Emotional distress claims permitted under RESPA

Posted Wed, 08/26/2009 - 12:16 by Headliner

A magistrate judge in Virginia has denied defendants partial motion for summary judgment, ruling that claims for emotional distress are actual damages permitted under RESPA and the Fair Debt Collection Practices Act (FDCPA). In their claims, the plaintiffs seek actual damages, alleging that Countrywide Home Loans failed to properly credit payments on a mortgage loan. The case is: Dannie R. Carter and Dorothy M. Carter v. Countrywide Home Loans Inc., et al., (Civil No. 3:07CV651). On Sept. 17, 2007, Dannie and Dorothy Carter filed a lawsuit in the Circuit Court of Henrico County, Va., against Countrywide for several claims relating to Countrywides alleged failure to properly credit payments that the Carters made toward their mortgage loan with Countrywide. The case was moved to the U.S. District Court for the Eastern District of Virginia, Richmond Division in October 2007. Following a discovery conference with all parties, the District Court provided the defendants with an opportunity to file cross motions for summary judgment on the limited issue of whether actual damages as defined under RESPA and the FDCPA include or exclude claims for economic loss and emotional distress. On April 14, Judge Dennis Dohnal issued his opinion on the matter. The plaintiffs alleged that they are entitled to recover actual damages, additional statutory damages, and attorneys fees and costs for the defendants alleged RESPA and FDCPA violations. Included in the plaintiffs list of actual damages are: the loss of equity in their home resulting from the foreclosure, economic damages, damage to their reputation, and damages for emotional and mental distress, frustration and humiliation. The District Court previously ruled that any actual damages claimed by plaintiffs that are related to the foreclosure of plaintiffs home are barred by the Rooker-Feldman doctrine, given that the state court had already ruled on such issues. The issue remained, however, on whether or not the plaintiffs claims for economic damages and emotional distress constitute actual damages that are recoverable. Countrywide argued that the Carters have no evidence to support their claims and requested dispositive relief on the issue. However, Countrywide does not argue, as was suggested at the conference with the court, that the Carters claims for economic loss and emotional distress are not available under RESPA or the FDCPA. At the same time, [the defendants] argue in [their] motion that plaintiffs claims should fail as a matter of law, said Dohnal. Emotional distress under RESPA Dohnal determined that Section 2605(f) of RESPA, which governs the servicing of mortgage loans and the administration of escrow accounts, allows recovery of actual damages, but the question before the court was whether or not actual damages under 2605(f)(1) includes compensation for economic loss and/or emotional and mental distress. 2605(f) of RESPA provides: Whoever fails to comply with any provision of this section shall be liable to the borrower for each such failure in the following amounts: In the case of any action by an individual, an amount equal to the sum of any actual damages to the borrower as a result of the failure; and any additional damages, as the court may allow, in the

Source/(s):
http://www.hadd.com/node/1394 http://www.respanews.com/Media/MediaManager/Carter_v_Countrywide.pdf

case of a pattern or practice of noncompliance with the requirements of this section, in an amount not to exceed $1,000. Dohnal looked to other cases that have examined 2605(f) and noted that other courts have consistently found that actual damages includes emotional distress damages. He pointed to several specific cases indicating this, including Wright v. Litton Loan Servicing LP, where the court concluded that actual damages includes damages for non-economic loss, such as pain, suffering and emotional distress, and Ploog v. HomeSide Lending Inc., where the court said RESPAs actual damages provision includes recovery for emotional distress. The courts which found RESPAs actual damages provision includes damages for emotional distress did so on the basis that RESPA is a consumer protection statute that should be construed liberally, said Dohnal. Even courts that have not had occasion to consider the issue of whether 2605(f) permits recovery for emotional distress damages have interpreted RESPA as being a consumer protection statute. Dohnal cited just two courts that have held RESPAs actual damages provision does not encompass emotional distress. He pointed to Katz v. Dime Savings Bank and In re: Tomasevic. In Katz, Dohnal said the court examined the legislative history of 2605 and concluded that it was originally enacted by Congress in 1990 as part of the Affordable Housing Act, the purpose of which was to help provide for more affordable housing in the United States. Dohnal said the court reasoned, [T]he duty of a loan officer to respond to borrower inquiries is just one small part of a broad statute designed to help facilitate home ownership. If Congress had intended for this statute to have a remedial purpose, then it would have explained such an intention either in the language of the statute or the accompanying legislative history. Dohnal disagreed with this analysis indicating that it contrasts with the express terms of RESPA. As noted earlier, the statutory language is clear that Congress intended for RESPA to be a remedial consumer protection statute, Dohnal opined. As the court in Rawlings explained, it is also worth noting that the U.S. Department of Housing and Urban Developmentalso interprets RESPA as being a consumer protection statute.' Dohnal further noted that if Congress intended for this one Section of RESPA to not serve a remedial purpose, it is his belief that Congress would have been explicit with such intention, particularly as it would have been contrary to the purposes of the remainder of the statute. Because this Court finds the rationale of [other] cases persuasive, and because nothing in the pertinent statutory language limits the scope of actual damages, the court concludes that 2605s actual damages provision includes possible recovery for plaintiffs emotional distress damages, Dohnal concluded. Regarding the plaintiffs claims to economic loss, according to the court, the defendants did not challenge the fact that the plaintiffs are entitled to recover damages for out-of-pocket expenses for their RESPA claim. However, they argued that the plaintiffs have failed to prove any economic loss resulting from the defendants actions. The court declined to rule on the issue in order to afford ample time to develop the record on whether the plaintiffs have proven any loss. FDCPA reads like RESPA According to Dohnal, the Fair Debt Collection Practices Act is similar to RESPA in that its actual damages provision also encompasses emotional distress damages.

Source/(s):
http://www.hadd.com/node/1394 http://www.respanews.com/Media/MediaManager/Carter_v_Countrywide.pdf

The language of the FDCPAs 1692k and 2605(f) of RESPA are essentially identical, Dohnal noted. Not surprisingly, courts that have analyzed the FDCPA have held that 1692ks provisions allow for recovery of emotional distress damages. Moreover, the Federal Trade Commissions commentary to the FDCPA has established that actual damages for FDCPA violations include damages for personal humiliation, embarrassment, mental anguish or emotional distress as well as out-of-pocket expenses.

Source/(s):
http://www.hadd.com/node/1394 http://www.respanews.com/Media/MediaManager/Carter_v_Countrywide.pdf