Maryland Legal Alert for Financial Services
Maryland Legal Alert - October 2021
IN THIS ISSUE:
PUTATIVE CLASS ACTION FILED IN MARYLAND FOR ALLEGED MORTGAGE SERVICING ERRORS
DON’T GET SURPRISED BY THE NO SURPRISES ACT: NEW ID REQUIREMENTS EFFECTIVE JANUARY 1, 2022
CFPB ISSUED DEBT COLLECTION FAQS
Putative Class Action Filed in Maryland for Alleged Mortgage Servicing Errors
Throughout the pandemic, mortgage servicers have worked with many of their borrowers to place them into forbearance programs. Whether voluntarily offered in connection with a lender’s internal program or mandated by state or federal authorities, mortgage forbearances proved to be popular for borrowers facing COVID-19 hardships.
While the forbearance may solve one immediate issue, it can create a new problem for borrowers and lenders, namely, how to address the deferred payments scheduled to be paid during the forbearance period.
For borrowers that can resume their regularly scheduled mortgage payments, a payment deferral agreement is usually the preferred off-ramp from a forbearance. In a payment deferral, the parties agree that the borrower will repay the deferred balance (i.e., the amount that would have been paid during the forbearance period if the borrower made the regularly scheduled payments) at the loan’s maturity date when the property is sold or when the loan is refinanced. Generally, interest and penalties will not accrue on the deferred balance.
During the rollout for these programs, some servicers expressed practical and logistical concerns over how to implement these programs into their existing systems. With numerous borrowers exiting forbearance programs, we are starting to observe what may prove to be a flood of COVID-19-era servicing claims.
Recently, a putative nationwide class action suit was filed in the U.S. District Court for the District of Maryland. In this case, the plaintiffs obtained an eight-month forbearance period and, thereafter, agreed to a COVID-19 Payment Deferral Agreement with their servicer. Under the deferral agreement, the forborne payments would not accrue interest and would be repaid at loan maturity, sale of the property or refinancing of the loan.
The plaintiffs allege that instead of setting aside the forborne payments as agreed, the servicer added that balance to the loan’s principal balance. According to the plaintiffs, this resulted in the servicer impermissibly increasing their loan balance and double-charging interest on their deferred payments. The plaintiffs also assert claims for violation of the Truth in Lending Act and Regulation Z (sending inaccurate monthly statements and payoff statements), the Maryland Consumer Protection Act (misrepresenting the deferral agreement terms and loan balance), and the Real Estate Settlement Practices Act (failing to respond to qualified written requests).
Practice Point: We anticipate that these types of claims will become more prevalent as borrowers continue to transition out of forbearances or similar loss mitigation programs. Servicers should review their affected loans and ensure there are no discrepancies in how these loans are being serviced. We will continue to monitor for further developments.
Please contact Bryan M. Mull for any questions concerning mortgage servicing issues.
Contact Bryan M. Mull | 410-576-4227
Don’t Get Surprised by the No Surprises Act: New ID Requirements Effective January 1, 2022
Effective for plan years beginning on and after January 1, 2022, the Consolidated Appropriations Act, 2021 (No Surprises Act) imposes new transparency requirements on group health plans (including grandfathered plans) regarding disclosure of in-network and out-of-network deductibles and out-of-pocket limitations.
More specifically, the No Surprises Act will require a group health plan to include on any physical or electronic plan or insurance identification card issued to plan participants and beneficiaries the following information in clear writing:
- Any applicable plan deductible;
- Any applicable out-of-pocket maximum limitation under the plan; and
- Telephone number and website through which a participant, beneficiary or enrollee may obtain information and assistance.
The U.S. Department of Labor (DOL) recently stated in FAQ guidance that it will not issue regulations clarifying the statutory ID card requirements prior to January 1, 2022. Consequently, until further guidance is published, plans and issuers must implement the ID card requirements in good faith.
When determining whether a plan or issuer has complied with the ID card requirements in good faith, the DOL will consider the extent to which a plan’s ID card includes required information. To clarify, the DOL stated that the required information on an electronic or physical ID card include the following:
- Applicable major medical deductible and applicable out-of-pocket maximum, and
- Telephone number and website address for individuals to seek consumer assistance and access additional applicable deductibles and maximum out-of-pocket limits.
Furthermore, if not all the required information can be included on the ID card, the DOL will consider the ease of obtaining that information through other information set forth on the card, such as a web address or Quick Response (QR) code.
Practice Point: In light of the DOL’s guidance, it is reasonable to conclude that an employer’s group health plan would be in good faith compliance with the new ID card requirements so long as, no later than January 1, 2022, each ID card issued to participants, beneficiaries and enrollees includes the plan’s basic medical deductible and out-of-pocket maximum, as well as a telephone number, web address and/or QR code where any other applicable deductible and maximum out-of-pocket limits may be found.
Additional ID card guidance should be expected in the coming year. So, beginning in 2022, health and welfare plan sponsors, administrators and practitioners, who don’t like surprises, should keep their eyes open for word from the DOL on this topic.
Please contact Barry F. Rosen for questions concerning this topic.
Contact Barry F. Rosen | 410-576-4224
CFPB Issued Debt Collection FAQs
As we previously reported (see Part I and Part II of our Debt Collection Rule coverage), the Debt Collection Rule of the Consumer Financial Protection Bureau (CFPB) becomes effective on November 30, 2021.
With the effective date approaching, the CFPB recently issued FAQs pertaining to debt collectors’ telephonic communications under the Debt Collection Rule. Among other things, the FAQs address required and optional information for “limited-content messages,” and clarify that the so-called Zortman voicemails (i.e., “We have an important message from [company’s name]. This is a call from a debt collector. Please call [company’s telephone number].”) do not qualify as limited-content messages.
The FAQs also address the Debt Collection Rule’s call frequency presumptions. Under the rule, a debt collector is presumed to violate the prohibition against repeated or continuous telephone calls or conversations if the debt collector places a telephone call to a particular person in connection with the collection of a particular debt:
- More than seven times within seven consecutive calendar days; or
- Within a period of seven consecutive calendar days after having had a telephone conversation with the person in connection with the collection of such debt.
Among other things, the FAQs clarify that the above presumption generally applies on a per-debt basis rather than a per-consumer basis (e.g., a consumer with two debts in collection could receive 14 calls from a debt collector in a week — seven for each debt). Also, the FAQs clarify that if a consumer initiates a call, this does not count toward the call frequency limitations, but a conversation initiated by a consumer’s call would count toward the conversation frequency limitations.
Practice Point: Debt collectors should review the FAQs to ensure that their telephone policies are aligned with the Debt Collection Rule. The CFPB has also published a small entity compliance guide with further information on the application of the Debt Collection Rule.
Please contact Bryan M. Mull with any questions concerning this topic.
Contact Bryan M. Mull | 410-576-4227
October 12, 2021
Mull, Bryan M.
Rosen, Barry F.