736 F.3d 88 (2nd Cir. 2013), 11-4525-cv, Vincent v. The Money Store
|Citation:||736 F.3d 88|
|Opinion Judge:||KATZMANN, Chief Judge:|
|Party Name:||Lori Jo VINCENT, Ruth Ann Gutierrez, Linda U. Garrido, John Garrido, on behalf of themselves and all others similarly situated, Plaintiffs-Appellants, v. THE MONEY STORE, TMS Mortgage, Incorporated, HomeEq Servicing Corporation, Moss, Codilis, Stawiarski, Morris, Schneider & Prior, LLP, Defendants-Appellees.[*] Joseph Mazzei, Plaintiff,|
|Attorney:||Paul S. Grobman (Neal DeYoung, Sharma & DeYoung LLP, on the brief), New York, N.Y., for Plaintiffs-Appellants. Daniel A. Pollack (Edward T. McDermott, W. Hans Kobelt, on the brief), McCarter & English, LLP, New York, N.Y., for Defendants-Appellees The Money Store, TMS Mortgage, Inc., HomeEq Servi...|
|Judge Panel:||Before: KATZMANN, Chief Judge, LIVINGSTON, and LOHIER, Circuit Judges. KATZMANN, Chief Judge, concurring: DEBRA ANN LIVINGSTON, Circuit Judge, concurring in part and dissenting in part:|
|Case Date:||November 13, 2013|
|Court:||United States Courts of Appeals, Court of Appeals for the Second Circuit|
Argued: Nov. 8, 2012.
[Copyrighted Material Omitted]
This case requires us to determine if the consumer protections of the Fair Debt Collection Practices Act (" FDCPA" ), 15 U.S.C. § 1692 et seq., and the Truth in Lending Act (" TILA" ), 15 U.S.C. § 1601 et seq., apply to a mortgage lender that has purchased mortgages initially payable to other lenders and, after the homeowners defaulted on their mortgages, hired a law firm to send allegedly deceptive debt collection letters on its behalf. Plaintiffs-Appellants Lori Jo Vincent, Ruth Ann Gutierrez, Linda Garrido, and John Garrido (collectively, the " plaintiffs" ) appeal from a judgment of the United States District Court for the Southern District of New York (Koeltl, J. ), which granted defendants' motion for summary judgment on plaintiffs' TILA claims and denied plaintiffs' motion for reconsideration of the district court's (Sprizzo, J. ) earlier dismissal of their FDCPA claims against Defendants-Appellees The Money Store, TMS Mortgage, Inc., and HomeEq Servicing Corp. (collectively, " The Money Store" ).
With respect to plaintiffs' FDCPA claims, although creditors are generally not considered debt collectors subject to the FDCPA, the statute contains an exception
to creditor immunity where the creditor, " in the process of collecting [its] own debts, uses any name other than [its] own which would indicate that a third person is collecting or attempting to collect such debts." 15 U.S.C. § 1692a(6). Plaintiffs contend that The Money Store used the name of the law firm Moss, Codilis, Stawiarski, Morris, Schneider & Prior, LLP (" Moss Codilis" ) by hiring the law firm to send out collection letters that falsely indicated that Moss Codilis had been retained to collect the debts The Money Store was in fact collecting. The district court rejected that argument, finding that The Money Store had not used a name other than its own, and therefore could not be found liable for violating the FDCPA through the so-called false name exception.
Similarly, with respect to plaintiffs' TILA claims, the district court found that The Money Store could not be held liable under TILA for charging plaintiffs unauthorized fees on their accounts and failing to refund the resulting credit balances. TILA applies only to a " creditor," which is defined in the statute as the person to whom the debt is initially payable. 15 U.S.C. § 1602(g).1 Because The Money Store was an assignee of the plaintiffs' notes, and therefore not the person to whom the debts were initially payable, the district court determined that The Money Store did not qualify as a creditor under TILA.
For the reasons set forth below and resolving all factual disputes in plaintiffs' favor, we respectfully first hold that the district court erred in concluding that The Money Store was not a " debt collector" under the false name exception to FDCPA liability. Where a creditor, in the process of collecting its own debts, hires a third party for the express purpose of representing to its debtors that the third party is collecting the creditor's debts, and the third party engages in no bona fide efforts to collect those debts, the false name exception exposes the creditor to FDCPA liability. With respect to the TILA claims, however, we conclude that the district court correctly determined that, because plaintiffs' mortgage documents did not name The Money Store as the person to whom the debt was initially payable, The Money Store is not a " creditor" under TILA and is therefore not subject to liability. Accordingly, we affirm the judgment of the district court in part, vacate in part, and remand the case for further proceedings consistent with this Opinion.
I. Factual Background
The following facts are drawn from the record before the district court and are undisputed unless otherwise noted:
Plaintiffs-Appellants are homeowners who defaulted on their mortgages. The Money Store, a mortgage lender, serviced the loans on which plaintiffs defaulted.
A. The Plaintiffs' Mortgages
Plaintiff Lori Jo Vincent took out a mortgage loan on her home in Carrollton, Texas on February 16, 1998. She executed a promissory note and a deed of trust with her lender, Accubanc Mortgage Corporation. In the promissory note Vincent agreed:
In return for a loan that I have received, I promise to pay U.S. $67,600.00 (this amount is called " principal" ), plus interest, to the order of the Lender. The
Lender is ACCUBANC MORTGAGE CORPORATION. I understand that the Lender may transfer this Note.
J. App'x 851. In addition, the deed of trust states:
Borrower [Vincent] owes Lender [Accubanc] the principal sum of SIXTY-SEVEN THOUSAND SIX HUNDRED and NO/100— Dollars (U.S. $67,600.00). This debt is evidenced by Borrower's note dated the same date as this Security Instrument (" Note" ), which provides for monthly payments, with the full debt, if not paid earlier, due and payable on March 1, 2028. This Security Instrument secures to Lender [Accubanc]: (a) the repayment of the debt evidenced by the Note, with interest, and all renewals, extensions and modifications of the Note....
J. App'x 857. Neither the promissory note nor the deed of trust mentions The Money Store.
At the time of the loan's execution on February 16, 1998, Accubanc gave Vincent the disclosure statement required by TILA, 15 U.S.C. § 1631. 2 Immediately after executing the mortgage, Accubanc transferred its interest in the loan to EquiCredit Corporation of America by endorsing the promissory note to EquiCredit. Two-and-a-half months later, on April 30, 1998, EquiCredit assigned and endorsed the note and deed of trust to The Money Store, which is reflected on the note with a stamp that reads " Without Recourse Pay to the Order of TMS Mortgage Inc." Vincent's first loan payment was due on April 1, 1998, before the note had been assigned to The Money Store.
On April 5, 1997, plaintiff Ruth Gutierrez took out a mortgage loan on her home in Stockton, California. Gutierrez executed a note and deed of trust identifying the lender as First Financial Funding Group and using language very similar to the loan documents described above for Vincent's mortgage. Again, neither of these documents mentions The Money Store. At the time First Financial and Gutierrez executed the loan, First Financial also gave Gutierrez the TILA-required disclosure statement. Two days later, on April 7, 1997, First Financial assigned and endorsed the note and deed of trust to The Money Store. Gutierrez's first loan payment was due on May 10, 1997, meaning that Gutierrez's first payment, unlike Vincent's, was not due until after the loan had been assigned to The Money Store.
On May 22, 1996, plaintiffs Linda and John Garrido took out a $100,000 mortgage loan on their home in Huntington Station, New York. The promissory note they executed on that date again used language similar to the notes applicable to the other loan transactions, and listed FHB Funding Corporation as their lender. The Garridoses additionally signed a mortgage that referenced the note and identified FHB Funding as the " Lender" and the Garridoses as the " Borrower." Once again, neither the note nor the mortgage mentions The Money Store. Like Vincent and Gutierrez, the Garridoses also received the TILA-required disclosure statement from FHB Funding at the time they executed the loan. Three weeks later, on June 13, 1996, FHB Funding assigned and endorsed the note and mortgage to The Money Store. The Garridoses' first loan payment was due on July 1, 1996, i.e., two weeks after the loan had been assigned to The Money Store.
After the loans had been assigned to The Money Store, plaintiffs all eventually defaulted on their mortgages. They subsequently received letters from Moss Codilis informing them of their default. In addition, The Money Store allegedly charged plaintiffs improper fees on their accounts, including, inter alia: fees for multiple property inspections that did not occur; vague and unwarranted fees for " file reviews," " senior lien monitoring," and " Outsource Management Fees" ; excessive late fees; surcharges for breach letters; attorneys' fees that were never paid out to attorneys; costs for purported motions in the bankruptcy court that were never filed; and fees for other bankruptcy services that were in excess of what was contractually allowed.
B. The Breach Letter Program
By agreement dated April 17, 1997, The Money Store contracted with Moss Codilis to prepare and mail breach notices to borrowers who, like plaintiffs, had defaulted on their loans. Such notices inform homeowners that they are in default and are...
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