FDUTPA:”Per Se” Violations of Deceptive or Unfair trade Practices Under Federal or State Law

a per se violation of TILA or any other Federal or State law makes the act also per se violations of the FTC act, (and the applicable little FTC acts passed in various states). Florida is used here as an example. 

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THIS ARTICLE IS NOT A LEGAL OPINION UPON WHICH YOU CAN RELY IN ANY INDIVIDUAL CASE. HIRE A LAWYER.
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Anyone who has done even the most cursory research knows that a pattern of behavior in which the name of the creditor or lender is withheld is a “per se” predatory loan. While Judges don’t care whether the borrower knows the actual lender, clearly Congress, the U.S. Supreme Court and the executive branch DO care ( and so their state counterparts); the courts are required to follow the law not create it by inaction or action contrary to the express wording of statutes. As we have discussed this will be shortly revealed as the rescission cases go back to SCOTUS which has already ruled unanimously that there is nothing wrong with the rescission statute, it clearly states the procedures and nothing unconstitutional about its process or effect.
 
Pretender lenders are rushing as many cases to forced sale through foreclosure because their days are numbered in which they can continue to do so. One reason is that their violations of Federal and State statutes prohibiting unfair trade practices are violations per se and another is that their violations are still prosecutable even if they are not on some list somewhere in some statute or group of cases interpreting deceptive trade and lending practices. 
 
For along time, it has been known, accepted and understood that withholding the name of the actual lender as a matter of practice makes each such loan and each such practice “predatory per se” under Reg Z of the Federal truth in Lending Act. The purpose of this article is to suggest that a per se violation of TILA or any other Federal or State law makes the act also per se violations of the FTC act, (and the applicable little FTC acts passed in various states). Florida is used here as an example. 
 
While the recognition that the alleged loan transaction was by definition unto itself predatory, there has been no attempt or agreement to arrive at any consequences that should befall the “ pretender lender” violator because TILA has enforcement provisions and self executing punishment like TILA rescission but it does not specifically provide an easy route to assessing substantial damages by way of disgorgement, which probably cannot be barred by the defense of the statute of limitations. 
 
If a loan is predatory per se under Reg Z as a table funded loan then it is hard to imagine how that act of “lending” would not also be a per se violation of the FTCA and, in Florida, the FDUTPA 501.204 et seq. A table funded loan by definition withholds the identity of the true lender. Table funded loans were not only part of the pattern and practice of creating illusions they called “loans” but became industry standard.
 
 It is neither an exaggeration nor over-reaching to say that table funded loans that were predatory per se became industry practice from around 2001 through the present. In other words it became industry standard to violate the Federal Truth in Lending Act, the FTC Act, and the state versions of the FTC act (in Florida §501.204 et seq). As we have seen with construction defect lawsuits starting back in the 1970’s, the fact that it became custom and practice to violate the the local building codes does not in any way raise a valid defense to violating those codes. 
 
This would fall under the Florida FDUTPA category of “Per Se by Description. “ It doesn’t matter whether the judge “feels” that some bank or “lender” or “servicer” might be hurt. That question has been decided by the Federal legislative branch, the Federal Executive Branch and the Federal Judicial branch as enunciated by the highest court in the land. Under the powers vested in the Federal government laws were passed in which the Federal government pre-empted or restricted state action in circumstances where ordinary consumers were fooled by deceptive practices. And the test is whether the least sophisticated and most gullible consumer was tricked and hurt by the trick. The same line of thought applies to state laws like the little FTC act in Florida.
 
Once the violation becomes a per se violation, the question is not whether there is injury but rather how much should be awarded to the consumer as a punishment to the violator and as a means to settle the score with the consumer. This calls for disgorgement which is not considered to be “damages” since it is described as merely preventing the violator from keeping ill-gotten gains. Attorneys fees and court costs are almost always provided by the Federal and state FTC statutes. The violations under the FDCPA may be barred by the expiration of a statute of limitations but the per se violations of the of the FDCPA and its equivalent state statutes probably is a trigger for declaring the FDCPA violation a per se violation which in turn triggers the rest of the applicable statutes for disgorgement of ill-gotten gains. 
 
Per Se by Description
The reference in §501.203(3)(a) and (c) to FDUTPA violations based on FTC or FDUTPA rules, or “[a]ny law, statute, rule, regulation, or ordinance” can further be interpreted as a formal acknowledgment of violations of a second type of per se violation which occurs when a rule, statute, or ordinance is violated, and the rule, statute, or other ordinance expressly describes unfair, deceptive, or unconscionable conduct, without necessarily referring expressly to FDUTPA.
 
Rules Adopted by the FTC
Pursuant to the FTC act, the FTC has adopted rules which describe unfair or deceptive acts in several contexts, and which appear in 16 C.F.R. ch. 1, subch. D, entitled “Trade Regulation Rules.” Some of the more well known of these include the FTC rules governing door-to-door sales,16 franchises,17 holders in due course,18 negative option sales plans,19 funeral industry practices,20 and mail or telephone order sales.21 According to the definition of “violation of this part,” in §501.203(3)(a) a violation of FDUTPA can occur when federal administrative rules promulgated by the Federal Trade Commission pursuant to the FTC act are violated. Along these lines, the 11th Circuit has confirmed that §501.203(3)(a) of FDUTPA creates a private cause of action for violation of an FTC rule even though none exists under federal law.22
 
[Whether  or not the facts alleged by the consumer are sufficient for rescission, damages remain available under the FTC act and little FTC acts in various states. The damages extend up to and including all money paid by the debtor. And according to recent case law following a long prior tradition, the statute of limitations does not apply to petitioners for disgorgement of ill-gotten gains.  16 CFR 433 — Preservation of consumer claims and defenses, unfair or deceptive acts or practices]

120510advisoryopinionholderrule

Much of the material for this article has been inspired by the following article:
Florida Bar Journal May, 2002, Volume LXXVI, No. 5 Page 62 by Mark S. Fistos. “Per Se Violations of Florida Deceptive and Unfair Practices Act §501.204(1)”
Relevant passages quoted:
 
FDUTPA broadly declares in §501.204(1) that “[u]nfair methods of competition, unconscionable acts or practices, and unfair or deceptive acts or practices in the conduct of any trade or commerce” are unlawful. By design, FDUTPA does not contain a definition or “laundry list” of just which acts can be “deceptive,” “unfair,” or “unconscionable.” No specific rule or regulation is required to find conduct unfair or deceptive under the statute.1
 
There is, however, an entire body of state and federal rules, ordinances, and statutes which serves to identify specific acts that constitute automatic violations of FDUTPA’s broad proscription in §501.204(1). These rules, ordinances, and statutes, if violated, constitute “per se” violations of FDUTPA, and could automatically expose parties to actual damages, injunctions, and civil penalties up to $15,000 per violation. An assessment of potential per se FDUTPA violations, therefore, should play a part in any commercial law practice, and is imperative for any lawyer bringing or defending against a claim for deceptive or unfair trade practices.
 
Approaches to FDUTPA Liability
There are two basic approaches to analyzing FDUTPA liability: one is to determine whether an act or practice in trade or commerce violates broadly worded standards relating to unfairness, deception, unconscionable acts or practices, or unfair methods of competition; a second is to assess whether conduct in trade or commerce constitutes a per se violation.2
FDUTPA tracks the broad language of the Federal Trade Commission Act (FTC act)3and declares “[u]nfair methods of competition, unconscionable acts or practices, and unfair or deceptive acts or practices in the conduct of any trade or commerce” to be unlawful. Subsection 501.204(2) of FDUTPA in turn provides that “due consideration and great weight” be given interpretations by federal courts and the Federal Trade Commission of what constitutes unfairness and deception.
 
Based on FTC interpretations and federal case law dating from the 1960s, Florida courts have adopted and applied in various contexts a broadly worded standard of unfairness under which a practice is unfair, “if it offends public policy and is immoral, unethical, oppressive, unscrupulous or substantially injurious to consumers.”4

Categories of Per Se Violations

The rules, regulations, ordinances, and statutes referenced in the above-quoted §501.203(3) refer to sources which may serve as a basis for a per se FDUTPA violation. These sources can be broken down into three categories:
1) Per se violations whereby a statute, ordinance, or rule expressly refers to FDUTPA and provides a violation thereof to be a violation of FDUTPA; [per se by reference]
2) Per se violations whereby a statute, ordinance, or rule expressly describes deceptive, unconscionable, or unfair conduct without referring expressly to FDUTPA and when violated constitutes a per se violation of FDUTPA; [per se by description] and
3) Per se violations whereby a court, in the absence of any such reference or description, construes a statute, ordinance, or rule to be a per se violation of FDUTPA.
 
Examples from Footnotes: Fla. Stat. §§210.185(5) (cigarette distribution), 320.03(1) (DHSMV agents), 320.27(2) (vehicle dealer licensing), 624.125(2) (service agreements), 681.111 (lemon law), 501.97(2) (location advertising), 400.464(4)(b) (home health agencies), 400.93(6)(b) (home medical equipment providers), 483.305(3) (multiphasic health testing centers), 496.416 (charitable contributions), 501.160(3) (price gouging), 501.0579 (weight loss centers), 501.34 (aftermarket crash parts), 509.511 (campground memberships), 559.934 (sellers of travel), 624.129(4) (location and recovery services), 817.62(3)(c) (credit card factoring);Code of Ordinances, City of Ft. Walton Beach, Florida §23-145(a) (title loans).

Padget v OneWest – IndyMac Provides some insight into RESPA remedies

The Ocwen Court provided an example for clarity: “Suppose an S & L signs a mortgage agreement with a homeowner that specifies annual interest rate of 6 percent and a year later bills the homeowner at a rate of 10 percent and when the homeowner refuses to pay institutes foreclosure proceedings. It would be surprising for a federal regulation to forbid the homeowner’s state to give the homeowner a defense based on the mortgagee’s breach of contract.” Ocwen, 491 F.3d at 643-44.

Padget-One west bank dba Indymac

Editor’s Note: The assumption was made that One West owned the loan when it was clearly securitized. One West used the fact that Plaintiff admitted that One West was the owner of the loan and therefore undermined Plaintiff’s case against One West as a debt collector which requires the actor to be collecting for the benefit of a third party.

This is where the rubber meets the road. either you are going to master the nuance introduced by securitization or you are going to let the other side have a field day with misrepresentations that you have admitted are true.

PADGETT, Plaintiff,
v.
ONEWEST BANK, FSB, d/b/a INDYMAC

Civil Action No. 3:10-CV-08
United States District Court, Northern District of West Virginia, Martinsburg

parties filed an Agreed Order in the bankruptcy court resolving IndyMac’s motion to lift the automatic stay. (Id. at ¶ 14). Pursuant to this Agreed Order, the plaintiff’s mortgage was deemed current as of May 1, 2008, and the one payment for which the plaintiff was in arrears was added onto the end of the mortgage. (Id. at ¶¶ 15-
16). The first payment due under the Agreed Order was due in May 2008. (Id. at ¶ 17). The plaintiff made the May 2008 payment in a timely fashion and has made his monthly mortgage payment each month after May 2008, up to and including the date of the filing of the plaintiff’s First Amended Complaint. (Id. at ¶¶ 18-19).

In March 2009, Defendant OneWest Bank, F.S.B. (“OneWest”) purchased IndyMac, whereupon IndyMac Mortgage Services (“IndyMac MS”) became a division of OneWest. (Id. at ¶¶ 20-21). On July 16, 2009, OneWest, doing business as IndyMac MS, sent the plaintiff a letter claiming he was one month behind on his payments. (Id. at ¶ 22). In response, on July 28, 2009, the plaintiff wrote to OneWest, enclosing a copy of the Agreed Order from his bankruptcy proceeding and requesting that OneWest supply him with documentation that he nevertheless remained one month behind. (Id. at
¶¶ 24-26). Again, on August 3, 2009, and September 16, 2009, IndyMac MS sent letters to the plaintiff alleging he was behind on his mortgage payments. (Id. at ¶¶ 28-29).

OneWest continues to assess monthly late fees against his account and has informed credit reporting agencies that the plaintiff’s mortgage is delinquent, though plaintiff alleges he is current on his monthly mortgage payments.

OneWest argued that all of the plaintiff’s claims for relief were preempted by the Home Owners’ Loan Act of 1933, 12 U.S.C. § 1461, et seq. (“HOLA”). (Id. at 4).

Motion to Dismiss denied in part and granted in part. Motion to Strike denied. Plaintiff was allowed to proceed.

Foreclosure Defense and Offense: Good News For Class Actions and Individual Actions

As with all cases cited here, you should get on line and capture the pleading documents and other pertinent motions, discovery etc. It would help us and thousands of others, if you would send what you find to ngarfield@msn.com.

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McKell v. Washington Mutual-Class Action Defense Cases: Defense Motion To
Dismiss Class Action Improperly Granted As To Breach of Contract And UCL
Claims Based On Federal RESPA Violations California Court Holds
California Court Holds as Matter of First Impression that RESPA Prohibits
Lender from Marking Up Costs of Another Provider's Services Without
Providing Additional Services of its Own 

Plaintiffs filed a putative class action lawsuit against Washington Mutual
Bank in California state court alleging inter alia violations of
California’s unfair competition laws (UCL), Consumers Legal Remedies Act
(CLRA), and breach of contract. “The basis of all causes of action was
defendants’ overcharging plaintiffs for underwriting, tax services, and wire
transfer fees in conjunction with home loans. Defendants charged plaintiffs
more for these services than defendants paid the service providers.” McKell
v. Washington Mutual Bank,___ Cal.App.4th___, 2006 WL 2664130 (Cal.App.
September 18, 2006) [Slip Opn., at 2]. Plaintiffs’ UCL claim was premised
upon alleged violations of the California Residential Mortgage Lending Act
(CRMLA) and the federal Real Estate Settlement Procedures Act (RESPA) and
Regulations X, among other state and federal laws. Slip Opn., at 5. The
trial court granted a defense motion to dismiss the class action complaint,
presumably on the ground that the claims “turn on the alleged existence of
an agreement requiring Washington Mutual to charge no more than pass-through
costs for underwriting, tax services, and wire transfers,” id., at 3, which
plaintiffs could not do. The California Court of Appeal affirmed in part and
reversed in part. We do not here discuss those aspects of the trial court’s
ruling that the divided appellate court opinion affirmed. Rather, we focus
on the Court of Appeal’s holdings that plaintiffs had adequately pleaded UCL
and breach of contract claims.

The appellate court first held that the trial court did not err “in
requiring plaintiffs to plead a factual basis for implying an agreement by
[the Bank] to charge only pass-though costs,” Slip Opn., at 8. But in
analyzing the UCL claims, the Court of Appeal explained at page 10,

A cause of action for unfair competition under the UCL may be established
“‘independent of any contractual relationship between the parties.’” . . .
Thus, the determination whether plaintiffs have stated a cause of action for
violation of the UCL is not dependent upon their ability to plead the
existence of an implied agreement to charge only pass-through costs for
underwriting, tax services and wire transfer services.” (Citations omitted.)
Plaintiffs’ fraudulent business practices claims survived demurrer because
“a reasonable consumer likely would believe that fees charged in connection
with a home mortgage loan bore some correlation to services rendered.” Slip
Opn., at 11. The Court rejected the Bank’s argument that Regulation X “only
requires that the HUD-1 statement itemize the charges imposed on the buyer
and seller” because listing the charge “does not preclude a finding [that]
it is deceptive.” Id. (citations omitted).

Plaintiffs’ unfair business practices allegations also survived demurrer
because “the determination whether [a business practice] is unfair is one of
fact which requires a review of the evidence from both parties” and “thus
cannot usually be made on demurrer.” Id., at 12. The Court of Appeal
rejected the Bank’s judicial abstention argument because the Court was
“doing no more than enforcing already-established economic policies.” Id.,
at 13. The Court rejected also the Bank’s argument that the Court “should
not interfere” because “lending practices are strictly regulated” because
plaintiffs are not challenging the amount of the fees per se but rather the
business practice of “lead[ing] borrowers to believe it is charging them for
the cost of certain services it provides, when in reality it is charging
them substantially in excess of such costs.” Id., at 13-14.

Turning to the RESPA claim, the Court of Appeal quoted at length from Kruse
v. Wells Fargo Home Mortgage, Inc., 383 F.3d 49 (2d Cir. 2004), Slip Opn.,
at 16 et seq. Kruse analyzed HUD’s interpretation of section 8(b) and
concluded that it “prohibits a ‘“settlement service provider” from
“mark[ing]-up the cost of another provider’s services without providing
additional settlement services.”’” Id., at 19 (quoting Kruse, at 61-62). As
a matter of first impression, the California appellate court agreed with
Kruse and “adopt[ed] that court’s reasoning as our own.” Id. In accepting
HUD’s interpretation of section 8(b), the Court also noted that “its
interpretation of section 8(b) is consistent with Congress’s stated intent
to protect consumers from unnecessarily high settlement charges.” Id., at 20
(citation omitted).

The Court rejected defense arguments that RESPA and Regulation X expressly
preempt state law claims alleging violations of RESPA and Regulation X, Slip
Opn., at 21-24, and additionally rejected defense claims that plaintiffs’
claims were preempted by the federal Home Owners’ Loan Act (HOLA), 12 U.S.C.
§ 1461 et seq., id., at 24-31. With respect to the HOLA preemption claim,
the appellate court observed that “plaintiffs are not attempting to employ
the UCL to enforce a state law purporting to regulate the lending activities
of a federal savings association” but rather “to enforce federal law
governing the operation of federal savings associations.” Id., at 27. As the
Court explained at page 29,

Insofar as plaintiffs are using the UCL to enforce federal laws as set forth
in RESPA, they are not seeking to enforce “state laws affecting the
operations of federal savings associations.” (§ 560.2(a).) The UCL does not
“purport[] to regulate or otherwise affect [a savings’ association’s] credit
activities” (ibid.) but only provides a means of enforcing federal
requirements. It is thus the type of state law not preempted by federal law.
[Citations.]
With respect to the breach of contract claim, the appellate court admitted
that “[p]laintiffs have still failed to identify the contract and
contractual provision under which [the Bank] required them to pay
underwriting and wire transfer costs” but that they identify the deed of
trust for the fee for tax services. Slip Opn., at 32. The Court agreed that
“[t]he deed of trust . . . required that any tax services fee [the Bank]
charged plaintiffs comported with RESPA,” id., at 33. Because plaintiffs
alleged the fee violated RESPA, they adequately pleaded a breach of contract
claim so as to survive demurrer. Id. 

NOTE: The Court of Appeal had no trouble in affirming the dismissal of the
CLRA claim: “Plaintiffs cite no authority or make no argument demonstrating
that Washington Mutual’s actions were undertaken ‘in a transaction intended
to result or which results in the sale or lease of goods or services.’ . . .
Rather, its actions were undertaken in transactions resulting in the sale of
real property. The CLRA thus is inapplicable . . . ” Slip Opn., at 31
(citation and footnote omitted). The Court also affirmed dismissal of the
common law claims for unjust enrichment, bailment, and conversion, id., at
33-35.

One of the appellate court judges issued a concurring and dissenting opinion
in which he expressed the view that “this entire action is preempted by
federal law,” specifically, the Home Owners’ Loan Act (HOLA). Slip Opn.,
Vogel, J., concurring and dissenting, at 4

 
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