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Student Loan Law: 11.2.1 Introduction

In response to concerns that student loan debt prevents borrowers from working in public service professions—e.g., teaching, law enforcement, public interest law, and social work—Congress passed a loan forgiveness program for public service employees in 2007.6

Consumer Class Actions: 1.7.7.6 Consider Claims for Equitable Relief

When one of the plaintiff’s objectives is to force the defendant to change its practices, or when damages are minimal or may annihilate the defendant, the plaintiff should consider adding an equitable claim that may provide for rescission, cancellation of the transaction at issue, or injunctive or declaratory relief. A class action seeking only equitable relief can be certified under Rule 23(b)(2), which has less strict standards as to certification and notice than a class seeking damages that must be certified under Rule 23(b)(3).

Consumer Class Actions: 1.7.8.2 Manageability

In evaluating which of multiple claims to pursue, keep in mind that it is generally not wise in a class action to raise claims that require proof of different sets of facts. Attorneys should avoid complicating the litigation unnecessarily. It is advisable to limit a class action to one or two basic types of issues that rely on the same facts, same elements of the claims, or the same proof. A class is then more likely to be certified, and the case will then be easier to manage and more efficient to litigate, both for the attorney and the court.

Consumer Class Actions: 1.7.2.4 Mass Arbitration

When both class actions in court and in arbitration are foreclosed, an increasingly common alternative to obtain relief for a large number of consumers or workers is to proceed with a mass arbitration. Mass arbitration involves numerous individual claimants bringing largely identical individual arbitration claims against the same defendant, at the same time, before the same arbitration provider, and through the same lawyers.

Unfair and Deceptive Acts and Practices: 6.6.3.2 Rules Requiring Disclosure of All Material Restrictions

The FTC Telemarketing Rule requires disclosure of all material restrictions, limitations or conditions to purchase, receive or use goods or services that are the subject of an offer that is covered by the rule.273 A telemarketer’s failure to disclose material limitations on the use of an offered credit card is a violation of the rule.274 A number of states have similar requirements in their telemarketing statutes.275

Unfair and Deceptive Acts and Practices: 6.6.4 Coercive Tactics

Coercive tactics to obtain the consumer’s agreement to a transaction can be UDAP violations.279 It is unfair and deceptive for a creditor to take a loan application, mortgage and note from the applicant, record the mortgage, and then disapprove the loan, but refuse to satisfy the mortgage unless the consumer pays a broker fee and other charges.280 Coercing the consumer’s payment of spurious charges in order to get a payoff statement so a home can be sold is a UDAP violation.

Unfair and Deceptive Acts and Practices: 6.7.2.1 Substantive Rules Under Truth in Lending Act

Until its rulemaking authority was transferred to the CFPB, the Federal Reserve Board had the authority to adopt rules identifying unfair, deceptive, or abusive mortgage lending practices. The rules that the FRB adopted, and particularly the analysis it published in the Federal Register when adopting them, may be persuasive to courts in considering whether those practices are UDAP violations. Even if a particular transaction is not subject to one of these rules, some of which have been superseded, courts may be persuaded by the agency’s analysis.

Unfair and Deceptive Acts and Practices: 6.7.2.3 Loans Doomed to Foreclosure Because of a Combination of Risky Features

The federal banking agencies’ guidance letters regarding predatory and unsustainable mortgage lending can act as powerful support for a UDAP unfairness claim. In 2008, the highest court in Massachusetts upheld a preliminary injunction restricting foreclosure by the now-defunct subprime lender Fremont.331 The decision affirms the trial court’s holding that the state attorney general had made a sufficient showing that mortgage loans were presumptively unfair if they contained four characteristics:

Unfair and Deceptive Acts and Practices: 6.7.2.4 Other Unfair and Deceptive Practices in Mortgage Lending

Many states have predatory lending laws that prohibit at least some abusive mortgage lending practices.342 Massachusetts has UDAP regulations requiring extensive disclosures by mortgage brokers and mortgage lenders of all aspects of a mortgage loan (other than a loan used to purchase the home or an open-end home equity line of credit), and prohibiting a variety of unfair and deceptive practices.343 Misrepresenting the advantages344 or failing to di

Unfair and Deceptive Acts and Practices: 6.7.4 Payoff of Mortgage

A lender commits a UDAP violation by misrepresenting the payoff amount on a mortgage loan.377 Requiring the payment of unauthorized fees before a mortgage will be satisfied is deceptive.378 Merely adding such fees to a payoff statement, which gives the false impression that payment is required before the mortgage will be released, is a UDAP violation.379 Violating a state statute requiring prompt recordation of the reconveyance of a deed of trust a

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