SLOMSKY, District Judge.
Table of Contents I. INTRODUCTION ...........................................................................343 II. FACTUAL BACKGROUND .....................................................................345 A. Plaintiffs Mortgage .................................................................345 B. Defendant's Loan Servicing Practices ................................................346 C. Defendant's Pre-Foreclosure Notices .................................................347 D. Defendant's Monthly Mortgage Statement and Loan Modification Offer ..................348 E. Plaintiffs Requests for Mortgage Information ........................................348 III. LEGAL STANDARD FOR MOTION TO DISMISS ...................................................349 IV. DISCUSSION .............................................................................350 A. Legality of Property Inspection Fees ...............................................350 1. Fair Debt Collection Practices Act, 15 U.S.C. § 1692e and § 1692f ......350 a. Pre-Foreclosure Notices and Mortgage Statement — § 1692e .................351 b. Loan Servicing Practices — § 1692f ......................................354 2. Loan Interest and Protection Law, 41 Pa. Cons. Stat. § 101 ..................356 3. Fair Credit Extension Uniformity Act, 73 Pa. Cons. Stat. § 2270.1 ...........359 4. Unjust Enrichment ................................................................360 B. Sufficiency of Pre-Foreclosure Notices Pursuant to Pennsylvania Foreclosure Prevention Act and 15 U.S.C. § 1692e ............................361 C. Adequacy of Responses to Qualified Written Requests Under Real Estate Settlement Procedures Act, 12 U.S.C. § 2605(e) .......................362 V. CONCLUSION ................................................................................365
Plaintiff Charles Benner is a residential homeowner in Pennsylvania. His mortgage is serviced by Defendant Bank of America.
First, regarding the property inspection fees, Plaintiff contends that the request for payment of these fees violated provisions of the Fair Debt Collection Practices Act ("FDCPA"), 15 U.S.C. § 1692e and § 1692f Section 1692e prohibits debt collectors from using "any false, deceptive, or misleading representation or means in connection with the collection of any debt," which includes "false representation of ... the character, amount, or legal status of any debt." Section 1692f provides that "[f]he collection of any amount (including any interest, fee, charge, or expense incidental to the principal obligation) [is prohibited] unless such amount is expressly
Act 6, which is the second law Plaintiff contends was violated, required Defendant to send Plaintiff a written notice of its intention to foreclose on his property. The notice had to inform him of his "right... to cure the default ... and exactly what performance including what sum of money, if any, must be tendered." 41 Pa. Stat. § 403(c)(3). Furthermore, Act 6, among other things, limits the sum of money that can be demanded to "the reasonable costs of proceeding to foreclosure as specified in writing by the residential mortgage lender actually incurred to the date of payment." Id. § 404(b)(3). Plaintiff contends that Defendant's property inspection fees were unnecessary and thus not "reasonable costs of proceeding to foreclosure" or even permitted by the mortgage agreement.
Next, Plaintiff contends that Defendant's conduct regarding the inspection fees also violated the Pennsylvania Fair Credit Extension Uniformity Act, the third law allegedly violated by Defendant. This Act states that "[i]t shall constitute an unfair or deceptive debt collection act or practice under this act if a debt collector violates any of the provisions of the [FDCPA]." 73 Pa. Stat. § 2270.4.
Finally, Plaintiff brings a Pennsylvania common law claim for unjust enrichment, again based on Defendant's attempted collection of the property inspection fees.
Plaintiff also asserts an FDCPA claim against Defendant for conduct unrelated to the property inspection fees. The Pennsylvania Foreclosure Prevention Act (also known as "Act 91") required Defendant's pre-foreclosure notices to include information on how to apply for the Homeowner's Emergency Mortgage Assistance Program ("HEMAP"). 35 Pa. Stat. § 1680.403c(b)(1). Specifically, Defendant was required to advise Plaintiff as the debtor that he had "thirty (30) days, plus (3) days for mailing, to have a face-to-face meeting with a consumer credit counseling agency to attempt to resolve the delinquency or default," id., and that an "application for mortgage assistance [could] be submitted to [HEMAP] beyond the thirty (30)-day period." Id. § 1680.403c(b)(7). Plaintiff contends that Defendant violated § 1692e of the FDCPA by sending pre-foreclosure notices that contained false or misleading information about how and when he could exercise his HEMAP rights under Act 91.
Lastly, Plaintiff argues that Defendant violated federal law by failing to provide adequate responses to his multiple written requests for mortgage information. The Real Estate Settlement Procedures Act ("RESPA"), 12 U.S.C. § 2605(e), imposes a duty on loan servicers to respond to borrowers' inquiries within a certain time frame. Section 2605(e)(1)(A) states that "the servicer shall provide a written response acknowledging receipt of the correspondence within 20 days." Additionally, § 2605(e)(2) requires servicers — "[n]ot later than 60 days ... after the receipt from any borrower of any qualified written request"
In early 2011, several months after receiving the pre-foreclosure notices. Plaintiff wrote to Defendant for information about a loan modification offer made by Defendant and the method used to calculate the amount of his default. Defendant responded at different times, from different offices, and allegedly never provided the information requested. Thus, Plaintiff contends that Defendant also violated the requirements of RESPA.
On October 20, 2011, Plaintiff filed this lawsuit.
The following facts are drawn from the Amended Complaint, items of public record, and other documents integral to the claims.
In 2002, Plaintiff Charles Benner borrowed $147,000 to buy a home in Northeast Philadelphia. (Doc. No. 14 ¶ 46.) A mortgage was placed on his home which he
(Id. ¶ 28.) Allied Mortgage Group later sold the mortgage to another lender, and Wilshire Credit Corporation began servicing the loan. (Id. ¶ 50.)
During 2009, Plaintiff fell behind on his mortgage payments. (Id. ¶ 51.) After the default, Wilshire Credit offered him the opportunity to modify his mortgage payments through its "Home Affordable Modification Trial Period Plan." (Id. ¶ 53, Ex. B.) The Plan included a three month trial period. This period was to begin on January 1, 2010. The Plan required Plaintiff to take certain steps to implement the modification. (Id.) Plaintiff accepted Wilshire Credit's offer on December 27, 2009, and thereafter made monthly payments at a reduced rate. (Id. ¶ 54, Ex. B.)
On February 1, 2010, Defendant Bank of America notified Plaintiff that it was replacing Wilshire Credit as the servicer of the mortgage. (Id. ¶ 58; Doc. No. 16, Ex. B.) Defendant's notice provided, among other things, information about its status as a "debt collector," a new address where Plaintiff should send his mortgage payments, and details on how to exercise his rights under the Real Estate Settlement Procedures Act ("RESPA"). (Doc. No. 16, Ex. B.) The RESPA information contained the following definition and condition:
(Id.) After receiving this notice. Plaintiff began sending his reduced monthly payments to Defendant. (Doc. No. 14 ¶ 58.)
Defendant services residential mortgages nationwide. (Id. ¶ 1.) As a loan servicer, it acts as an agent for the owner of the loan. (Id. ¶ 15.) Defendant is responsible for billing borrowers and collecting principal and interest payments. (Id. ¶ 16.) When a borrower defaults on his mortgage payments. Defendant makes the decision whether to initiate foreclosure or to offer a
On June 7, 2010, the Federal Trade Commission ("FTC") filed a Complaint in the Central District of California alleging that Defendant
Defendant charged Plaintiff for default-related services. On November 8, 2010, approximately nine months after Defendant began servicing Plaintiffs mortgage, it sent him a letter with the following caption in large, bold letters across the top:
(Doc. No. 14 ¶ 60, Ex. C.) The Act 91 Notice, which contained Defendant's logo and payment stub, advised Plaintiff "that the mortgage on [his] home is in default, and the lender intends to foreclose." (Id.) Plaintiff was informed that proceedings would commence unless he: (1) applied for assistance with the Homeowner's Emergency Mortgage Assistance Program (HEMAP) or (2) "cure[d] the default within thirty (30) days of the date of this notice by paying the total amount past due to the lender, which is $27,184.02 plus any mortgage payments and late charges which become due during the thirty (30) day period." (Id.). The total amount due was comprised of monthly charges, late charges, and a $262.50 charge listed as "INSPECTION-OCCUPIED." (Id.)
The Act 91 Notice provided Mr. Benner with the following instructions on HEMAP:
To see if HEMAP can help, you must MEET WITH A CONSUMER CREDIT COUNSELING AGENCY WITHIN 30 DAYS OF THE DATE OF THIS NOTICE.
Under the Act, you are entitled to a temporary stay of foreclosure on your mortgage for Thirty (30) days from the date of this Notice. During that time you must arrange and attend a "face-to-face" meeting with one of the consumer credit counseling agencies listed at the end of this Notice. THIS MEETING MUST OCCUR WITHIN THE NEXT THIRTY (30) DAYS. IF YOU DO NOT
(Id. Ex. C.) On December 16, 2010, Defendant sent a second, nearly identical Act 91 Notice to Plaintiff, the main difference being an adjustment for December's monthly charges. (Id. ¶ 61, Ex. D.)
On January 4, 2011, Plaintiff received his monthly mortgage bill from Defendant. (Id. ¶ 68, Ex. J.) The bill stated that Plaintiffs account remained "seriously delinquent." (Id.) Included on the bill was the following statement:
As long as your loan remains delinquent, [Defendant] will conduct inspections of your property on a periodic basis. These inspections are provided for in your loan documents. [Defendant] will inspect your property to confirm occupancy, identify the occupants, and observe the physical condition of the property. You are responsible for paying the costs of these inspections.
(Id.) Defendant also continued to demand payment for the previously assessed $262.50 property inspection fee. (Id.)
Three weeks later, without explanation. Defendant's Home Retention Division, located in Pittsburgh, Pennsylvania, sent Plaintiff a letter informing him that his loan modification had been approved. (Id. ¶ 62, Ex. E.) The "Field Inspection Fees" were still listed at $262.50. (Id.) The letter provided details on a new monthly payment, and also advised that it would not be effective until Plaintiff took certain steps. (Id.)
Plaintiff rejected the loan modification offer in a letter dated February 4, 2011. (Id. ¶ 63, Ex. F.) The letter was addressed to Defendant's Home Retention Division in Pittsburgh, the same division and location that sent the loan modification offer. (Id.) He wrote that "[b]ased on [his] prior full compliance with a trial plan agreement, [he] should have been given a modification under the federal Home Affordable Modification Program (`HAMP')." (Id.). Plaintiff requested more detailed information on the modification program Defendant was using to make its offer, as well why the offer was being limited to a variable — as opposed to fixed — interest rate modification of the amount of the mortgage. (Id.)
Since Defendant had not responded to Plaintiffs February 4th letter, he sent a second request to the same Pittsburgh location in a letter dated March 11, 2011. (Id. ¶ 64, Ex. G.) In addition to making the same requests. Plaintiff informed Defendant that he was represented by counsel. (Id.) He also asked for "an explanation of how [it] calculated the arrears set forth in the Pennsylvania Act 91 Notices [it] sent [him], given that [he] ha[d] been paying [his] agreed upon trial payments continuously." (Id.) Plaintiff declared that his letter was a "Qualified Written Request" pursuant to 12 U.S.C. § 2605. (Id.) After failing to receive a response, he then sent a third letter to the same location, dated April 13, 2011, repeating the same requests. (Id. ¶ 65, Ex. H.)
Several days before Defendant received the third letter, PHFA informed Defendant that it had denied the request for emergency mortgage assistance. (Doc. No. 16, Ex. C.) On April 20, 2011, Defendant's Fort Worth, Texas office sent Plaintiff a letter indicating that it had received his correspondence and he should "expect a complete response within twenty (20) business days." (Id. ¶ 66, Ex. I.) Two days later, Plaintiff received an identical letter. (Id.)
Defendant's Simi Valley, (California location — the location where Defendant initially directed Plaintiff to send his "Qualified Written Requests" to on the notice with the RESPA information — sent him a letter dated April 28, 2011, which included a loan history statement purportedly in response to his earlier requests. (Id.; Doc. No. 16, Ex. B.) On May 3, 2011, the Simi Valley office sent another letter advising Plaintiff that his "request has been forwarded to the appropriate department for further research." (Doc. No. 14 ¶ 66, Ex. I.)
Plaintiff filed this lawsuit on October 20, 2011. As of that date Defendant still had not provided him with the information he initially requested about the loan modification offer, the calculation of the arrears and the mortgage default balances. (Id. ¶ 67.)
The motion to dismiss standard under Federal Rule of Civil Procedure 12(b)(6) is set forth in the Supreme Court's Opinion Ashcroft v. Iqbal, 556 U.S. 662, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009). First, "[t]hreadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice" to defeat a Rule 12(b)(6) motion to dismiss. Id. at 678, 129 S.Ct. 1937 (citing Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007)). Second, "only a complaint that states a plausible claim for relief survives a motion to dismiss." Id. at 679, 129 S.Ct. 1937 (citing Twombly, 550 U.S. at 556, 127 S.Ct. 1955). "Determining whether a complaint states a plausible claim for relief will ... be a context-specific task that requires the reviewing court to draw on its judicial experience and common sense. But where the well-pleaded facts do not permit the court to infer more than the mere possibility of misconduct, the complaint has alleged — but it has not `show[n]' — `that the pleader
Applying the principles of Iqbal and Twombly, the Third Circuit set forth a three-part analysis that a district court in this Circuit must conduct when evaluating whether allegations in a complaint survive a 12(b)(6) motion to dismiss:
First, the court must "tak[e] note of the elements a plaintiff must plead to state a claim." Second, the court should identify allegations that, "because they are no more than conclusions, are not entitled to the assumption of truth." Finally, "where there are well-pleaded factual allegations, a court should assume their veracity and then determine whether they plausibly give rise to an entitlement for relief."
Santiago v. Warminster Twp., 629 F.3d 121, 130 (3d Cir.2010) (quoting Iqbal, 556 U.S. at 675, 679, 129 S.Ct. 1937). "This means that our inquiry is normally broken into three parts: (1) identifying the elements of the claim, (2) reviewing the complaint to strike conclusory allegations, and then (3) looking at the well-pleaded components of the complaint and evaluating whether all of the elements identified in part one of the inquiry are sufficiently alleged." Malleus v. George, 641 F.3d 560, 563 (3d Cir.2011).
Defendant charged Plaintiff $262.50 for property inspections conducted after his loan went into default. Plaintiff was informed through pre-foreclosure notices and his monthly mortgage statement that he had to pay the amount charged for the inspections in order to cure the default. Defendant's attempt to collect the fees, and the way in which the fees were communicated to him, form the basis of Plaintiffs claims that Defendant violated the Fair Debt Collection Practices Act ("FDCPA"), the Pennsylvania Loan Interest and Protection Law, the Fair Credit Extension Uniformity Act, and Pennsylvania common law.
Defendant has moved to dismiss all claims based upon the property inspection fees. For reasons that follow. Defendant's Motion to Dismiss will be granted on all claims relating to the property inspection fees.
Defendant demanded payment of property inspection fees in the November 8 and December 16, 2010 pre-foreclosure notices and in the January 4, 2011 monthly mortgage invoice. Plaintiff contends in Count I of the Amended Complaint that these demands were not permitted under Pennsylvania consumer protection law, nor authorized by the mortgage agreement, and as a result Defendant's representations were false in violation of both § 1692e and § 1692f of the FDCPA. The Court disagrees.
The FDCPA was enacted "to eliminate abusive debt collection practices by debt collectors" after Congress found "abundant evidence" of "deceptive" and "unfair" tactics being used by them. 15 U.S.C. § 1692(a), (e). "The Act entitles consumers to certain information regarding the nature of their debts ... and prohibits
Courts must use the "least sophisticated debtor" standard when analyzing communications between debt collectors and debtors. Lesher v. Law Offices of Mitchell N. Kay, PC, 650 F.3d 993, 997 (3d Cir.2011). The standard is not high, but it does "`prevent liability for bizarre or idiosyncratic interpretations of collection notices by preserving a quotient of reasonableness and presuming a basic level of understanding and willingness to read with care.'" Id. (quoting Wilson v. Quadramed Corp., 225 F.3d 350, 354-55 (3d Cir.2000)). The specific provisions of the FDCPA at issue in this case are § 1692e and § 1692f.
Section 1692e prohibits debt collectors from using "any false, deceptive, or misleading representation or means in connection with the collection of any debt." Under § 1692e(2), it is a violation to make any "false representation of — (A) the character, amount, or legal status of any debt; or (B) any services rendered or compensation which may be lawfully received by any debt collector for the collection of a debt." "The language of this provision creates a straightforward, objective standard." Glover v. Fed. Deposit Ins., Corp., 698 F.3d 139, 149 (3d Cir.2012).
"`A debt collection letter is deceptive where it can be reasonably read to have two or more different meanings, one of which is inaccurate.'" Rosenau v. Unifund Corp., 539 F.3d 218, 222 (3d Cir.2008) (quoting Brown v. Card Serv. Center, 464 F.3d 450, 455 (3d Cir.2006)). For example, the Third Circuit has held that a debt collector would violate § 1692e if it "assert[ed] that it could take [a legal] action that it had no intention of taking and has never or very rarely taken before." Brown, 464 F.3d at 455 (3d Cir.2006). In another instance, a debt collection letter signed by the collector's "Legal Department," which was comprised solely of non-lawyers, was a violation of § 1692e because it falsely implied lawyers had sent the letter. Rosenau, 539 F.3d at 220-23; see also Lesher, 650 F.3d at 1003 (finding law firm debt collection letter violated § 1692e because firm name and logo printed at the top of the letter "falsely impl[ied] that an attorney, acting as an attorney, [was] involved in collecting" the debt); Crossley v. Lieberman, 868 F.2d 566, 571 (3d Cir.1989) (debt collector's letter violated § 1692e by threatening "to take action `within one week' ... [which collector] knew because of [Pennsylvania law] he was not permitted to institute within one week").
In this case, Defendant informed Plaintiff on multiple occasions that he owed $262.50 for property inspections. The falsity of these demands allegedly arises from the limitations placed on debt collectors by the Pennsylvania Loan Interest and Protection Law (also known as "Act 6"). Act 6 requires mortgagees or lenders to send notice to delinquent borrowers of their intention to foreclose. Section 403(c) of the Act requires, among other things, the following:
The written [pre-foreclosure] notice shall clearly and conspicuously state:
41 Pa. Stat. § 403(c) (emphasis added). Section 404(b) reads, in relevant part, that:
To cure a default under this section, a residential mortgage debtor shall:
Id. § 404(b) (emphasis added). Thus, while Section 403(c)(3) directs lenders to state the exact amount needed to cure the default, Section 404(b) limits that amount to certain items.
Pennsylvania courts have not set forth a test for determining whether a specific cost is reasonable in a proceeding to foreclosure. The ability of lenders to pass-through property inspection costs to defaulted borrowers has been addressed, however, by the United States Bankruptcy Court for the Eastern District of Pennsylvania. For example, in one case, a residential mortgage lender sought to collect $144 in property inspection fees as part of a debtor's Chapter 13 reorganization plan. In re Sacko, 394 B.R. 90, 104 (Bankr. E.D.Pa.2008). In analyzing the lender's claim, the court first looked to the mortgage agreement, noting the mortgage language was "broad enough to encompass property inspections." Id. at 105. The court noted, however, "the mere fact that a mortgage loan is delinquent, by itself, does not establish the necessity for property inspections at the borrower's expense." Id. A court must examine the facts of each case. See id. In Sacko, the court did not allow the collection of fees because the lender failed to present any evidence that the inspections were necessary after it was shown that the lender was in constant contact with the borrower during the foreclosure process. Id. at 105-06.
A different conclusion was reached In re Cervantes, 67 B.R. 816 (Bankr.E.D.Pa. 1986). In Cervantes, the court held that the lender was entitled to $106.80 in property inspection fees because 41 Pa. Stat. § 404(b)(3) and the mortgage agreement allowed such recovery. Id. at 821. There was no evidence in the case that the fee was unreasonable. Id.
In another case, the bankruptcy court denied the lender recovery of property inspection fees because the fees were not authorized under the mortgage agreement. In re Burwell, 107 B.R. 62, 66 (Bankr. E.D.Pa.1989). The court said it could "see little legal necessity for the mortgagee's making superficial periodic inspections to a mortgaged premises. Certainly, such inspections are unlikely to garner information which ... [is] essential to proper prosecution of a foreclosure suit." Id. at 66. The court did note, however, that it was "not foreclosing the possibility of a mortgagee's convincing [the court] that, in a given specific factual situation, inspections might be sufficiently necessary ..., e.g., if the premises were vacant or were
In the instant case, Plaintiff's legal theory — that Defendant's property inspection fees were not "reasonable" foreclosure costs under Pennsylvania law, and therefore false representations in violation of § 1692e(2) of the FDCPA — is one of first impression in the Third Circuit. Plaintiff does not allege the property inspections were fraudulent, but rather that conducting them was unnecessary and simply a way for Defendant to generate revenue after Plaintiff's default.
First, neither federal nor state law expressly prohibits lenders from charging defaulted borrowers for property inspections. It is not expressly forbidden by the FDCPA. As indicated by Sacko, Cervantes, and Burwell, courts have acknowledged situations in which it is appropriate in Pennsylvania for lenders to charge and recover such fees.
Second, Plaintiff defaulted on the loan and, similar to the situation in Sacko and Cervantes, paragraph fourteen of the mortgage agreement permits Defendant to charge for property inspections "for the purpose of protecting [its] interest in the Property."
Moreover, Plaintiffs contention that Defendant's January 4, 2011 mortgage invoice falsely represented its right to conduct properties inspections is equally unpersuasive. Plaintiff was in default when Defendant sent the January mortgage statement. The statement advised Plaintiff that his account was still "seriously delinquent" and stated the following: "As long as your loan remains delinquent, [Defendant] will conduct inspections of your property on a periodic basis. These inspections are provided for in your loan documents."
There is nothing false or misleading about this statement. Plaintiff's mortgage specifically allows for property inspections. As noted previously, paragraph fourteen of Plaintiff's mortgage informs him that "Lender may charge Borrower fees for services performed in connection with Borrower's default, for the purpose of protecting Lender's interest in the property and rights under this Security Instrument, including... property inspection ... fees." The monthly mortgage statement directed Plaintiff to his loan documents for information on property inspections, and in those documents the right to inspect is clearly stated. For the foregoing reasons, the Court will dismiss Plaintiff's claim that Defendant violated § 1692e(2) as alleged in Count I.
Using the same facts described above regarding the property inspections, Plaintiff also alleges a FDCPA violation under § 1692f(1). Section 1692f prohibits the use of "unfair or unconscionable means to collect or attempt to collect any debt." Thus, "[t]he collection of any amount (including any interest, fee, charge, or expense incidental to the principal obligation) [is prohibited] unless such amount is expressly authorized by the agreement creating the debt or permitted by law." § 1692f(1) (emphasis added). "The only inquiry under § 1692f(1) is whether the amount collected was expressly authorized by the agreement creating the debt or permitted by law...." Allen ex rel. Martin v. LaSalle Bank, N.A., 629 F.3d 364, 368 (3d Cir.2011). The Third Circuit directly addressed § 1692f(1) in Pollice v. Nat'l Tax Funding, L.P., 225 F.3d 379, 406-08 (3d Cir.2000), adopting the following three-part analysis:
Id. at 407-08 (internal quotation and citation omitted).
In Pollice, Pittsburgh government agencies had thousands of claims against home-owners with delinquent taxes, water, and sewer charges. Id. at 385. The interest rate that municipal governments, such as Pittsburgh, could lawfully charge debtors was 10% annually under the Pennsylvania Municipal Claims and Tax Liens Law. Id. at 390. A local Pittsburgh ordinance, on the other hand, allowed debt collectors to charge rates up to 12%. Id. at 386. The Pittsburgh agencies sold the claims to debt collectors, who then charged the municipal debtors at the 12% rate. Id. at 385-86. Using the analysis set forth above, the Third Circuit held that the debt collectors violated § 1692f(1) because under Pennsylvania law only 10% could be charged. Under the second category, the debt collectors' rates were not permissible because they were in direct violation of state law. Id. at 407. The debt collectors' actions were also not allowable under the third category, since homeowners had not expressly agreed to these interest and penalty rates when they applied for municipal services. Id. at 408.
Here, Plaintiff does not dispute that Defendant is permitted to charge property inspection fees. Rather, he contends that Defendant's practices, such as conducting automatic inspections for borrowers in default, is not permissible under the terms of the mortgage or relevant Pennsylvania law, and therefore is in violation of § 1692f(1). The Court disagrees. Using the Pollice test, Defendant's imposition of property inspection charges falls into the third category; that is, property inspection charges are neither affirmatively permitted nor expressly prohibited under Pennsylvania law and were expressly agreed to in the mortgage contract. There is no reference at all to property inspection charges in the Pennsylvania statutes at issue in this case. Accordingly, the fees can only be charged if expressly agreed to in the contract creating the debt. Unlike the situation in Pollice, the fourteenth paragraph of Plaintiff's mortgage agreement expressly allows Defendant to charge for conducting property inspections once a borrower is in default.
In Count IV of the Amended Complaint, Plaintiff alleges that, apart from the FDCPA, Defendant's property inspection fees also violate Act 6, the Pennsylvania Loan Interest and Protection Law. For reasons that follow, the Court will grant Defendant's Motion to Dismiss Count IV.
As noted above, Act 6 requires lenders to provide notice of an intention to foreclose on a residential mortgage. 41 Pa. Stat. § 403. Section 403(c) specifically requires that lenders send written notice containing, among other things, "[t]he right of the debtor to cure the default as provided in Section 404." Id. § 403(c)(3). Section 404 not only covers the right to cure a default, but also permits a lender to include certain items in the amount necessary to cure the default. The amounts are set forth in Section 404(b) and, as noted previously, are limited to the following:
Id. § 404(b) (emphasis added). Section 504 permits individual lawsuits against lenders that violate the provisions of Act 6 where damages are incurred. Section 504 reads in full:
In this case, Plaintiff alleges that the property inspection fees were unlawful under Section 404(b) because they were not "reasonable costs of proceeding to foreclosure," and therefore he is entitled to damages pursuant to Section 504. Because Plaintiff has not yet paid the inspection fees, Defendant argues that he cannot bring suit under Section 504 because he has not suffered any damages. Neither Act 6 nor the Pennsylvania courts have further defined the term "damages" as used in Section 504. Therefore, the Court must follow the rules laid out in the Pennsylvania Statutory Construction Act, 1 Pa. Cons.Stat. § 1501 et seq., in order to determine the meaning of "damages" in Section 504.
"[T]he legislative intent behind the statute's enactment controls its meaning and application." United Cerebral Palsy v. Workmen's Comp. Appeal Bd., 543 Pa. 544, 673 A.2d 882, 887 (1996) (citing 1 Pa. Cons.Stat. § 1921(a); Frontini v. Commonwealth Dep't of Transp., 527 Pa. 448,
Following these rules of statutory interpretation, the Court first looks to the purpose of Act 6. Federal and state courts — in explaining and applying the provisions of Act 6 at issue in this case — have consistently defined the Act in the following manner. Act 6 is a "`comprehensive interest and usury law with numerous functions,' one of which is that `it offers homeowners with `residential mortgages' a measure of protection from overly zealous `residential mortgage lenders.''" In re Graboyes, 223 Fed.Appx. 112, 114 (3d Cir.2007) (quoting Beckett v. Laux, 395 Pa.Super. 563, 577 A.2d 1341, 1343 (1990)). "The comprehensive statutory scheme demonstrates an extensive program designed to avoid mortgage foreclosures." Bennett v. Seave, 520 Pa. 431, 554 A.2d 886, 891 (1989). In the residential mortgage context, the Act is "typically raised as a defense to mortgage foreclosure proceedings." Id. (citations omitted).
Thus, the remedy for a defective Act 6 notice, such as the pre-foreclosure notice at issue in this case, is typically to set aside the foreclosure or deny a creditor the ability to collect an impermissible fee. See, e.g., In re Smith, 866 F.2d 576, 578, 586 (3d Cir.1989) (holding lender's failure to properly send pre-foreclosure notice to Plaintiff's new address before initiating foreclosure suit gave rise to a cause of action for damages under Section 504 of Act 6); id. at 586 (citing Main Line Fed. Sav. & Loan Ass'n v. Joyce, 632 F.Supp. 9, 10 (E.D.Pa.1986) (noting proper pre-foreclosure notice is jurisdictional prerequisite for foreclosure action)); id. (citing In re Sharp, 24 B.R. 817, 821 (Bankr. E.D.Pa.1982) (setting aside foreclosure where lender failed to determine debtor's last known address)); In re Burwell, 107 B.R. 62, 67-68 (Bankr.E.D.Pa.1989) (denying creditor ability to collect property inspection fees on foreclosed mortgage in debtor's bankruptcy proceeding). The purpose of Act 6, as shown by the cases above, is to help residential homeowners reacquire property that has been lost, or to prevent the imminent loss of money or property, because of the impermissible actions of residential mortgage lenders.
When Section 504 is read in conjunction with other sections of Act 6, the word "damages" only refers to the loss of money or property. Section 504 falls within Article V of the Act. Article V lists the "Remedies and Penalties" available to those that have been affected by an Act 6 violation. Within Article V, Sections 501 through 504 address the items that are recoverable for such a violation. Section 501, which is entitled "Excessive interest need not be paid," permits a debtor to reduce the amount of his debt by the amount of interest being charged in excess of the statutory maximum, even if the debtor has not actually paid the excessive interest at the time of the lawsuit. Specifically, Section 501 states:
Section 502, which is entitled "Usury and excess charges recoverable," allows a debtor to recover excessive interest and other impermissible charges that he has actually paid to his creditor, and, within a certain time frame, triple the amount paid. Section 502 reads in full:
Section 503 permits a debtor to recover the reasonable fees paid to his attorney after prevailing in an Act 6 lawsuit. Lastly, as noted above, Section 504 permits individuals to bring suit "for damages" against those that have violated any provision of the Act.
The relationship between Sections 501, 502, and 504 — for purposes of interpreting the word "damages" in Section 504 — is most instructive. In Section 501, the legislature expressly permits a debtor to recover for excessive interest charges despite the fact that the debtor has not yet paid the unlawful amount. Section 501 only allows this remedy, though, for unlawful interest, not other unlawful charges. Other unlawful charges, such as those that are not reasonable in proceeding to foreclosure, are addressed in Section 502. Section 502 only allows recovery of other unlawful charges when such amounts have actually been paid to a creditor. The legislature has therefore singled out excessive interest charges as money that can be recovered before being paid; other excess charges can only be recovered after being paid. Neither Sections 501 nor 502 address lost property, but, consistent with the purpose of Act 6, "damages" in Section 504 has been read, as noted in the cases above, to include loss of property. However, to read "damages" in Section 504 to also include a creditor's unlawful yet unpaid charge, would render Sections 501 and 502 superfluous. There would be no need for the legislature to have drawn the distinction between paid and unpaid interest and other charges, if all unlawful charges could be remedied through the "damages" language in Section 504.
For reasons that follow, the Court also will grant Defendant's Motion to Dismiss Count III of the Amended Complaint alleging a violation of the Pennsylvania Fair Credit Extension Uniformity Act ("FCEUA"), 73 Pa. Stat. § 2270.1 et seq., as enforced by the remedial provision of the Unfair Trade Practices and Consumer Protection Law ("UTPCPL"), 73 Pa. Stat. § 201-9.2. Section 2270.4(a) of the FCEUA states:
A violation of the FCEUA "shall constitute a violation of the ... Unfair Trade Practices and Consumer Protection Law ["UTPCPL"]." Id. § 2270.5(a). Since the FCEUA does not provide individuals with the right to institute private causes of action for violations, individual plaintiffs must use 73 Pa. Stat. § 201-9.2, the remedial provision of the UTPCPL, to obtain relief. Therefore, the law governing UTPCPL claims also governs Plaintiff's FCEUA claim in this case.
"[T]he UTPCPL is to be liberally construed to effectuate its objective of protecting the consumers of this Commonwealth from fraud and unfair or deceptive business practices." Ash v. Cont'l Ins. Co., 593 Pa. 523, 932 A.2d 877, 881 (2007). In a private UTPCPL action, a plaintiff must prove that he "suffer[ed][an] ascertainable loss of money or property, real or
In this case, Plaintiff has not identified an "ascertainable loss of money or property" that he suffered to establish a UTPCPL claim. Defendant charged Plaintiff $262.50 for property inspections. According to the Amended Complaint, Plaintiff has not paid the $262.50 fee. This fee is an outstanding liability, but does not constitute a "loss of money or property."
The Court will also grant Defendant's Motion to Dismiss the unjust enrichment claim in Count V of the Amended Complaint. Plaintiff has a mortgage contract that allows Defendant to collect property inspection fees from borrowers in default. Pennsylvania law precludes him from bringing an unjust enrichment action when the relationship of the parties is based on a written contract.
"An action based on unjust enrichment is an action which sounds in quasi-contract or contract implied in law." Sevast v. Kakouras, 591 Pa. 44, 915 A.2d 1147, 1153 n. 7 (2007) (citing Schott v. Westinghouse Elec. Corp., 436 Pa. 279, 259 A.2d 443, 448 (1969)). "A quasi-contract imposes a duty, not as a result of any agreement, whether express or implied, but in spite of the absence of an agreement, when one party receives unjust enrichment at the expense of another." AmeriPro Search, Inc. v. Fleming Steel Co., 787 A.2d 988, 991 (Pa.Super.2001) (citation omitted). "The Supreme Court of Pennsylvania has concluded that `the quasi-contractual nature of unjust enrichment [is] inapplicable when the relationship between
Here, Plaintiff has a direct contractual relationship with Defendant that is governed by the written home mortgage agreement. The agreement addresses numerous topics, including Defendant's ability to charge for property inspections if Plaintiff defaults — as he admittedly did — on his mortgage payments. Plaintiff has a right, of course, to challenge the reasonableness of those charges, but a theory of unjust enrichment is not the proper legal vehicle. The Court will therefore dismiss Count V of the Amended Complaint.
In Count II of the Amended Complaint, Plaintiff makes another claim, albeit for a different reason, that Defendant violated the Fair Debt Collection Practices Act ("FDCPA"), 15 U.S.C. § 1692e. The violation consists of Defendant's action in providing him with pre-foreclosure notices that contained false or misleading information about his legal rights under the Pennsylvania Foreclosure Prevention Act (also known as "Act 91"), § 35 Pa. Stat. § 1680.401c et seq. Specifically, in the Amended Complaint, Plaintiff contends that Defendant misinformed him that: (1) he only had thirty days — instead of thirty-three days — to have a face-to-face meeting with a counseling agency; (2) his ability to apply to the Home Emergency Mortgage Assistance Program ("HEMAP") ended after thirty-three days; and (3) Defendant's logo and payment stub were improperly included on the pre-foreclosure notices.
As noted previously, § 1692e prohibits debt collectors from using false or misleading representations "in connection with the collection of any debt." Id. § 1692e (emphasis added). More than sixteen different illegal practices are listed in § 1692e, such as false statements about "the character, amount, or legal status of any debt" and "threat[s] to take any action that cannot legally be taken or that is not intended to be taken." Id. Although the list is not exhaustive, § 1692e clearly seeks
The purpose of Act 91 is, among other things, to "give a homeowner the chance to apply for a state loan to help pay off the mortgage in situations where the homeowner cannot meet his mortgage payments because of unemployment, before foreclosure occurs.'" Ayers v. Phila. Hous. Auth., 908 F.2d 1184, 1187 (3d Cir. 1990) (quoting Bennett v. Seave, 520 Pa. 431, 554 A.2d 886, 892 (1989) (Papadakos, J., concurring)). For example, debt collectors must provide defaulted borrowers with notice that they "may qualify for financial assistance under the Homeowner's Emergency Mortgage Assistance Program." 35 Pa. Stat. § 1680.403c(b)(1). Debt collectors must advise borrowers that they have "thirty (30) days, plus (3) days for mailing, to have a face-to-face meeting with a consumer credit counseling agency to attempt to resolve the delinquency or default." Id. The Act permits an "application for mortgage assistance [to] be submitted to [HEMAP] beyond the thirty (30)-day period." Id. § 1680.403c(b)(7).
The FDCPA and Act 91 serve different purposes. The FDCPA is aimed at restricting the activities of debt collectors, whereas Act 91 ensures debtors are aware of the potential for state-funded assistance. While both statutes are often implicated in the debt collection process, not every inaccurate statement made during that process is actionable under the FDCPA. See Carlson v. First Revenue Assurance, 359 F.3d 1015, 1018 (8th Cir.2004) ("The FDCPA was designed to provide basic, overarching rules for debt collection activities; it was not meant to convert every violation of a state debt collection law into a federal violation.").
In this case, Plaintiff points to language in Defendant's pre-foreclosure notices that supposedly misled him about how and when he could apply for state-funded mortgage assistance. But these representations — regardless of their accuracy — do not relate to Defendant's attempt to collect the outstanding mortgage debt. Rather, the statements provided Plaintiff with information about a state-run program designed to help him with his difficult financial situation. Defendant's statements did not mischaracterize the legal status of his mortgage debt, nor did the statements misrepresent how much he owed or Defendant's legal right to collect the debt.
Plaintiff contends that Defendant violated the Real Estate Settlement Procedures Act ("RESPA"), 12 U.S.C. § 2605(e), by failing to adequately respond to Plaintiff's multiple written requests for information about its loan modification offer and the method used to calculate his outstanding mortgage debt. For reasons that follow,
RESPA was enacted after Congress found "that significant reforms in the real estate settlement process [were] needed to insure that consumers throughout the Nation [were] provided with greater and more timely information on the nature and costs of the settlement process." Id. § 2601(a). One such reform is the duty RESPA imposes on loan servicers to respond to borrowers' inquiries about their mortgages within a certain time frame. See id. § 2605(e). Section 2605(e) states the following:
Id. § 2605(e)(1)-(2) (emphasis added).
A loan servicer is permitted to "establish a separate and exclusive office and address for the receipt and handling of qualified written requests" from borrowers. 24 C.F.R. § 3500.21(e)(1). In order
In addition to alleging a breach of a duty required to be performed under RESPA, a plaintiff must also show that the breach caused him to suffer damages. Hutchinson v. Del. Sav. Bank FSB, 410 F.Supp.2d 374, 383 (D.N.J.2006) (citing 12 U.S.C. § 2605(f)(1)(A) ("Whoever fails to comply with any provision of this section shall be liable to the borrower for each such failure ... [for] any actual damages to the borrower as a result of the failure....") (emphasis added)). "Actual damages encompass compensation for any pecuniary loss including such things as time spent away from employment while preparing correspondence to the loan servicer, and expenses for preparing, photocopying and obtaining certified copies of correspondence." Cortez v. Keystone Bank, Inc., No. 98-2457, 2000 WL 536666, at *12 (E.D.Pa. May 2, 2000).
The Third Circuit has not specifically addressed whether "actual damages" also encompasses non-pecuniary damages, such as mental and emotional suffering, although other circuits have found that RESPA does include such damages. See Catalan v. GMAC Mortg., Corp., 629 F.3d 676, 696 (7th Cir.2011); McLean v. GMAC Morg. Corp., 398 Fed.Appx. 467, 471 (11th Cir.2010) ("Construing the term `actual damages' broadly, and based on the interpretations of `actual damages' in other consumer-protection statutes that are remedial in nature, plaintiffs arguably may recover for non-pecuniary damages, such as emotional distress and pain and suffering, under RESPA.").
Here, Defendant Bank of America clearly notified Plaintiff that any qualified written requests must be sent to its office in Simi Valley, California. On February 4, March 11, and April 13, 2011, Plaintiff instead sent written requests to Defendant's office in Pittsburgh, Pennsylvania, seeking information about Defendant's loan modification offer and how his mortgage default was calculated. Because no written request was sent to its offices in Simi Valley, California, Defendant argues that Plaintiff's requests did not trigger any duties under RESPA. The Court disagrees.
First, nowhere in the plain language of 12 U.S.C. § 2605(e) or 24 C.F.R. § 3500.21(e)(1), supra, is a borrower required to send his requests to a loan servicer's specified address; the law simply allows a loan servicer to establish such a place. What is required, though, is that the loan servicer actually receive the borrower's request for information. Here, although Defendant has divisions in Pittsburgh, Simi Valley, and throughout the country, each office is still under the management and control of Defendant.
Second, Defendant's Simi Valley office eventually received Plaintiff's requests but failed to respond in accordance with the requirements of RESPA. Although Plaintiff's requests for information were sent to the Pittsburgh office, Plaintiff was ultimately contacted by the Simi Valley office in a letter dated April 28, 2011, which confirms that Defendant was aware in April 2011 of Plaintiff's request for information about the loan modification offer
Defendant also contends that even if its RESPA duties were triggered, Plaintiff has not pled sufficient facts to show he suffered actual damages as a result. The Court again disagrees. Plaintiff alleges he "has suffered fear, anxiety and other emotional distress" as a result of Defendant's actions. The Court finds it reasonable to infer that a borrower in default who repeatedly seeks — yet fails to obtain — information about his financial situation could have damages for mental and emotional suffering. Therefore, the Court will deny Defendant's Motion to Dismiss Count VI of the Amended Complaint.
For the foregoing reasons, the Court will grant Defendant's Motion to Dismiss Counts I through V of the Amended Complaint, and will deny the Motion to Dismiss Count VI of the Amended Complaint. An appropriate Order follows.
• Count I — FDCPA. 15 U.S.C. § 1692e(2) and § 1692f(1), for charging the property inspection fees
• Count II — FDCPA, 15 U.S.C. § 1692e, for improper Pennsylvania pre-foreclosure notices
• Count III — Fair Credit Extension Uniformity Act, 73 Pa. Stat. § 2270.1 et seq., for FDCPA violations
• Count IV — Pennsylvania Loan Interest and Protection Law, 41 Pa. Stat. § 101 et seq., for charging the property inspection fees
• Count V — Unjust enrichment
• Count VI — Real Estate Settlement Procedures Act, 12 U.S.C. § 2605(e), for insufficient responses to mortgage loan information requests
• Count VII — Fair Credit Reporting Act, 15 U.S.C. § 1681 s-2(b), for providing negative reports to credit bureaus ?Count VIII — 15 U.S.C. § 1692c(a)(2), c(c), d(5), for continually contacting Plaintiff after learning he was represented by an attorney
(Mot. Dismiss Hr'g Tr. 47:13-20, Mar. 13, 2012.) Nor does Plaintiff contend that the inspections were not actually conducted. (See Doc. No. 14 at 1, 20; Doc. No. 22 at 8.) Despite these concessions, Plaintiff is attempting to change the clear language of the mortgage through statutory juggling in order to justify his claim that the property inspection fees were improper false statements.
Id. at 656. The plaintiff claimed breach of contract and deceptive practices under New York General Business Law based on the defendant's allegedly excessive property inspection fees. Id. at 656-59. In Mendez, as in this case, the court dismissed the plaintiffs claims because: (1) there was "no plausible claim that the inspection fees charged by the [d]efendant were in violation of any express terms of his actual mortgage contract," and (2) the "actual mortgage contract contained no express limitation on the appropriate amount of default related servicing fees." Id. at 657, 659; see also Dougherty v. Wells Fargo Home Loans, Inc., 425 F.Supp.2d 599, 607 (E.D.Pa.2006) (dismissing § 1692f(1) claim challenging mortgage company's right to charge borrower for attorney's fees because "paragraph 7 [of the mortgage] expressly authorizes [the mortgage company] to pay costs to protect the value of the mortgaged property, including attorney's fees, and to charge [the borrower] for such fees").
