Justia Banking Opinion Summaries

Articles Posted in US Court of Appeals for the Seventh Circuit
by
Ewing and Webster disputed debts they allegedly owed to debt‐collection companies. Under the Fair Debt Collection Practices Act, debt‐collection companies must report such disputes to credit reporting agencies, 15 U.S.C. 1692e(8), but the companies failed to do so. The plaintiffs sued separately, seeking damages. The companies prevailed at summary judgment. Both district courts determined that the companies’ mistakes were bona fide errors.In consolidated appeals, the Seventh Circuit first held that the plaintiffs suffered intangible, reputational injuries, sufficiently concrete for purposes of Article III standing; they have shown that their injury is related closely to the harm caused by defamation. The court affirmed as to Ewing and reversed as to Webster. In Ewing’s case, a receptionist accidentally forwarded Ewing’s faxed dispute letter to the wrong department. The company had reasonably adapted procedures; if its step‐by‐step fax procedures had been followed, the error would have been avoided. Unlike the one‐time misstep in Ewing, a lack of procedures invited the Webster error. Until debtors and their attorneys knew that the collection company no longer accepted disputes by fax, it was entirely foreseeable that it would continue receiving faxed disputes. There were no procedures to avoid the error that occurred. View "Webster v. Receivables Performance Management, LLC" on Justia Law

by
In 2010, Leszanczuk executed a mortgage contract, securing a loan on her Illinois residence. The mortgage was insured by the FHA. After Carrington acquired the mortgage, Leszanczuk contacted Carrington by phone in December 2016 to make her December payment. Leszanczuk asserts that Carrington told her that her account was not yet set up in their system and that her account was in a “grace period.” In early 2017 Carrington found Leszanczuk to be in default and conducted a visual drive-by inspection of Leszanczuk’s property. Carrington charged Leszanczuk $20.00 for the inspection and disclosed the fee in her March 2017 statement. Leszanczuk claims Carrington knew or should have known that she occupied her property because of the phone conversation and Carrington mailed monthly mortgage statements to the property’s address.Leszanczuk sued Carrington for breach of the mortgage contract and for violations of the Illinois Consumer Fraud and Deceptive Business Practices Act, on behalf of putative nationwide and Illinois classes. She alleged that a HUD regulation limits the fees Carrington may charge under the contract and that the inspection fee was an unfair practice. The Seventh Circuit affirmed the dismissal of the complaint. The mortgage contract expressly permits the disputed fee. Leszanczuk has failed to adequately allege that the inspection fee offended public policy, was oppressive, or caused substantial injury. View "Leszanczuk v. Carrington Mortgage Services, LLC" on Justia Law

by
Palladinetti and others purchased 30 Chicago-area apartment buildings and resold individual apartments as condominiums. Using a process that Palladinetti helped create, his co-defendants bought the buildings, falsely representing to lenders that they had made down payments. Palladinetti served as his co-defendants’ attorney for the purchases and sales and as the registered agent for LLCs formed to facilitate the scheme. The group recruited buyers for the condominiums and prepared their mortgage applications, misrepresenting facts to ensure they qualified for the loans.Palladinetti and his co-defendants were charged with seven counts of bank fraud, 18 U.S.C. 1344(1) and (2), and nine counts of making false statements on loan applications, 18 U.S.C. 1014 and 2. Count one involved a $345,000 mortgage that Palladinetti’s wife obtained for the purchase of a residence. That mortgage application was prepared using the group’s fraudulent scheme in July 2005. The government agreed to dismiss all other counts if Palladinetti were convicted on count one. Because Palladinetti stipulated to almost all elements of section 1344(1), the trial was limited to whether the bank he defrauded was insured by the FDIC when the mortgage application was submitted.The Seventh Circuit affirmed his conviction. The testimony and exhibits demonstrated that one entity was continuously insured, 1997-2008, that on the date the mortgage was executed that entity was “Washington Mutual Bank” and also did business as “Washington Mutual Bank, FA,” and that entity was the lender for the mortgage at issue. View "United States v. Palladinetti" on Justia Law

by
In 2006, the borrowers concealed, from their lender, their lack of equity in four Chicago properties. All defaulted and the lender went into receivership. As receiver for that bank, the FDIC sued the title insurance company that conducted the closings and an appraisal company that aided the transactions. The FDIC settled with the appraisal company and went to trial against the title insurance company, winning a $1,450,000 verdict, less than the $3,790,695 the FDIC wanted. The court granted deducted $500,000 from the verdict to account for the money the FDIC received from its settlement with the appraisal company.The Seventh Circuit affirmed but remanded with instructions to add the setoff amount back into the judgment. A statute telling courts to award “appropriate” prejudgment interest in FDIC receivership cases that blend federal and state law, 12 U.S.C. 1821(l), gave the district court authority to exercise its discretion and to look to state law for guidance. There was no legal error or abuse of discretion in denying prejudgment interest. Because of difficult causation issues, the district court did not abuse its discretion in refusing to amend the jury verdict to add more damages. The district court erred in giving the title company a $500,000 setoff. View "Federal Deposit Insurance Corp. v. Chicago Title Insurance Co." on Justia Law

by
Degroot defaulted on a debt owed to Capital. AllianceOne sent Degroot a letter, stating: The amount of your debt is $425.86 ... interest and fees are no longer being added. Degroot understood that Capital had “charged-off” his account, meaning that his debt would no longer accrue interest or other fees for any reason. Capital subsequently transferred the account to CSI. CSI's 2019 letter stated: BALANCE DUE: $425.86 and “NEW INFORMATION ON YOUR ACCOUNT,” indicating that Capital had placed the account with CSI for collections, with an itemized summary of Degroot’s balance. After offering to resolve the debt, with disclosures required by certain states, concluded by stating “no interest will be added to your account balance through the course of” CSI collection effortsDegroot filed a purported class action, alleging that CSI’s letter misleadingly implied that Capital would begin to add interest and fees to previously charged-off debts if consumers failed to resolve their debts with CSI and that he was “confused.” Degroot asserted that CSI violated the Fair Debt Collection Practices Act. 15 U.S.C. 1692. The Seventh Circuit affirmed the dismissal of the suit. The 2019 letter accurately disclosed the amount of the debt and did not imply fees or interest would be added in the future. Even if CSI’s letter did imply that fees and interest could begin to accrue if the debt remained outstanding, the statement was not misleading given that Wisconsin law provided for the assessment of fees and interest on “static” debts in certain circumstances. View "Degroot v. Client Services, Inc." on Justia Law

by
The Dais obtained a loan from Apex secured by a mortgage on their laundromat. The laundromat ceased operations; the Dais defaulted. Apex agreed to accept a deed in lieu of foreclosure if the property was marketable. A December 2008 inspection revealed that it was in disrepair, exposed to the elements, and open to vagrants. Apex took measures to preserve the property and returned the deed to the Dais in April 2009. In December 2010, two Chicago firefighters lost their lives battling a blaze at the abandoned laundromat. Their estates sued Apex. Apex and the estates settled. Apex's insurer, Federal, denied coverage, citing a policy exclusion for any liability or loss "arising out of property you acquire by foreclosure, repossession, deed in lieu of foreclosure or as mortgagee in possession.” The district court granted Federal summary judgment.The Seventh Circuit vacated, applying Pennsylvania law. Summary judgment was inappropriate given the open question of material fact: who possessed the property at the time of the fire. Apex instructed its realtor to post a notice informing the Dais how to obtain keys for the new locks. Apex urged the Dais to inspect and secure the property. In July 2009, Dai ordered a handyman to board up the property after being cited for building code violations. In October 2009, Dai entered into a settlement to cure the code infractions by November 2010. He failed to do so and served 180 days in jail. Apex had no contact with the property after April 2009. View "Apex Mortgage Corp. v. Great Northern Insurance Co." on Justia Law

by
Spring Hill owned a 240-apartment complex in a Chicago suburb. In 2007, the owner converted the apartments into condominiums and attempted to sell them. Ginsberg recruited several people to buy units in bulk, telling them they would not need to put their own money down and that he would pay them after the closings. The scheme was a fraud that consisted of multiple components and false statements to trick financial institutions into loaning nearly $5,000,000 for these transactions. The seller made payments through Ginsberg that the buyers should have made, which meant that the stated sales prices were shams, the loans were under-collateralized, and the “buyers” had nothing at stake. The seller paid Ginsberg about $1,200,000; Ginsberg used nearly $600,000 to make payments the buyers should have made, paid over $200,000 to the buyers and their relatives, and kept nearly $400,000 for himself. The loans ultimately went into default, causing the financial institutions significant losses.The Seventh Circuit affirmed Ginsberg’s bank fraud conviction, 18 U.S.C. 1344. The evidence was sufficient for the jury to conclude Ginsberg knew that the loan applications, real estate contracts, and settlement statements contained materially false information about the transactions, including the sales prices, the down payments, and Ginsberg's fees. The court rejected a challenge to the admission of testimony by a title company employee. View "United States v. Ginsberg" on Justia Law

by
In 2006-2009,, Ghuman and Khan “flipped” 44 gas stations. Ghuman would recruit a buyer before they purchased the station. The buyers lacked the financial wherewithal to qualify loans. Ghuman and Khan's co-defendant, AEB loan officer Brahmbhatt, arranged loans based on fraudulent documentation. They also created false financial statements for the gas stations. Co-defendant Mehta, an accountant, prepared fictitious tax returns. The loans, which were guaranteed by the Small Business Administration, went into arrears. In 2008-2009 the SBA began auditing the AEB loans; the FBI began looking into suspected bank fraud. AEB ultimately incurred a loss in excess of $14 million.Khan cooperated and pled guilty to one count of bank fraud, 18 U.S.C. 1344, in connection with a $331,000 loan. Ghuman pleaded guilty to another count of bank fraud in connection with a $744,000 loan and to one count of filing a false tax return, 26 U.S.C. 7206. The district court denied Ghuman credit for acceptance of responsibility and imposed a below-Guidelines prison term of 66 months. The court ordered Khan to serve a 36-month prison term and ordered Ghuman to pay $11.8 million and Khan to pay $10.8 million in restitution. The Seventh Circuit affirmed the sentences with an adjustment to Ghuman’s term of supervised release. View "United States v. Khan" on Justia Law

by
In 2012, Seaway Bank sued J&A to collect on loans secured by a mortgage on Chicago property. In 2013, the court entered a judgment of foreclosure. The court approved the sale of the mortgaged property and entered a $116,381 deficiency judgment against the guarantor. In 2017, Illinois regulators closed Seaway. The FDIC was appointed as receiver, set a claims bar date, and published notice. J&A filed no timely claims. Months later, J&A filed a Petition to Quash Service in the 2012 state-court lawsuit. J&A argued that once relief was granted, it was entitled to the property.The FDIC removed the proceeding to federal court and moved to stay the proceedings to allow J&A to exhaust the mandatory claims process under the Financial Institutions Reform, Recovery, and Enforcement Act, 12 U.S.C. 1821(d). The court granted the stay; J&A did not submit any claims by the submission deadline. The FDIC moved to dismiss for failure to exhaust the Act's claims process. J&A asserted that the jurisdiction-stripping provision applied only to claims seeking payment from a failed bank and that J&A did not seek payment but only to quash service and vacate void orders; only if the court granted that non-monetary relief could they pursue “possessory relief,” so that the FDIC’s motion was not ripe because they were not yet seeking the return of the property or monetary relief. The Seventh Circuit affirmed dismissal. The district court lacked jurisdiction over the Petition because J&A failed to exhaust administrative remedies. View "Seaway Bank & Trust Co. v. J&A Series I, LLC, Series C" on Justia Law

by
Taylor fell behind on his mortgage payments during the 2008 financial crisis and sought help under the Home Affordable Mortgage Program (HAMP), which allowed eligible homeowners to reduce their monthly mortgage payments to avoid foreclosure. The first step toward a permanent loan modification was for qualifying borrowers to enter into a Trial Period Plan (TPP, 12 U.S.C. 5219(a)(1)) with their lenders and make lower payments on a provisional basis. Taylor’s lender, Chase, sent him a proposed TPP agreement to be signed and returned to Chase to start the process. That agreement stated that the trial period would not begin until both parties signed the TPP and Chase returned to Taylor a copy bearing its signature. Taylor signed the proposed agreement, but Chase never did. Taylor’s loan was never modified. Taylor sued Chase.The district court granted Chase judgment on the pleadings. The breach of contract claim failed because Taylor failed to allege that Chase had signed and returned a copy of the TPP. The Seventh Circuit affirmed. Chase never pre-committed to sending Taylor a countersigned copy of the TPP; it expressly reserved the right not to The return of the signed copy was a condition precedent to contract formation. Taylor alleged no actions by Chase from which it could be reasonably inferred that Chase intended to proceed with the trial modification absent a countersignature. View "Taylor v. J.P. Morgan Chase Bank, N.A." on Justia Law