failure to communicate with borrower causes cognizable UCL harm

Boessenecker v. JPMorgan Chase Bank, 2013 WL 3856242 (N.D. Cal. July 24, 2013)

I expect to see a lot more mortgage-related consumer protection claims working their way through the courts.  The complaint alleged as follows: Plaintiffs bought a home in 2007 from defendant, and refinanced with JPM in 2010.  They received a letter from JPM that the loan was paid in full.  But over two months later, they got another letter informing them that they owed $5176 “due to ‘shortage’ in pay off amount.”  They sent letters and emails to JPM asking for an explanation, understandably, and a month later received an email telling them that the shortage “pertain[ed] to an internal issue regarding the payoff amount that [defendant] confirmed during the refinancing,” but were told to “not be alarmed” and that they would “not be negatively impacted.”  

 

But a few weeks later, they got another letter telling them that the payoff was short by almost $3700.  They again sought an explanation from JPM, which two weeks later told them that the first “shortage” “pertained to an insurance disbursement” that “has been resolved” and that the second occurred because the tax department had “overpaid [the] county” and was awaiting a refund.  (Why was this plaintiffs’ problem?  Who knows?)  On the same day, JPM told plaintiffs that it might have to take the funds out of their escrow account, requiring them to increase their monthly payment in order to refill the account. 

Plaintiffs promptly requested a reconciliation and resolution of the issue.  Eight months later, they got a letter telling them that their payments were increasing by $465 due to an “impound shortage.”  They called JPM and were told the problem was a shortage in the escrow account. They contacted JPM several times, but didn’t receive any explanation that made sense.  In order to avoid credit problems, they made the increased payments.  A year later, JPM told them that their monthly payment was decreasing by $320 a month. They again requested a reconciliation, but didn’t get one.  Thereafter, they sent, through counsel, two Qualified Written Requests (“QWRs”) to JPM.  JPM didn’t include the requested information in its response to the first and failed to respond to the second.

At the time of suit, plaintiffs hadn’t received a response about their refinanced loan, and didn’t know whether their first loan was paid in full or why their payments increased then decreased.  While this was going on, interest rates reached an historic low.  They wanted to refinance to take advantage of this and reduce their monthly payments, but without understanding the status of their current and past loans were too uncertain to take any action.

They sued for violation of the Real Estate Settlement Procedures Act and California’s related Rosenthal Act governing debt collection, both of which claims the court declined to dismiss.  They also alleged violation of the UCL, negligence, and negligent/intentional infliction of emotional distress.  The UCL borrows violation of other laws, and the RESPA violation qualified.  JPM argued that plaintiffs lacked standing because they didn’t allege they suffered any actual harm.  (I know why defendants do this, but it bugs me that now any failure to state a claim is labeled “standing.”  Don’t we have a rich and highly developed vocabulary for reasons a claim might fail?)  Here, plaintiffs alleged that as a result of JPM’s failure to respond to their QWRs, they “have not been able to refinance their loan to take advantage of the low interest rates and save thousands per year on their mortgage payments.”  That was enough to plead actual harm.

Turning to the negligence claim, JPM argued that plaintiffs failed to plead facts showing it owed them any duty of care.  “As a general rule, a financial institution owes no duty of care to a borrower when the institution’s involvement in the loan transaction does not exceed the scope of its conventional role as a mere lender of money.”  Because plaintiffs based their claims on conduct occurring in the ordinary course and scope of defendant’s participation in the loan transaction, no duty of care arose and the claim was dismissed.

Likewise, plaintiffs failed to plead extreme and outrageous conduct, so the emotional distress claims failed.