July 2016 - Lessons Learned

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TH E M R EP O RT | 47 O R I G I NAT I O N S E R V I C I N G A NA LY T I C S S E C O N DA R Y M A R K E T SERVICING THE LATEST How Will a Recent Supreme Court Ruling Affect Servicers? The Supreme Court ruled consumers must be able to prove "concrete" harm before filing a class action suit under the Fair Credit Reporting Act. T he U.S. Supreme Court issued a ruling in mid-May that is likely to affect mortgage servicers. In the case of Spokeo Inc. vs. Rob - ins, the court ruled that consumers must prove they have suffered "concrete harm" in order to bring a class action suit under the Fair Credit Reporting Act (FCRA), and that consumers cannot bring suits based solely on a bare violation of statutes. The respondent, Thomas Robins, and others, originally filed a class-action com - plaint in the U.S. District Court for the Central District of California in May 2014, claiming, among other things, that people search engine Spokeo willfully failed to comply with the FCRA requirements by delivering inaccurate information to them after they used it to search for information. While the Supreme Court ruled that a plaintiff must prove to have suffered "concrete harm," at the same time, the court left it entirely up to lower courts to determine exactly what constitutes concrete harm—and implied that it doesn't necessarily have to be tangible harm. "The Court further suggested that a plaintiff could be able to show a risk of harm sufficiently 'concrete' to support standing based on a statutory violation alone where the harm alleged was based on a long-recognized common-right (for example, slander, libel, and right to obtain publicly-available information)," said Luke Sosnicki, Senior Counsel in the Financial Industry Group in Dykema's Los Angeles office. "But that's pretty much where the Court stopped. With respect to FCRA, the statute at issue in the suit, the only specific example the Court provided as to a published inaccuracy that would not suffice to show a risk of harm 'concrete' enough to support standing would be an incorrect zip code; and even that sentence was qualified with a footnote stating that the example does not apply to 'other types of false information.'" How does the ruling affect mortgage servicers? Sosnicki said the ruling is help - ful to servicers, but at the same time, it leaves many questions unanswered. "As just one example, district courts have recently been staying TCPA (Telephone Consumer Protection Act) class actions until Spokeo was decided, reason - ing that Spokeo could entirely dispose of these cases," Sosnicki said. "It hasn't. Instead, the district courts will now need to decide under what circumstances re - ceiving unsolicited, automated phone calls may constitute 'concrete' harm." Sosnicki continued, "The same applies to many other statutes applicable to loan servicers. For example, it is difficult to conceive how missing a deadline to send a notice of servicing transfer, a response to a qualified written request, or borrower correspondence under RESPA's new loss mitigation rules could result in injury in fact." One thing the Supreme Court's deci - sion does is leave the debate open as to whether an untimely response to a request for information, or providing incorrect information that the recipient of the information does not use or rely on, is akin to publishing an incorrect ZIP code or withholding information the plaintiff has a right to receive. In the meantime, the Ninth Circuit Court of Appeals will have a chance to issue an appellate-level deci - sion defining what exactly constitutes con- crete harm in the context of the FCRA. "Other courts will then follow or reject, analyze, and try to apply to other statutes as well," Sosnicki said. "Ultimately, the issue may return to the Supreme Court with a developed body of caselaw—which may be what the Court intended in the first place." Renters Warehouse Seeks: Takeovers, Transfers & Contract Buyouts. 952-229-8414 | #RentEstate Trust Your SFR Property Management to the Pros FREE Portfolio Management Consultation FREE Contract Buyout Estimates ✔ Manage $3+ Billion in Residential Real Estate ✔ Local Market Sta & Expertise ✔ Centralized Services Model for E‡cient Scale ✔ Customized Financial Reporting Solutions

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