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Diehl v. Money Source Inc.

United States District Court, S.D. Alabama, Southern Division

June 13, 2018

THE MONEY SOURCE, INC., et al., Defendants.



         This matter comes before the Court on the Motion for Summary Judgment of Defendant LoanCare, LLC (doc. 86) and the Motion for Summary Judgment of Defendant The Money Source, Inc. (doc. 91). Both Motions have been extensively briefed and are now ripe for disposition.[1]

         I. Nature of the Case.

         This action arises from a residential mortgage loan transaction gone awry. Plaintiff, Anastasia P. Diehl, contends that defendants LoanCare, LLC (“LoanCare”) and The Money Source, Inc. (“TMS”) engaged in malfeasance by, inter alia, failing to credit two timely mortgage payments to her account, misleading her as to certain payment options, falsely classifying her loan as being in default, and engaging in an aggressive campaign of harassment to collect mortgage payments that she had already paid.

         Diehl's Amended Complaint (doc. 58) sets forth five causes of action against LoanCare and/or TMS.[2] In Count I, Diehl brings a claim against TMS for violation of the Real Estate Settlement Procedures Act, 12 U.S.C. §§ 2601 et seq. (“RESPA”), on the theory that “TMS was required to reasonably investigate the errors identified in the letter [from Diehl in May 2016], make all appropriate corrections and provide the information and documents requested.” (Doc. 58, ¶ 71.) In Count II, Diehl alleges that LoanCare and TMS breached the mortgage agreement, whereas Diehl has not breached such agreement but has instead timely made all required payments. Count III of the Amended Complaint is a fraud claim directed at both LoanCare and TMS, predicated on allegations that LoanCare made misrepresentations of material fact to Diehl concerning the features, benefits, and operation of the Equity Accelerator Program.[3] As for Count IV, Diehl asserts claims of invasion of privacy against LoanCare and TMS, based on predicate factual allegations that those defendants falsely held her in default, threatened imminent loss of her home, engaged in repeated harassing collection calls, and contacted her ex-husband about their false claims of default. (Id., ¶ 87.) Finally, in Count VI of the Amended Complaint, Diehl brings a claim against TMS for violating the Fair Credit Reporting Act, 15 U.S.C. §§ 1681 et seq. (“FCRA”), by failing properly to investigate Diehl's dispute of its reporting of false and derogatory credit information; disregarding or failing to review all relevant information; submitting credit information that it knew to be false, incomplete or unverifiable; failing to modify or delete reporting of credit information concerning Diehl that it knew to be false, incomplete or unverifiable; and failing to respond accurately to Diehl's disputes through the credit reporting agencies. All five claims are targeted by defendants' summary judgment motions.

         II. Background.[4]

         A. Diehl's Mortgage Loan and Payment Request.

         On or about April 15, 2014, plaintiff, Anastasia P. Diehl, entered into a promissory note with non-party Home Mortgage of America, Inc., in the amount of $140, 409, and secured by a mortgage on Diehl's home, located on Peyton Drive North in Mobile, Alabama. (Doc. 118, Exh. 2.) Before Diehl even made her first payment, defendant TMS acquired the loan. (Cooper Dep. (doc. 118, Exh. 3), at 85.) On May 28, 2014, TMS sent Diehl a letter notifying her as follows:

“The servicing of your mortgage loan is being transferred from The Money Source, Inc. to LoanCare, on behalf of The Money Source, Inc. effective 05-27-14. LoanCare has partnered with The Money Source, Inc. and will be acting as the subservicer on behalf of The Money Source, Inc. for such things as issuing billing statements, collecting payments, paying your property taxes and homeowners insurance, and preparing year-end statements.”

(Cooper Decl. (doc. 123, Exh. A), ¶ 12 & Exh. 4.) In August 2015, the servicing of Diehl's mortgage loan was transferred from defendant LoanCare back to TMS, which continues to service that loan today. (Id., ¶¶ 13, 15.) In a Notice of Servicing Transfer dated July 17, 2015, LoanCare notified Diehl that “LoanCare, LLC will stop accepting payments received from you after August 2, 2015. The Money Source, Inc. will collect your payments going forward.” (Id., ¶ 15 & Exh. 5.) Thus, from August 2015 through the present, TMS has been both the owner and the servicer of Diehl's loan. (Cooper Dep., at 86.)

         In November 2014, Diehl contacted LoanCare to ask if she could make mortgage payments bi-monthly to coincide with her paycheck schedule. (Diehl Decl. (doc. 118, Exh. 4.), ¶ 2.) According to Diehl, she “just wanted the convenience of having the mortgage payments automatically withdrawn in conjunction with the direct deposits of [her] paycheck.” (Id.) In response, LoanCare sent an email to Diehl stating, “We do offer a variety of payment options including weekly, biweekly, and semi monthly. Please contact Equity Accelerator Program Enrollment Center directly … for more details.” (Doc. 118, Exh. 6.) A LoanCare representative has testified that LoanCare actually did not offer a variety of payment options at that time. (White Dep. (doc. 118, Exh. 7), at 71.) The email was referring to the Equity Accelerator Program, but made no reference to Paymap, Inc., the entity that administered the program. (Id. at 72.) At any rate, Diehl contacted the Equity Accelerator Program Enrollment Center through the telephone number furnished by LoanCare. (Diehl Decl., ¶ 3.)

         B. The Equity Accelerator Program.

         When borrowers like Diehl requested bi-monthly payment arrangements, LoanCare's practice as of November 2014 was to refer them to the Equity Accelerator Program (“EAP”). (Bielby Dep. (doc. 118, Exh. 5), at 70.) LoanCare would simply provide the borrower with the EAP's information and have them contact the EAP directly. (Id. at 71.) The EAP is owned by nonparty Paymap, Inc., and is not affiliated with LoanCare. (Bielby Decl. (doc. 122, Exh. A), ¶ 18.) Likewise, there is no contractual relationship between TMS and Paymap. (Cooper Decl., ¶ 17.) There was, however, a service agreement between LoanCare and Paymap for the EAP during the relevant time period. (Doc. 118, Exh. 8.)

         On December 2, 2014, Diehl received a solicitation email whose sender was listed as “Equity Accelerator Program, ” with an associated email address of “”. (Doc. 118, Exh. 14.) The email described the benefits of the “LoanCare Equity Accelerator(R) program” and explained that by enrolling, Diehl could save more than $21, 000 in interest payments and pay off her mortgage more than five years early. (Id.) According to the email, the key features of the EAP were that (i) funds would be electronically debited from her checking or savings account every other Friday, then applied to her mortgage based on her due date each month; (ii) Diehl would make additional payments of principal applied directly to her balance; and (iii) the EAP was subject to a monthly transaction fee of $5.42 and a one-time enrollment fee of $295, both of which “are small compared to what you can save.” (Id.) Although nothing in the body of the December 2 email identified the EAP as a product marketed and administered by Paymap, the second page included the following statement: “The Equity Accelerator program is offered by LoanCare under an agreement with Paymap Inc. We provided certain information about you and your mortgage to Paymap so Paymap could assist us in offering the program to you.” (Id. at 2.) Nothing in that disclaimer specified whether payments, electronic debiting of Diehl's account, or application of those payments to Diehl's loan balance would be handled by LoanCare or Paymap or someone else.

         Based on the information provided, Diehl says, her understanding was that LoanCare was offering the EAP, that LoanCare and the EAP were the same entity, and that payments deducted from her account pursuant to the EAP were withdrawn directly by LoanCare for application to her mortgage. (Diehl Decl., ¶ 3.) In reality, however, the way the EAP worked was that Paymap would withdraw funds from the borrower's account, then forward the payment to LoanCare on a monthly basis for application to the borrower's loan balance. (White Dep., at 75.) According to Diehl, had she known that the funds deducted from her account were actually being held by a third party, she would not have enrolled in the EAP, but instead “would have made other arrangements.” (Diehl Decl., ¶ 3.) There is no evidence, however, that she ever inquired or sought clarification from LoanCare or the EAP concerning this issue; rather, she simply assumed that LoanCare handled all payments directly.

         Diehl enrolled in the EAP, but never signed a written contract with Paymap or anyone else in connection with same. (Diehl Decl., ¶ 13.)[5] Nonetheless, pursuant to her enrollment in the program, bimonthly deductions were made from Diehl's account beginning no later than January 2015. (Doc. 118, Exh. 10.) Account activity statements supplied to Diehl reflected that each month, there were two withdrawals from her account, followed by a monthly notation of “Payment sent to your loan servicer” in substantially the full amount of those withdrawals. (Id.) The process appeared to work seamlessly during the first half of 2015; indeed, Diehl experienced no issues, and her loan was current as of August 2015. (Bielby Decl., ¶ 17.) Upon being notified that servicing of her loan was transferring from LoanCare to TMS in August 2015, Diehl contacted the EAP telephonically to ensure that her loan payments would be directed to TMS henceforth. (Diehl Decl., ¶ 8.) EAP representatives assured her that, in light of this development, her loan payments would be submitted to TMS going forward. (Id.) At no time did TMS, LoanCare or anyone else ever instruct Diehl to refrain from using the EAP as her method of making mortgage payments. (Id.)

         C. The Misapplied Mortgage Payments.

         Despite Diehl's proactive efforts to ensure that her loan payments would be processed properly after the servicing transfer from LoanCare to TMS in August 2015, the EAP persistently forwarded Diehl's payments to LoanCare rather than TMS on at least seven occasions, including August 2015, September 2015, October 2015, November 2015, December 2015, January 2016 and April 2016. (Bielby Decl., ¶¶ 21, 36.) Although most of these misdirected funds eventually reached TMS, for some unspecified reason the January 2016 and April 2016 payments did not. In early 2016, TMS notified Diehl that it had not received her January mortgage payment, even though the EAP had withdrawn those funds from her account in December 2015. (Diehl Decl., ¶ 9.) Similarly, in April 2016, TMS notified Diehl that it had not received her April mortgage payment, even though the EAP had withdrawn those funds from her account in March 2016. (Id., ¶ 10.)[6]

         Upon becoming aware that her January 2016 and April 2016 payments were never received by TMS, Diehl promptly endeavored to address and resolve the problem, both through telephone contacts and written correspondence. In January 2016, she called and spoke with representatives of both TMS and LoanCare, ultimately spending roughly an hour and a half on the phone with them. (Diehl Dep. (doc. 118, Exh. 1), at 61-64.) A LoanCare representative instructed her to send an email to them so they could investigate what had transpired. (Id.) Diehl complied. On February 1, 2016, she sent an email to LoanCare, identifying her name and loan number, attaching bank information confirming her payment history, and explaining the problem as follows: “I'm contacting you in regards to my 1/1/2016 payment that was sent to you electronically from the equity accelerator program. The payment was not applied to my mortgage.” (Doc. 118, Exh. 15.)[7] On February 27, 2016, nearly four weeks later, LoanCare sent a response email to Diehl advising her to contact the Equity Accelerator Program directly for further assistance, with the instruction, “If they state that they have sent us your payment, please obtain a proof of payment from them so we may research your request.” (Doc. 118, Exh. 16.) Diehl also sent copies of statements to TMS confirming the withdrawal of funds from her account by the EAP for the January 2016 and April 2016 payments, and otherwise furnished TMS with every document requested for proof of the payment deductions from her account. (Diehl Decl., ¶ 11.)[8] Among the documents Diehl sent to TMS was an April 11, 2016 activity statement from the EAP, confirming the withdrawals from her account in December 2015 and March 2016, as well as the EAP's representation of “Payment sent to your loan servicer” in the full monthly amount in January 2016 and April 2016. (Diehl Decl., ¶ 11; doc. 118, Exh. 10.)

         For its part, TMS continued to deem Diehl's loan in default, despite actual notice of the ongoing discrepancies and disputes over remittance of payments by the EAP to TMS on Diehl's behalf. On February 5, 2016, TMS sent a letter to Diehl advising her that “[y]our mortgage is now one month past due.” (Doc. 118, Exh. 17, at 1.) On May 17, 2016, TMS sent a letter to Diehl notifying her that “the captioned loan is in default” because she failed to make payment in April 2016, and that the amount due was $3, 362.05. (Doc. 118, Exh. 17, at 25.) To make matters worse, in August 2016, TMS took the funds that Diehl had submitted for that month's mortgage payment, and applied the first $234.82 to late fees, rather than to the principal/interest balance. (Cooper Dep., at 138-39.) In effect, this unilateral action by TMS placed Diehl further in default of her loan, even though TMS was well aware of the problem that the EAP had misdirected Diehl's payments for January 2016 and April 2016.

         Not surprisingly, Diehl opted to cancel her enrollment in the EAP. On April 11, 2016, the EAP sent her a letter confirming that her “LoanCare Servicing Equity Accelerator® was closed.” (Doc. 118, Exh. 10, at 5.) From that point on, Diehl's mortgage payments have been deducted by TMS directly from her account without incident.

         D. The Collection Activities and Notice of Servicing Error.

         Beginning in January 2016, Diehl “received hundreds of collection calls from TMS, ” including contacts as late as December 14, 2017, the day following her deposition in this action. (Diehl Decl., ¶ 14.)[9] TMS placed many of these collection calls to Diehl using an automated dialing system. (Cooper Dep., at 79-80.) Plaintiff's evidence is that she received collection calls from TMS at various times of day, and on weekends. (Diehl Decl., ¶ 14.) According to Diehl, she never received a collection call from TMS later than 9:00 p.m. (Diehl Dep., at 199.) The calls would begin respectfully, then the caller would become “aggressive.” (Id.) In addition to using Diehl's cell number (which she had provided to TMS), TMS also placed collection calls to her work telephone number (which she had not provided to TMS). (Diehl Decl., ¶ 14.) Diehl never authorized TMS to contact her at work, and she found TMS's efforts to contact her there to be “very embarrassing.” (Id.)[10] Although Diehl asked TMS to stop calling her, the barrage of collection calls continued unabated. (Id.)

         From Diehl's perspective, the low point of these collection activities occurred on November 4, 2016, when TMS utilized skip-tracing services to locate a telephone number for her ex-husband. (Cooper Dep., a 185-86.) Diehl's ex-husband had nothing to do with the subject mortgage loan and had no obligations under the subject note, yet TMS called him anyway to discuss it, all without Diehl's permission. (Diehl Decl., ¶ 15.) The ex-husband then contacted Diehl by text and telephone, accusing her of squandering child support payments and mismanaging her finances, and causing her significant distress. (Id., ¶ 15 & Exh. 1.)

         On May 9, 2016, Diehl sent a letter to TMS bearing the subject line “Qualified Written Request / Notice of Error.” (Doc. 118, Exh. 23.) In this correspondence, Diehl explained the history of her difficulties with the EAP, including a specific complaint that “several of my payments that were made through the program over the past months have not been applied to my mortgage. I am NOT behind on my mortgage. I have reason to believe that you are not properly applying my payments.” (Doc. 118, Exh. 23.) On that basis, Diehl requested that TMS “investigate all of these matters, ” “make all appropriate corrections, ” provide detailed payment and transaction histories, and “regard this as a qualified written request pursuant to 12 U.S.C. 2605(e).” (Id.) Three days later, on May 12, 2016, TMS sent Diehl a form letter acknowledging her written request for information and advising, “We are working to complete the research you requested on your account and will respond to you within thirty (30) business days of receipt.” (Cooper Decl., ¶ 29 & Exh. 8.)

         In its written response dated June 6, 2016, TMS advised Diehl that “we are not affiliated with” the EAP, and “recommend[ed] that you contact them directly if you have any questions or concerns related to their services.” (Doc. 118, Exh. 24.) TMS also summarized Diehl's payment options in that correspondence. Nowhere in the June 6 letter did TMS explain to Diehl why it had refused to credit payments that it knew she had made through the EAP, from which TMS would accept her payments. Nor did it offer any corrections or other relief to address Diehl's concerns or to solve her problem, which TMS knew or should have known was occurring through no fault of her own. And of course, TMS's collections campaign persisted long after this exchange of correspondence and TMS's receipt of information confirming Diehl's withdrawal and payment history through the EAP.

         During 2016, TMS reported Diehl's account as delinquent to four credit reporting agencies: Equifax, Transunion, Experian, and Innovis. (Cooper Decl., ¶¶ 32-42.) In particular, TMS reported her account as being 30 days' delinquent in April 2016, 60 days' delinquent in August 2016, and 90 days' delinquent in September 2016. (Hoover Dep. (doc. 118, Exh. 21), at 21.) In September 2016, Diehl submitted disputes to Experian and other credit bureaus, explaining that she had never been late on payments and that she had sent bank statements to TMS demonstrating that all such payments had been timely withdrawn from her account. (Doc. 118, Exh. 20.) TMS continued to report Diehl's loan as delinquent until at least February 2018, based on its failure to receive the January 2016 and April 2016 payments. (Cooper Decl., ¶ 45.)

         III. Summary Judgment Standard.

         Summary judgment should be granted only “if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Rule 56(a), Fed.R.Civ.P. The party seeking summary judgment bears “the initial burden to show the district court, by reference to materials on file, that there are no genuine issues of material fact that should be decided at trial.” Clark v. Coats & Clark, Inc., 929 F.2d 604, 608 (11th Cir. 1991). Once the moving party has satisfied its responsibility, the burden shifts to the non-movant to show the existence of a genuine issue of material fact. Id. “If the nonmoving party fails to make 'a sufficient showing on an essential element of her case with respect to which she has the burden of proof, ' the moving party is entitled to summary judgment.” Id. (quoting Celotex Corp. v. Catrett, 477 U.S. 317 (1986)) (footnote omitted). “In reviewing whether the nonmoving party has met its burden, the court must stop short of weighing the evidence and making credibility determinations of the truth of the matter. Instead, the evidence of the non-movant is to be believed, and all justifiable inferences are to be drawn in his favor.” Tipton v. Bergrohr GMBH- Siegen, 965 F.2d 994, 999 (11th Cir. 1992) (internal citations and quotations omitted). “Summary judgment is justified only for those cases devoid of any need for factual determinations.” Offshore Aviation v. Transcon Lines, Inc., 831 F.2d 1013, 1016 (11th Cir. 1987) (citation omitted).

         IV. Analysis.

         A. Statutory Claims Against TMS.

         1. RESPA Claim (Count I).

         In Count I of the Amended Complaint, Diehl alleges that TMS violated the Real Estate Settlement Procedures Act, 12 U.S.C. §§ 2601 et seq. (“RESPA”), by failing to take certain specific actions upon receipt of her Notice of Servicing Error in May 2016. The Amended Complaint expressly alleges that “TMS was required to reasonably investigate the errors identified in the letter, make all appropriate corrections and provide the information and documents requested.” (Doc. 58, ¶ 71.) This allegation dovetails neatly with the provisions of RESPA, which the Eleventh Circuit has summarized as follows: “Basically, a servicer must respond by fixing the error, crediting the borrower's account, and notifying the borrower; or by concluding that there is no error based on an investigation and then explaining that conclusion in writing to the borrower.” Renfroe v. Nationstar Mortg., LLC, 822 F.3d 1241, 1244 (11th Cir. 2016) (citations omitted). Even where a servicer ...

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