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Unfair and Deceptive Acts and Practices: 6.7.5.2 Role of HAMP Guidelines

The irresponsible mortgage lending in the early years of the 21st century left many homeowners with unsustainable mortgage obligations and led them to seek modifications of their mortgage loans to avoid foreclosure. The federal government responded by creating several programs to encourage loan modifications, and many lenders created internal programs to offer homeowners workouts or other options to avoid foreclosure. Unfortunately, broken promises, misinformation, lack of follow-through, and other missteps characterized mortgage servicers’ implementation of these options.

Unfair and Deceptive Acts and Practices: 6.7.5.4.2 Breach of agreement to modify loan as UDAP violation

Courts in many states have allowed consumers to proceed with claims that creditors violated UDAP statutes by breaching a representation or agreement that a mortgage loan would be modified if the consumer complied with certain conditions.416 However, courts may require an allegation of something more than a simple breach of contract to state a UDAP claim.417 Whether such a claim is viable depends on precisely what the creditor represented to the consumer.418

Unfair and Deceptive Acts and Practices: 6.7.5.4.3 Unfair loan modification terms

Many UDAP statutes prohibit unfair as well as deceptive acts. Proposing a forbearance agreement in bad faith that provides for higher payments than those originally defaulted upon, plus a large balloon payment, and that is impossible for the homeowners to perform, may be an unfair practice.419 “Dual tracking”—pursuing both loan modification and foreclosure simultaneously—in violation of HAMP guidelines may be unfair.420

Unfair and Deceptive Acts and Practices: 6.7.5.5 Meeting UDAP Statutes’ Injury Requirements in Loan Modification Cases

Most UDAP statutes allow consumers to sue only if the unfair or deceptive practice has caused the consumer a loss or injury, and some require that the consumer have lost money or property.429 In the loan modification context, some courts have required overly elaborate proof that the consumer has met this initial standing-type requirement, transforming it into a requirement of proof of damages.

Unfair and Deceptive Acts and Practices: 6.7.7.1 Introduction

Representing homeowners victimized by foreclosure rescue scams is discussed in detail in NCLC’s Home Foreclosures. This section focuses just on UDAP claims against foreclosure rescuers.

As discussed in the next subsections, foreclosure rescue scams fall into two basis types: “phantom help” scams and deed theft scams. In both cases, the rescuer usually starts by using public records to identify people whose homes are facing foreclosure. The scammer then approaches those people, and offers, for a fee, to help save their homes.

Unfair and Deceptive Acts and Practices: 6.7.7.2 “Phantom Help” Scams

Phantom help scammers promise services such as refinancing, the preparation of pro se pleadings, or other techniques to stave off foreclosure. Instead, the company just provides generic advice, refers the consumer to a bankruptcy attorney, or files a bankruptcy petition for the homeowner. A poorly drafted bankruptcy petition that is dismissed will make matters worse because it will be more difficult for the homeowner to file a proper bankruptcy petition later.

Unfair and Deceptive Acts and Practices: 6.7.7.3 Deed Theft Scams

An even more insidious form of “rescuer” claims to be able to save the home from foreclosure. The rescuer asks the consumer to sign a pile of papers whose import the consumer typically does not understand. Buried in the paperwork are contracts whereby the consumer conveys the home to the rescuer, who then leases it back to the consumer. Sometimes the sale and leaseback is disclosed to the consumer, but with the vague and generally false promise that the consumer can repurchase the home at a future date.480

Unfair and Deceptive Acts and Practices: 6.8.1.1 Credit Card Regulation

The use of credit cards is pervasive in American society, and they have become an integral part of American lives. The rapid growth in credit card lending and debt during the 1990s and 2000s was accompanied by an increase in the variety of abuses and unfair practices involving credit card issuers.

Unfair and Deceptive Acts and Practices: 6.8.1.3 Credit Card Marketing and Advertising

The FTC’s telemarketing rule places special restrictions on sellers who market credit cards. The rule prohibits a telemarketer who represents a high likelihood of success in obtaining a credit card from seeking payment from the consumer before procuring the card.500

TILA also contains a number of protections regarding credit card advertising. These include:

Unfair and Deceptive Acts and Practices: 6.8.2.1 Consumer Financial Protection Bureau Enforcement Actions

The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (hereinafter the Dodd-Frank Act) vested the Consumer Financial Protection Bureau (CFPB) with both supervisory and enforcement authority over the nation’s largest banks, which include most of the top ten credit card issuers.514 The CFPB’s first three enforcement actions were against credit card issuers and involved violations of the prohibition against unfair, deceptive, and abusive acts and practices under section 1036 of the Consumer Financial Protection Act (CFPA), 12 U.S

Unfair and Deceptive Acts and Practices: 6.8.2.2.1 Introduction

A number of abuses are found with credit card products targeting the “subprime market,” which generally means consumers with lower credit scores or impaired credit histories.532 Prior to the CFPB’s actions described in the preceding section, the limited number of consumer protection actions taken by federal banking regulators primarily focused on subprime credit cards.533

Unfair and Deceptive Acts and Practices: 6.8.2.2.2 Office of the Comptroller of the Currency Advisory Letters

The Office of the Comptroller of the Currency (OCC), which until 2011 was the sole regulator of national banks,541 issued an advisory letter identifying a number of unfair and deceptive acts and practices in the marketing of subprime credit cards.542 The OCC letter characterized as possibly unfair and deceptive the promotion of credit cards with credit limits “up to” a specified dollar amount if the “up to” amount is essentially illusory.

Unfair and Deceptive Acts and Practices: 6.9.1.2 Misrepresentation or Nondisclosure of Interest Rate

Failing to comply with the interest rate disclosure provisions of the Truth in Savings Act can be a UDAP violation.567 Misrepresentations regarding the interest that will be paid on a deposit account are also UDAP violations.568 It is deceptive for a bank to fail to pay interest on an interest-bearing account and then refuse, upon discovery, to correct the failure.569 A bank may also violate the UDAP statute by fail

Unfair and Deceptive Acts and Practices: 6.9.2 Check Cashing

Check cashing outlets are common in low-income urban areas. Some states have special laws regulating the fees that these businesses can charge.596 Even before Pennsylvania adopted such a statute, a court held that a check-cashing service engaged in a UDAP violation by charging $1156 to cash a $11,171 Social Security check.597

Check cashing practices are discussed in NCLC’s Consumer Banking and Payments Law.598

Unfair and Deceptive Acts and Practices: 6.9.4 Remittances

Foreign-born workers in the United States often use remittances to transfer money to relatives back in their countries of origin. One decision deals with a money transfer service that disclosed a “net sale fee” of $12 and an exchange rate of 9.71 pesos to the dollar. In fact, it had purchased pesos at an exchange rate considerably more favorable to it, keeping the difference as additional profit.