May 25, 2019

Colorado Court of Appeals: Collection Agency’s Bold and All-Caps Statement Would Be Confusing to Least Sophisticated Consumer

The Colorado Court of Appeals issued its opinion in Garrett v. Credit Bureau of Carbon County on Thursday, October 18, 2018.

Debt CollectionColorado Fair Debt Collection Practices ActLeast Sophisticated Consumer.

Credit Bureau of Carbon County (Credit Bureau) is an agency that collects or attempts to collect debts owed, due, or asserted to be owed or due to another. It sent Garrett two collection notices demanding payment on a consumer debt. Garrett sued Credit Bureau, asserting that the language of its communications overshadowed and contradicted the statutory requirements of the Colorado Fair Debt Collection Practices Act (the Act). The district court concluded that Credit Bureau’s notices had not violated the Act and denied Garrett’s motion for judgment on the pleadings, granted Credit Bureau’s motion for summary judgment, and dismissed the case.

On appeal, Garrett contended that the district court wrongly concluded that Credit Bureau did not violate the Act because the format and content of Credit Bureau’s notices overshadowed or contradicted the statutorily required disclosures. The Act requires debt collectors to provide a debt validation notice describing the debt. It prohibits debt collectors from using false, deceptive, or misleading representations when collecting a debt. Overshadowing occurs when a collection letter contains the requisite validation notice, but that information is obscured or diminished by the letter’s presentation or format. Contradiction occurs when language accompanying the validation notice is inconsistent with the substance of the rights and duties that the statute imposes. In Flood v. Mercantile Adjustment Bureau, LLC, 176 P.3d 769 (Colo. 2008), the Supreme Court adopted the “least sophisticated consumer” test to determine whether a collection agency’s notice was confusing with respect to the statutorily required disclosures. Here, Credit Bureau’s use of the bold and capitalized phrase “WE CANNOT HELP YOU UNLESS YOU CALL” in the second notice would confuse the least sophisticated consumer because it was capable of being reasonably interpreted as changing the manner in which the consumer was required by law to dispute the debt or its amount. As a matter of law, the notice was deceptive or misleading in violation of the Act.

The judgment was reversed and the case was remanded for the district court to enter judgment for Garrett and award her statutory damages, costs, and a reasonable amount of attorney fees incurred on appeal.

Summary provided courtesy of Colorado Lawyer.

Colorado Supreme Court: Tort Cannot Be Transaction Giving Rise to Obligation to Pay Money, Therefore Not Debt Per Fair Debt Collection Practices Act

The Colorado Supreme Court issued its opinion in Ybarra v. Greenberg & Sada, P.C. on Monday, October 15, 2018.

Finance, Banking, and Credit—Insurance—Statutory Interpretation—Torts.

Ybarra petitioned for review of the court of appeals’ judgment affirming the dismissal of her Colorado Fair Debt Collection Practices Act action against Greenberg & Sada, P.C. The district court dismissed for failure to state a claim, finding that damages arising from a subrogated tort claim do not qualify as a debt within the contemplation of the Act. The court of appeals agreed, reasoning that the undefined term “transaction” in the Act’s definition of “debt,” required some kind of business dealing, as distinguished from the commission of a tort; and to the extent an insurance contract providing for the subrogation of the rights of an insured constitutes a transaction in and of itself, that transaction is not one obligating the debtor to pay money, as required by the Act.

The supreme court held that because a tort does not obligate the tortfeasor to pay damages, a tort cannot be a transaction giving rise to an obligation to pay money, and is therefore not a debt within contemplation of the Act; and because an insurance contract providing for the subrogation of the rights of a damaged insured is not a transaction giving rise to an obligation of the tortfeasor to pay money, it also cannot constitute a transaction creating a debt within contemplation of the Act.

Accordingly, the court of appeals’ judgment was affirmed.

Summary provided courtesy of Colorado Lawyer.

Colorado Court of Appeals: Practice of Billing Foreclosure Clients for Costs Not Incurred Violates CCPA

The Colorado Court of Appeals issued its opinion in State of Colorado ex rel. Coffman v. Robert J. Hopp & Associates, LLC on Thursday, May 17, 2018.

Foreclosure Commitments—Colorado Consumer Protection Act—Colorado Fair Debt Collection Practices Act—Deceptive Trade Practices—Statute of Limitations—Title Insurance Policy—Cancellation Fee—Civil Penalties—Evidence.

Hopp is an attorney whose law firms provided legal services for mortgage defaults, including residential foreclosures, in Colorado. Hopp also owned businesses that supported the law firms’ foreclosure services, including National Title, LLC and First National Title Residential, LLC, which provided foreclosure commitments for the law firms. National Title and First National Title Residential issued title commitments and policies through an underwriter, Fidelity National Title Insurance Company (Fidelity). Fidelity had a Division of Insurance (DOI)-approved manual that set forth rates and charges for foreclosure commitments.

While representing loan servicers, the law firms typically ordered foreclosure commitments from Hopp’s title companies. National Title invoiced the law firms a charge of 110% of the schedule of basic rates upon the delivery of a foreclosure commitment. As a routine practice, within 10 days of filing a foreclosure action, the law firms passed this cost on to the servicers by billing and seeking reimbursement from them for the charge of 110% of the schedule of basic rates, even though this cost may not have actually been incurred.

The State of Colorado ex rel. Cynthia H. Coffman, Attorney General for the State of Colorado, and Julie Ann Meade, Administrator, Uniform Consumer Credit Code (collectively, plaintiffs) sued Hopp, his law firms, his affiliated title companies, and his business that provided accounting and bookkeeping services for the law firms and title companies (collectively, defendants), alleging that defendants violated the Colorado Consumer Protection Act (CCPA) and the Colorado Fair Debt Collection Practices Act (CFDCPA) by engaging in the billing practices described above. The district court found in favor of plaintiffs and imposed penalties of $624,000.

On appeal, defendants contended that the trial court erred by imposing penalties under the CCPA and the CFDCPA because they were barred by the one-year limitation period in C.R.S. § 13-80-103(1)(d) and C.R.S. § 5-16-113(5) (CFDCPA claims), and C.R.S. § 6-1-115 (CCPA claims). Because the CCPA contains a statute of limitations specifically addressing cases brought under its provisions, the three-year statute of limitations controls over the more general C.R.S. § 13-80-103(1)(d). Further, because the CFDCPA did not contain a clear statute of limitations applying to government enforcement actions at the times relevant to this action, a catch-all provision applies requiring the government to file any claims within one year of discovery, which was done in this case. Therefore, the trial court did not err in concluding that the CFDCPA claims were timely filed.

Defendants next contended that the trial court erred when it concluded that they violated the CCPA and the CFDCPA by charging 110% of the schedule of basic rates for foreclosure commitment required by Fidelity’s rates on file with the DOI. This was the same amount that Fidelity’s manual listed as the charge for a completed title insurance policy, even in cases where the policy would never be issued because the foreclosure was cured or cancelled. Defendants did not charge amounts in compliance with Fidelity’s filed rates because they required payment from servicers even when a title insurance policy was never issued. The evidence supported the trial court’s finding that defendants misrepresented the premium charges as actually incurred costs. Therefore, the trial court did not err.

Defendants also contended that the trial court erred when it concluded that they knowingly engaged in a deceptive trade practice. Here, the trial court’s finding that defendants acted knowingly was supported by evidence in the record.

Defendants next argued that the trial court abused its discretion when it admitted plaintiffs’ Exhibit 103 and relied on it in assessing civil penalties against defendants. Exhibit 103 is a 1,114-page spreadsheet compiling electronic invoicing data submitted by Hopp’s law firms through a billing software to the servicers from 2008 until the time of trial. The trial court did not abuse its discretion when it admitted Exhibit 103 as a business record under CRE 803(6).

Plaintiffs contended on cross-appeal that the trial court abused its discretion when it admitted defendants’ Exhibit 1093 to rebut plaintiffs’ Exhibit 104. At times, servicers directed the law firms to order foreclosure commitments from LSI Default Title and Closing (LSI), instead of from one of Hopp’s affiliated title companies. Plaintiffs amended their complaint to add claims for defendants’ violation of the CCPA and CFDCPA through conduct regarding the LSI transactions. Exhibit 104 reflected that LSI appeared to charge defendants only $350 for title commitments ordered, which was representative of a cancellation fee. Exhibit 1093 was an email from an LSI representative to Hopp’s wife, which included an attached spreadsheet showing charges for full policy premiums rather than outstanding charges of $350. There were “unusual and unexplained adjustments” to Exhibit 104, and the trial court declined to place any weight on the exhibit in its final order and concluded that plaintiffs failed to prove their claim based on the LSI transactions. Here, there was a proper foundation for admitting Exhibit 1093, and given the late addition of the LSI claim and the parameters of the claim set forth in the plaintiffs’ written notice, the trial court did not abuse its discretion in declining to exclude Exhibit 1093 as a sanction for defendants’ failure to supplement their mandatory disclosures at a late point in litigation.

Both parties requested an award of attorney fees and costs incurred in this appeal. Plaintiffs, but not defendants, are entitled to an award.

The judgment was affirmed and the case was remanded with directions.

Summary provided courtesy of Colorado Lawyer.