Mortgage Servicers Face Consumer Lawsuits Under CFPB “Periodic Statement” Final Rule


The CFPB’s final rule amending Regulation Z, which implements the Truth in Lending Act (TILA) as amended by Dodd-Frank, became effective January 10. Among other things, the new rule requires mortgage servicers to provide borrowers with periodic statements that meet very specific content, form, and timing requirements. This rule does not exempt servicers from the periodic statement requirement even if the servicer receives a "cease communication" request from a borrower’s attorney. So, servicers who receive these requests must choose between: (a) not sending the borrower a statement and risking violation of the new rule and TILA, or (b) sending a statement and potentially violating state consumer collection statutes that prohibit communication with a represented borrower. For the most part, mortgage servicers have chosen option (b). As a result, they may face a rash of lawsuits.

While there are no reported decisions yet, the CFPB issued a helpful Advisory Opinion addressing whether a servicer would be liable under the federal Fair Debt Collection Practices Act, 15 U.S.C. § 1692k(e), for sending periodic statements despite a borrower’s "cease communication" request. In its Advisory Opinion, the CFPB expressly exempted servicers from liability under the FDCPA, indicating that they are required to send periodic statements irrespective of whether they receive a "cease communication" request. The CFPB made clear that it "believes that these [periodic statements] provide useful information to consumers regardless of their collections status."

The Advisory Opinion does not address servicers’ liability under parallel state consumer collection statutes, but it provides powerful ammunition to defeat such claims because most state statutes substantively track the FDCPA, and often defer to FDCPA case law. Servicers may also have a "conflict preemption" argument against state law claims. By its terms, TILA preempts any application of state law that is inconsistent with TILA’s mandates. Since TILA now requires servicers to send periodic statements irrespective of whether they receive a "cease communication" request from the borrower, state consumer collection statutes that prohibit periodic statements under those circumstances seem inconsistent with TILA’s mandates, and may be preempted.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Carlton Fields | Attorney Advertising

Written by:


Carlton Fields on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:

Sign up to create your digest using LinkedIn*

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.

Already signed up? Log in here

*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.