whether or not for credit worthiness, with knowledge or reason to know that the other person does not have a legitimate business need for the information or that the information is false.

If a court were to rule that the use of a third-party mail vendor violates Section 559.72(5), the impact on Credit Unions and other creditors could be significant. In the meantime, as this opinion is disseminated among consumer lawyers, I would not be surprised to see similar claims brought against creditors. SVL will continue to monitor the litigation between Mr. Hunstein and Preferred Collection and Management Services as the lower court considers the FCCPA claim. In the meantime, if you wish to discuss this matter and your unique risks, please contact a lawyer at SVL.

CFPB Proposed Delay of the Effective Date of Debt Collection Rules

Yesterday, April 7, 2021, the Consumer Financial Protection Bureau (CFPB) issued a proposal to delay the effective date of the Debt Collection Rules for sixty (60) days. The reason for the delay is to give those impacted by the Rules more time to prepare given the pandemic. The new proposed effective date is January 29, 2022. The proposal seeks only to modify the effective date and does not include any other changes. This proposal is open for public comment for thirty days, after which the CFPB will make a final determination on whether the effective date will be delayed. If you have questions about this proposal or the Debt Collection Rules, please do not hesitate to contact a lawyer at SVL.

CFPB Proposed Mortgage Servicing Changes to Limit Wave of Foreclosure from COVID-19

On April 5, 2021, the Consumer Financial Protection Bureau (CFPB) issued a proposed rule that seeks to amend Regulation X to assist borrowers affected by the COVID-19 emergency. Last week, the CFPB warned mortgage services of the coming wave of foreclosures when existing forbearance agreements come to an end. That warning included a directive that mortgage servicers need to be ready to handle the expected increase of loss mitigation requests by mortgage borrowers. The information released by the CFPB last week suggest that as many as 3 million consumers are behind on their mortgages.

The CFPB’s proposed rule to amend Regulation X (mortgage servicing rule) would:

  • Give borrowers more time by providing “a special pre-foreclosure review period” that would generally prohibit servicers of mortgage loans from starting foreclosure until after December 31, 2021. In essence, it would modify the 120-day rule to be a temporary blanket prohibition on starting a foreclosure because of a mortgage delinquency until after December 31, 2021.
  • Allow for streamlined loan modification options to borrowers with COVID-19 related hardships based on the evaluation of an incomplete application. 
  • Keep the consumers informed of their options by changing the required servicer communications to consumers. 

Please note that this proposed rule to the mortgage servicing rules would apply only to mortgage loans secured by a borrower’s principal residence. Further, the proposed changes would apply only to large servicers but the CFPB is seeking comments on whether it should extend to small servicers. The proposed effective date of these changes is August 31, 2021. The CFPB is accepting public comments on the proposed rule through May 10, 2021.

SVL is working to put together a virtual event to go through this proposed rule in detail. We anticipate having further information on the virtual event later this week. In the meantime, if you have questions, please contact a lawyer at SVL.

Supreme Court Defines Automatic Dialing System

Yesterday, the United States Supreme Court issued a long-awaited ruling in the case of Facebook, Inc. v. Duguid. This was an appeal out of the Ninth Circuit and involved the Telephone Consumer Protection Act of 1991 (TCPA). In particular, this case involved the definition of an “automatic telephone dialing system” (ATDS). Many in the consumer credit industry hoped that this case would restore some limits to the definition given by the Federal Communication Commission’s (FCC) previous ruling that defined an ATDS to include any modern telephone system.

The Court held that an ATDS under the TCPA is a device that “must have the capacity either to store a telephone number using a random or sequential number generator, or to produce a telephone number using a random or sequential number generator.” The case centered on the reading of the TCPA statute and its definition of an ATDS. Furthermore, the case turned on whether the clause “using a random or sequential number generator” modifies the two verbs that precede it (“store” and “produce”). The Court adopted the position that the clause modifies the two verbs. As such, for a creditor to be subject to the TCPA, it must use a random or sequential number generator that either stores or produces telephone numbers. Unfortunately, the Court did not address the term “capacity,” which is another part of the statutory definition that has caused litigation.

This limiting definition of an ATDS should help to reduce future litigation under the TCPA. How much this will limit future litigation remains uncertain. Credit Unions must remain careful and comply with the other provisions of the TCPA, which remain in effect, including respecting consumer’s revocation of consent.

Should you have question on how this ruling impacts your practices or procedures, please contact a lawyer at SVL.