Mortgage Lenders & Servicers

A recent Virginia Supreme Court decision, The Game Place, L.L.C. v. Fredericksburg 35, LLC, 813 S.E.2d 312 (Va. 2018), highlights the long-standing statutory requirement for using a deed of lease, affixing a corporate seal, or utilizing acceptable seal substitutes in long-term leases.  In Game Place, the Supreme Court of Virginia ruled that a fifteen-year lease was unenforceable under Virginia’s Statute of Conveyances, which requires that any freehold in land for a term of more than five years, including leases, be accomplished by deed or will.  The Court found that the subject lease was not in the form of a deed and the lessor-lessee relationship could therefore only be enforced as a month-tomonth tenancy against the tenant.  The tenant was current in their rent payments when they terminated the lease and vacated the premises; thus, the Court found the tenant had no ongoing payment obligations owed to the landlord. 

The Statute of Conveyances, Va. Code § 55-2, states: “No estate of inheritance or freehold or for a term of more than five years in lands shall be conveyed unless by deed or will.”  At common law, deeds in Virginia required a wax-imprinted seal or a scroll.  The Virginia legislature has statutorily recognized acceptable substitutes for a formal seal, contained in Va. Code § 11-3.  The substitutes include:  (1) a scroll; (2) an imprint or stamp of a corporate or official seal; (3) the use in the body of the documents of the words “this deed” or “this indenture” or other words importing a sealed instrument or recognizing a seal; and (4) a proper acknowledgement “by an officer authorized to take acknowledgements of deeds.” 

Virginia Practice Tip:  In light of this decision, it is clear under Virginia law that leases with a term of more than five years that do not comport with the Statute of Conveyances may be deemed unenforceable.  Commercial landlords and lenders with loans secured by lease agreements should confirm that the leases comprising or securing their transactions have a formal seal or one of the alternatives available under Va. Code § 11-3.  To the extent a lease for a period longer than five years lacks a seal or language importing a deed of lease as permitted by Va. Code § 11-3, the parties should consider requiring an amendment to the lease agreement, whereby landlord and tenant recognize formally that the lease is a sealed document and/or deed of lease from its effective date.

On June 6, the Consumer Advisory Board’s twenty-two members were informed that they would no longer serve on the CAB and could not reapply for their former positions.

Through June 5, the Consumer Financial Protection Bureau had four advisory bodies: the Academic Research Council, the Community Bank Advisory Council, the Credit Union Advisory Council, and the Consumer Advisory Board. By law, the CFPB must meet twice a year with the CAB to discuss trends in the financial industry, regulations, and the impact of financial products and practices on consumers. Tellingly, the CFPB’s acting director, Mick Mulvaney, has canceled several meetings between the CFPB and its advisory groups during his short tenure.

For the CAB’s former members, the coup de grace came on June 6 when, in an afternoon call, Anthony Welcher, the Bureau’s recently hired Policy Associate Director for External Affairs, informed them that they were terminated. This move came after several members criticized Mulvaney’s leadership and implored him to keep this week’s scheduled—and just cancelled—meeting on the books.

“We’re going to start the advisory groups with sort of a new membership, to bring in these new perspectives for these new dialogues,” Welcher said on the call. “We’re going to be using the current application cycle to populate these memberships in the new groups. So we’re going to be transitioning these current advisory groups over the next few months.”

In the memo announcing the members’ terminations, the CFPB defended this “[r]evamping” as necessary to “increase high quality feedback” and mentioned plans to hold more town halls and roundtable discussions and reduce the new CAB’s ranks. As a later released statement argued, “[b]y both right-sizing its advisory councils and ramping up outreach to external groups, the Bureau will enhance its ability to hear from consumer, civil rights, and industry groups on a more regular basis.” In response to press queries, a CFPB spokesman not only denied the members’ characterization of the agency’s action—“The Bureau has not fired anyone”—but also accused these “outspoken” officials of “seem[ing] more concerned about protecting their taxpayer funded junkets to Washington, D.C., and being wined and dined by the Bureau than protecting consumers.”

Reverse Mortgage Solutions, Inc. (“RMS”), a leading servicer of home equity conversion mortgages, commonly known as reverse mortgages, recently received a complete defense verdict in the United States District Court for the Southern District of West Virginia, in a trial presided over by Judge Irene Berger. The case arose out of a reverse mortgage entered into by the borrower, Teresa Lavis, and RMS in November 2013. When the borrower was unable to pay her taxes and insurance for several years, RMS – with the approval of the U.S. Department of Housing and Urban Development – called the loan due and payable and began foreclosure proceedings. The borrower retained Gary Smith of Mountain State Justice, who prompted her to send a letter to RMS in May 2016 purporting to “rescind” her loan. In early November 2016, the borrower then filed an eight-count Complaint against RMS in the Circuit Court of Raleigh County, West Virginia. RMS removed the case to the U.S. District Court for the Southern District of West Virginia.

The Complaint asserted claims under the West Virginia Consumer Credit Protection Act, the Truth in Lending Act, and the Residential Mortgage Lender, Broker and Servicer Act (“RMLBSA”), including a class action claim alleging that RMS charged various purportedly illegal and excessive fees, charges, and costs at closing. The borrower made individual claims under the West Virginia Consumer Credit Protection Act for unconscionable inducement into the loan, unfair or unconscionable debt collection, and using fraudulent, deceptive or misleading representations to collect a debt, as well as claims for breach of contract, failure to honor payment, rescission under the Truth in Lending Act, and failure to honor rescission. The basic allegations made by the borrower were that the loan officer misrepresented to her that she would never have to make a payment under the loan, was denied meaningful counseling about the loan because RMS steered her to a loan counselor alleged to have a business relationship with RMS, and had no opportunity to read the closing documents because the closing was rushed. She also asserted that RMS improperly sought reimbursement for tax and insurance payments it advanced on her behalf, had no right to foreclose, and failed to honor her purported “rescission” of the loan.

Ruling on a motion to dismiss, Judge Berger agreed with RMS that the borrower’s putative class action claims – alleging improper and unlawful closing fees and charges – were time-barred under the two-year statute of limitations applied to claims under the RMLBSA because they accrued on the date of the closing. The case proceeded on the borrower’s individual claims. Ultimately, on summary judgment, the Court also dismissed the borrower’s claims for unconscionable inducement and unconscionable debt collection. Notably, Judge Berger found that all terms of the loan had been disclosed to the borrower up front, some months before the closing, and that she could not, therefore, base an unconscionable inducement claim on the alleged statements made by RMS’s loan officer. In addition, the Court found – on an issue of first impression in West Virginia – that closing costs and fees were not “debts” that RMS sought to collect. Instead, they were charges and fees for services rendered.

Having dropped her claims for breach of contract and failure to honor payment, the case proceeded to trial on the borrower’s claims that RMS used fraudulent, deceptive or misleading representations to collect a debt and failed to honor her purported rescission of the loan. After a three-day jury trial, during which the borrower was represented by Gary Smith and Bren Pomponio of Mountain State Justice, the jury returned a complete defense verdict for RMS on all counts, finding that RMS did not misrepresent the amount or status of the debt and did not fail to honor the borrower’s purported rescission.

On May 31, the Fourth Circuit Court of Appeals affirmed a $150,000 sanctions award against three consumer attorneys and their law firms for bad faith conduct and misrepresentations.

The opinion reads like a detective story and lays out, in the Court’s own words, “a mosaic of half-truths, inconsistencies, mischaracterizations, exaggerations, omissions, evasions, and failures to correct known misimpressions created by [consumer attorneys’] own conduct that, in their totality, evince lack of candor to the court and disrespect for the judicial process.”

The litigation arose from a payday loan that plaintiff James Dillon obtained from online lender Western Sky.  Later, Dillon engaged attorneys Stephen Six and Austin Moore of Stueve Siegel Hanson LLP and Darren Kaplan of Kaplan Law Firm, PC who filed a putative class action against several non-lender banks that processed loan-related transactions through the Automatic Clearing House network.  Defendant Generations Community Federal Credit Union promptly moved to dismiss Dillon’s lawsuit on the basis of the loan agreement’s arbitration clause.  In response, Dillon challenged authenticity of the loan agreement and a two-year-long dispute ensued during which the district court refused to send the case to arbitration based on Dillon’s authenticity challenge; Generations appealed the district court’s decision; and the Fourth Circuit vacated it and remanded the case for further proceedings on the arbitration issue.  Significantly, when questioned by both the district court and the Fourth Circuit, Six maintained authenticity challenge and represented that he had drafted the complaint without the loan agreement and that Dillon’s claims do not rely on the loan agreement.

Six’s representations regarding the contents of the complaint were problematic given the complaint specifically referenced the loan agreement and its terms.  Evidence uncovered during arbitration-related discovery showed that Dillon possessed the loan agreement all along and, crucially, that he supplied his counsel with a copy of the agreement a week before the complaint was filed.  The latter piece of evidence was discovered only as a result of forensic examination of Dillon’s computer.  Once this evidence came to light, Dillon responded to Generations’ requests for admissions that the loan agreement was authentic.

Generations moved for sanctions against Dillon’s attorneys.  Instead of admitting their wrongdoing, Kaplan argued that there was never any challenge to authenticity, and Six argued that he still doubted authenticity even though he signed Dillon’s admissions that the loan agreement was authentic.  Invoking its inherent authority to punish bad faith behavior, the district court sanctioned Six, Kaplan, and their law firms jointly, ordering them to pay the defendants $150,000 in attorneys’ fees.  Moore was held liable jointly for only $100,000 of the total amount due to his lesser role in the bad-faith conduct.  The lawyers appealed.

The Fourth Circuit summarily rejected their arguments that neither the rules of ethics nor the Federal Rules of Civil Procedure required them to disclose the copy of the loan agreement before discovery commenced.  “These arguments miss the point.  Counsel are not being sanctioned for their failure to disclose the Dillon copy of the Western Sky loan agreement.  Rather, counsel are being sanctioned for raising objections in bad faith—simultaneously questioning (and encouraging the district court to question) the authenticity of a loan agreement without disclosing that the Plaintiff provided them a copy of that loan agreement before the complaint was filed.”

Discovery in consumer litigation is often asymmetrical and focuses on defendants’ obligations.  This opinion is a good reminder that the rules apply to plaintiffs too and that the courts will not condone a “crusade to suppress the truth to gain a tactical advantage.”

In Echlin v. PeaceHealth, the U.S. Court of Appeals for the Ninth Circuit held that a debt collection agency meaningfully participated in collection efforts even if it did not have authority to settle the account, did not receive payments, and was not involved in collection beyond sending two collection letters.  Accordingly, the collection agency did not violate the Fair Debt Collection Practices Act by sending the letters on its own letterhead.

Michelle Echlin incurred a debt in the form of medical bills owed to PeaceHealth.  After Echlin ignored multiple requests for payment, PeaceHealth referred her account to ComputerCredit, Inc. (“CCI”).  CCI sent Echlin two collection letters on its letterhead but Echlin did not respond.  In accordance with its agreement with PeaceHealth, CCI returned the account back to PeaceHealth.  Echlin later filed a purported class action alleging that CCI’s letters created a false or misleading belief that CCI was meaningfully involved in the collection of her debt—a practice known as flat-rating.  CCI and PeaceHealth moved for summary judgment.  The district court granted PeaceHealth’s and CCI’s motions for summary judgment, and Echlin appealed.

The Ninth Circuit found that CCI had meaningfully participated in collection of Echlin’s debt because it controlled the content of collection letters it sent and did not seek PeaceHealth’s approval prior to mailing.  While CCI did not have authority to process or negotiate payments from PeaceHealth, CCI handled correspondence and phone inquiries from debtors.  In addition, CCI personnel returned consumers’ calls if requested.  In rejecting Echlin’s claims that CCI could not have meaningfully participated if it had not handled payments or taken further action in collecting on the account, the Court noted that “[m]eaningful participation in the debt-collection process may take a variety of forms,” as shown by a long, non-exhaustive list of factors considered by courts across the country.

Notably, the Ninth Circuit distinguished cases that addressed the meaningful involvement by attorneys because those cases reflect concerns regarding the “unique sort of participation that is implied by letters that indicate the creditor has retained an attorney to collect its debts.”  The higher standard of involvement required of attorneys and law firms collecting a debt did not apply to non-attorneys.

In a short, straightforward opinion, the Eighth Circuit Court of Appeals joined its sister circuits that have applied a materiality standard to consumer claims of falsity and deception under the Fair Debt Collection Practices Act.

Consumer Paul Hill incurred a medical debt, and the creditor hired Accounts Receivable Services, LLC to collect the debt.  In the collections process, Accounts Receivable unsuccessfully filed a lawsuit against Hill to recover the debt.  The state court ruled that Accounts Receivable was not entitled to prevail in the collection lawsuit because it had not established that the documents purporting to show the assignment of debt were authentic.  Hill then sued Accounts Receivable under the FDCPA, claiming false and misleading representations in violation of 15 U.S.C. § 1692e, including threats “to take any action that cannot legally be taken … .”  15 U.S.C. § 1692e(5).  The United States District Court for the District of Minnesota dismissed Hill’s claims and he appealed, arguing that the Court erred in applying a materiality standard to these provisions.

To decide whether a materiality threshold applies, the Eighth Circuit Court of Appeals examined decisions from its sister circuits on the issue, found their reasoning persuasive, and adopted the view that a violation requires a showing of materiality.  The FDCPA was enacted to require that debt collectors provide information which helps consumers choose intelligently their actions with respect to their debts.  As the Seventh Circuit had explained, “immaterial information neither contributes to that objective (if the statement is correct) nor undermines it (if the statement is incorrect).”  An immaterial statement cannot mislead and, therefore, even if technically false, it is not actionable.

Applying the materiality requirement, the Eighth Circuit concluded that, even if Accounts Receivable had misrepresented authenticity of the debt assignment documents, such misrepresentations were immaterial because Hill did not deny that he incurred the debt and owed it.  Just because the debt collection lawsuit was unsuccessful does not automatically establish a violation of the FDCPA, as the Court previously held in Hemmingsen v. Messerli & Kramer, P.A., 674 F.3d 814, 820 (8th Cir. 2012).  “Accounts Receivable’s inadequate documentation of the assignment did not constitute a materially false representation, and the other alleged inaccuracies in the exhibits are not material.”

The Eighth Circuit’s decision is a welcome addition to the growing line of cases adopting the materiality threshold.

On April 23, the Office of the Comptroller of the Currency Bank added its support to Bank of America’s efforts to convince the Ninth Circuit to review a March 2 panel decision holding that the National Bank Act does not preempt a California state law requiring the payment of 2% interest on escrow accounts. “The panel decision errs in matters of fundamental importance to the national banking system” and “therefore presents the rare case that justifies rehearing,” the OCC wrote.

The case arises from a 2014 putative class action filed by borrower Donald Lusnak, alleging that Bank of America violated California’s Unfair Competition law by failing to pay 2% interest on mortgage escrow accounts, as required by a 1976 California statute. Bank of America argued, on a motion to dismiss, that the California law was preempted by the National Bank Act and its implementing regulations. The lower court agreed, holding that national banks’ incidental powers include providing and servicing escrow accounts and that the California law constituted a significant interference with those powers. The court also held that Dodd-Frank revisions to TILA (which took effect in 2013) did not apply retroactively to the plaintiff’s account and, more importantly, did not “expressly condition” the grant of a national bank’s powers on compliance with state law.

On appeal, a panel of the Ninth Circuit reversed, holding that the Dodd-Frank Act emphasized that the legal standard of preemption set forth in Barnett Bank of Marion County, N.A. v. Nelson applies to questions of whether state consumer financials laws are preempted. Under this standard, a state law is preempted if it “prevents or significantly interferes with the exercise by the national bank of its powers.”

Turning to the preemption question, the panel held that the California law did not rise to the level of significant interference. Specifically, the court pointed to another Dodd-Frank revision – TILA – which requires creditors to pay interest on escrow accounts “if prescribed by applicable state or federal law,” suggesting that Congress did not intend for the NBA to preempt state escrow interest laws. And – more importantly for the case at hand – the panel held that the California law had never been preempted, even before the enactment of Dodd-Frank. The panel dismissed Bank of America’s argument that OCC regulations specifically addressed the preemption issue, finding that the OCC had “inaccurately” interpreted the preemption standard articulated by Barnett Bank. Moreover, those regulations were not entitled to much deference, the panel held.

Interestingly, in a footnote, the court noted that it was not suggesting that “a state escrow interest law can never be preempted by the NBA” and that a state law setting “punitively high rates” may prevent or significantly interfere with a national bank’s business, raising the specter of multiple case-by-case determinations as to when a state escrow interest statute is “punitively high” and when it is not.

On April 13, Bank of America filed a Petition for Rehearing En Banc. In an amicus brief filed on April 23, the OCC called on the full court to grant the Petition, contending that the panel’s criticism of its regulation is “baseless” and that “numerous courts have sustained” the agency’s interpretation of Barnett Bank. The OCC also took issue with the panel’s reliance on Dodd-Frank’s amendments to TILA, arguing that those provisions cannot influence the issue because they went into effect after the borrower obtained his mortgage. On April 20, the American Bankers Association, U.S. Chamber of Commerce, and other industry groups submitted their own amicus brief also urging the Ninth Circuit to review the panel’s decision.

The resolution of this issue is an important one for national banks. As the Ninth Circuit pointed out, thirteen states have escrow interest laws similar to California’s. If the panel decision is not reversed, we expect that national banks will face growing litigation on this issue both in those states and in California. Already in California, at least four lawsuits have been filed in the wake of Lusnak in an attempt by plaintiffs’ lawyers to capitalize on the panel’s decision.

In a recent ruling, the Seventh Circuit Court of Appeals held that plaintiffs stated a viable claim under the Fair Debt Collection Practices Act by alleging that a collection letter which included the safe harbor language set forth in Miller v. McCalla, Raymer, Padrick, Cobb, Nichols, & Clark, LLC, 214 F.3d 872 (7th Cir. 2000), was false and misleading.  In reversing the lower’s court decision on which we previously reported, the Court of Appeals concluded that the letter’s reference to late and other charges was inaccurate, even though it came directly from the Miller safe harbor language, since the defendant could not lawfully impose such charges.  A link to the Seventh Circuit’s decision can be found here.

The letter at issue was an attempt to collect medical debts.  It recited verbatim the safe harbor language, including the statement of the amount of debt and a disclosure that “interest, late charges, and other charges … may vary from day to day … .”  The plaintiffs filed a class action asserting that the letter was misleading because the collector could not lawfully or contractually impose “late charges or other charges.”  In response, the collector argued that it was permitted to charge interest and that reference to late and other charges was not materially misleading.  The trial court agreed because “the central purpose of Miller’s safe harbor formula is to provide debt collectors with a way to notify debtors that the amounts they owe may ultimately vary.”  On appeal, the Seventh Circuit reversed dismissal of the plaintiffs’ claims.

In performing materiality analysis, the Court explained that, while debtors always have some incentive to pay variable debts quickly, the source of variability matters.  The letter did not specify how much the “late charges” are or what “other charge” may apply, “so consumers are left to guess about the economic consequences of failing to pay immediately.”  Because these additional fees and charges may be “a factor in [plaintiffs’] decision-making process,” the plaintiffs plausibly alleged that the letter was materially false or misleading.

The Court also found that the collector was not entitled to safe harbor protection because the Miller language was inaccurate under the circumstances in that the collector could not lawfully impose “late charges and other charges.”  The Court rejected the collector’s reliance on the Court’s earlier decision in Chuway v. Nat’l Action Fin. Servs., 362 F.3d 944 (7th Cir. 2004), wherein the Court instructed collectors to use the safe harbor language if “the debt collector is trying to collect the listed balance plus the interest running on it or other charges.”  Despite the apparent applicability of Chuway, the Court found that it was not persuasive because Chuway dealt with a fixed debt; therefore, the statement was arguably made in dicta.  The Court further stated that “in any event, our judicial interpretations cannot override the statute itself, which clearly prohibits debt collectors from [making] false or misleading misrepresentations.”  In support, the Court cited its recent controversial decision in Oliva v. Blatt, Hasenmiller, Leibsker & Moore LLC, 864 F.3d 492 (7th Cir. 2017), that effectively rejected the collector’s reliance on controlling law and found that the bona fide error defense did not apply.

Boucher highlights the need for customized compliance review of collection letters within the context of specific debts.  Such review must take into account not only whether the amount of debt is static or variable but also the sources of variability to help avoid claims of confusion and deception.

In a still-incomplete provocative piece whose conclusions were presented at this year’s American Economic Association (“AEA”) meeting in Philadelphia in January 2018 and highlighted by the American Bankruptcy Institute on March 29, 2018, three economists—Gene Amromin, Vice President and Director of Financial Research at the Federal Reserve Bank of Chicago; Janice C. Eberly, Professor of Finance at Northwestern University’s Kellogg School of Management; and John Mondragon, Assistant Professor of Finance at Kellogg—pinpoint a new potential culprit behind the nation’s student loan crisis.

As reported by the Federal Reserve Bank of New York, since the recession began in 2008, federally-owned student debt has grown from around 5% of all household debt to around 11.2%, and from $619.32 billion to $1.49 trillion. The report to the AEA discounts two commonly-cited factors for this increase: a growing number of students and soaring tuition costs. Simply put, with undergraduate enrollment only increasing by 4% from 2008 to 2015, the average growth in net tuition and fees from the 2007-08 to the 2017-18 school year cannot explain the dramatic increase in student debt seen over the last decade.

The numbers as to this latter area are debatable. According to some sources, the increase was 3.2%, 2.8%, and 2.4% at public four-year, public two-year, and private non-profit four-year universities, respectively. According to others, however, it was 37%. Importantly, not even the latter and larger figure would account for the explosion in student debt.

Instead, these scholars posit another possibility: the collapse of housing prices. They reason that many people tend to borrow money against their houses to fund their children’s educations (on average, a household with a child in college will extract $3,000 more in home equity than those without). Thus, when housing values collapsed from 2006 through 2012, thereby causing a credit crisis which greatly contributed to America’s Great Recession, the spigot for these funds closed. As home equity financing thusly dried up, many students faced two options: either dropping out of school or relying on education loans to meet their bills. Naturally enough in a nation in which higher education remains the surest apparent path to long-term prosperity, many students opted to incur greater debt. Ultimately, at least according to Amromin, Eberly, and Mondragon, a $1 drop in home equity loans due to a drop in a house’s value corresponded with 40 to 60 cents more in student borrowing.

Fittingly, the problem of student debt potentially linked to declining home values may be coming full circle. The National Association of Realtors reports that 83% of adults aged 22 to 35 with student debt who have yet to buy a house blame their lack of homeownership on student loans. Lending credence to these survey results, the Federal Reserve Board has found that for every 10% in student loan debt a person holds, their chance of home ownership drops 1-2% during their first five years after school.

For hard data regarding America’s consumer debt, one can consult the website of the Federal Reserve Bank of New York.

We previously reported on the Seventh Circuit Court of Appeals’ decision in Oliva v. Blatt, Hasenmiller, Leibsker & Moore, LLC, 864 F.3d 492 (7th Cir. 2017).  In Oliva, the sharply-divided Seventh Circuit held that the debt collector was liable under the Fair Debt Collection Practices Act even though the collector followed a longstanding law on venue selection, including the Seventh Circuit’s own controlling precedent at the time.  The Supreme Court has now denied the debt collector’s petition for review of the Oliva ruling.

As we explained in our previous post, the case arose out of the debt collector’s choice of venue in filing a collections lawsuit.  The debt collector relied on the Seventh Circuit’s 18-year-old controlling precedent interpreting the FDCPA’s venue provision and probably never foresaw that its entirely justified conduct would result in FDCPA liability.  The problem was that of timing.  During the pendency of the debt collection lawsuit, the Seventh Circuit overruled itself, thus rendering the debt collector’s choice of venue erroneous.  When the borrower sued, the trial court entered a judgment for the debt collector on the grounds of a bona fide error defense.  Sitting en banc, the Seventh Circuit reversed on the grounds that the new precedent applied retroactively and, therefore, the debt collector’s conduct violated the FDCPA even though it had not at the time of the conduct.  The Seventh Circuit also rejected the debt collector’s argument that its venue choice was subject to a bona fide error defense.

In its petition to the Supreme Court, the debt collector led with a quote from Justice Kennedy’s dissent in Jerman v. Carlisle, McNellie, Rini, Kramer & Ulrich, L.P.A., 559 U.S. 573 (2010).  The majority in Jerman held that the bona fide error defense under the FDCPA applies to mistakes of fact and not mistakes of law,  no matter how justified.  In his dissent, Justice Kennedy predicted that the Supreme Court’s holding would result in liability where a debt collector follows a “particular practice [that] is compelled by existing precedent … if that precedent is later overruled.”

This is exactly what happened here.  As the debt collector emphasized, the issue with the Seventh Circuit’s expansive reading of Jerman is that it characterized the debt collector’s error as an unprotected “mistake of law” despite the undisputed fact that, at the time of the conduct at issue, there was no mistake at all.  To be sure, the debt collector’s choice of venue did not become a mistake until the Seventh Circuit changed its controlling precedent and retroactively applied it to the debt collector’s conduct after it took place.

As a result of the Supreme Court’s denial of the debt collector’s petition, the Seventh Circuit’s ruling stays in place, along with all the unfortunate ramifications that will likely follow.  In fact, the Seventh Circuit already relied on Oliva in a recent decision and held that a defendant’s reliance on the Seventh Circuit’s prior precedent did not absolve the defendant from liability under the FDCPA.

We will continue to monitor Oliva’s progeny as it develops.