Federal District Court Confirms Borrower’s Obligation to Timely Pursue Claims

Commentary · September 27, 2011

Prince Lobel’s Financial Services Group recently obtained a significant ruling from a federal district court judge confirming that a borrower who fails to pursue his claims diligently is not entitled to relief under the Fair Debt Collection Practices Act (FDCPA).

In Williams v. Litton Loan Servicing, LP, et al., 1:10-cv-11866-MLW (D. Mass. Aug. 15, 2011), the plaintiff’s mortgage servicer made certain overdue tax payments to the city upon receiving notice of the borrower’s default, as permitted under the terms of the mortgage. The plaintiff subsequently made the same payments to the city, resulting in an overpayment. Instead of requesting a refund from the city, the plaintiff demanded that the servicer refund his payments. After the servicer denied this request, the plaintiff filed suit, claiming that the servicer violated the FDCPA by attempting to collect an unlawful debt. He also alleged that the servicer failed to comply with the Real Estate Settlement Procedures Act (RESPA) by failing to respond to his qualified written request for information.

The court dismissed the FDCPA claim as untimely.  It firmly rejected the borrower’s theory that the one-year limitations period should be “equitably tolled” as a result of a telephone conversation he had with the loan servicer in which the servicer allegedly requested that he refrain from filing suit until it had sufficient time to investigate his allegations. Agreeing with the defendants that the plaintiff was under no obligation to adhere to this request, the court ruled that the borrower had failed to diligently pursue his claims and thus was not entitled to enlarge the limitations period.

The court also dismissed the RESPA claim. Although RESPA imposes certain duties on a servicer to respond to a borrower’s request for information, the court ruled that Congress had not intended to permit affirmative claims to proceed unless the failure to respond caused the borrower pecuniary harm. Since the borrower failed to identify any pecuniary impact that resulted from the alleged failure to respond, the court held that he had not stated a valid claim for relief.

The Williams decision is a stark reminder to defense counsel to test the sufficiency of a complaint at the outset. Simply because a borrower has alleged facts showing a  substantive statutory violation does not necessarily mean that he can prevail on his claims. As the court recognized in Williams, a borrower who has failed to timely pursue his claims and who cannot identify monetary harm resulting from the alleged violations should not be permitted to proceed beyond the pleading stage.

Click the link below to read the full text of the court’s decision.