CFPB takes action against Citibank over faults in Student Loan Servicing (press release re-post)

FOR IMMEDIATE RELEASE: November 21, 2017

CONTACT: Office of Communications Tel: (202) 435-7170

CONSUMER FINANCIAL PROTECTION BUREAU TAKES ACTION AGAINST CITIBANK FOR STUDENT LOAN SERVICING FAILURES THAT HARMED BORROWERS

Company Deceived Borrowers About Tax Benefits, Incorrectly Charged Late Fees and Interest, Sent Misleading Monthly Bills and Incomplete Notices

Washington, D.C. – The Consumer Financial Protection Bureau (CFPB) today took action against Citibank, N.A. for student loan servicing failures that harmed borrowers. Citibank misled borrowers into believing that they were not eligible for a valuable tax deduction on interest paid on certain student loans. The company also incorrectly charged late fees and added interest to the student loan balances of borrowers who were still in school and eligible to defer their loan payments. Citibank also misled consumers about how much they had to pay in their monthly bills and failed to disclose required information after denying borrowers’ requests to release loan cosigners. The Bureau is ordering Citibank to end these illegal servicing practices, and to pay $3.75 million in redress to consumers and a $2.75 million civil money penalty. 

“Citibank’s servicing failures made it more costly and confusing for borrowers trying to pay back their student loans,” said CFPB Director Richard Cordray. “We are ordering Citibank to fix its servicing problems and provide redress to borrowers who were harmed.” 

Citibank, based in Sioux Falls, South Dakota, is one of the world’s largest banks with over $1.4 trillion in assets. Citibank provides a variety of products to consumers, including credit cards, mortgages, personal loans, and lines of credit. For years, Citibank made private student loans to consumers and also serviced these loans.

As a loan servicer, Citibank manages and collects payments, and provides customer service for borrowers. They are also responsible for providing borrowers with accurate periodic account statements and supplying year-end tax information. The servicer also keeps track of the borrower’s in-school enrollment status and is responsible for granting and maintaining deferments when appropriate.  

For the student loan accounts that Citibank was servicing, the Bureau found that Citibank misrepresented important information on borrowers’ eligibility for a valuable tax deduction, failed to refund interest and late fees it erroneously charged, overstated monthly minimum payment amounts in monthly bills, and sent faulty notices after denying borrowers’ requests to release a loan cosigner. Specifically, the Bureau found that Citibank: 

• Misled borrowers about their tax-deduction benefits: Federal law allows some borrowers to deduct up to $2,500 in student loan interest paid on “qualified education loans” annually. On its website and periodic account statements, Citibank made statements that suggested borrowers had not paid qualified interest, or that the borrowers were not eligible for the qualified interest tax deduction. Consequently, borrowers did not seek this tax benefit, even though they may have been able to benefit from it. 
• Incorrectly charged late fees and interest on loan balances to students still in school: Current students are eligible for in-school deferments, which postpone repayment until six months after they are no longer enrolled in school. Citibank erroneously canceled in-school deferments for certain borrowers based on inaccurate information about their enrollment status. In doing so, Citibank charged late fees when the borrowers did not make payments, even though payments should not have been due. Citibank also erroneously added interest to the loan principal, and failed to refund late fees and erroneously charged interest after discovering that in-school deferments had been terminated in error. 
• Overstated the minimum monthly payment due on account statements:Citibank serviced some loans for “mixed-status borrowers,” who had multiple student loans with Citibank, some of which were in repayment status, while other loans were in deferment status. While loans were in deferment, no payment was required, though borrowers had the option to make payments on those loans. For mixed-status borrowers with student loans in or approaching repayment, Citibank overstated the minimum amount due on the mixed-status account statements. 
• Failed to disclose required information after refusing to release a cosigner: Many consumers applied for student loans from Citibank with a cosigner to help guarantee the loan. Some of these borrowers later requested that these cosigners be released for some or all of their student loans with Citibank. When Citibank received an application from a student loan borrower to release a cosigner and place the loan in the borrower’s name only, Citibank would make a determination based on information in the borrower’s credit report and score. When Citibank denied a cosigner release application, it failed to provide the borrower with all of the information required under the Fair Credit Reporting Act. 

Enforcement Action

Under the Dodd-Frank Wall Street Reform and Consumer Protection Act, the Bureau has the authority to take action against institutions violating consumer financial laws, including engaging in unfair, deceptive, or abusive acts or practices. The CFPB’s order requires Citibank to:

• Refund $3.75 million to harmed consumers: The Bureau’s order requires Citibank to pay $3.75 million in restitution to harmed consumers who were charged erroneous interest or late fees, paid an overstated minimum monthly payment, or received inadequate notices as a result of Citibank’s faulty servicing.
• Make changes to their servicing practices: The Bureau’s order requires Citibank to provide accurate information regarding student loan interest paid, implement a policy to reverse erroneously assessed interest or late fees, and to provide borrowers who were denied a cosigner release with their credit scores, the phone number of the credit reporting agency that generated the credit report, and disclosure language confirming that the credit reporting agency did not make the decline decision.
• Pay a $2.75 million fine: The Bureau’s order requires Citibank to pay a $2.75 million penalty to the CFPB’s Civil Penalty Fund.

A copy of the Bureau’s consent order is available at:http://files.consumerfinance.gov/f/documents/cfpb_citibank-n.a._consent-order_112017.pdf

The CFPB previously addressed many of these issues in a related 2015 enforcement action against Discover for servicing practices related to the loans it acquired from Citibank beginning in late 2010. Today’s enforcement action applies to the private student loans that Citibank retained, and continued to service, after that period.

Earlier this year the Bureau issued a consumer advisory warning student loan borrowers to watch out for similar servicing errors driven by faulty information about whether a borrower was enrolled in school. This advisory highlighted complaints from consumers about surprise late fees and other charges driven by inaccurate college enrollment information.  

The Bureau’s consumer advisory is available at: https://www.consumerfinance.gov/about-us/blog/consumer-advisory-bad-information-about-your-college-enrollment-status-can-cost-you/

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The Consumer Financial Protection Bureau is a 21st century agency that helps consumer finance markets work by making rules more effective, by consistently and fairly enforcing those rules, and by empowering consumers to take more control over their economic lives. For more information, visit consumerfinance.gov.

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CITI (Citibank) subsidiaries CitiFinancial Servicing and CitiMortgage, Inc. to pay 28.8 mil for giving runaround to borrowers trying to save their homes (CFPB release re-post)

January 23, 2017

CONTACT:Office of CommunicationsTel: (202) 435-7170

CONSUMER FINANCIAL PROTECTION BUREAU ORDERS CITI SUBSIDIARIES TO PAY $28.8 MILLION FOR GIVING THE RUNAROUND TO BORROWERS TRYING TO SAVE THEIR HOMES

  
Mortgage Servicers Kept Borrowers in the Dark About Options, Demanded Excessive Paperwork

Washington, D.C. – The Consumer Financial Protection Bureau (CFPB) today took separate actions against CitiFinancial Servicing and CitiMortgage, Inc. for giving the runaround to struggling homeowners seeking options to save their homes. The mortgage servicers kept borrowers in the dark about options to avoid foreclosure or burdened them with excessive paperwork demands in applying for foreclosure relief. The CFPB is requiring CitiMortgage to pay an estimated $17 million to compensate wronged consumers, and pay a civil penalty of $3 million; and requiring CitiFinancial Services to refund approximately $4.4 million to consumers, and pay a civil penalty of $4.4 million. 

“Citi’s subsidiaries gave the runaround to borrowers who were already struggling with their mortgage payments and trying to save their homes,” said CFPB Director Richard Cordray. “Consumers were kept in the dark about their options or burdened with excessive paperwork. This action will put money back in consumers’ pockets and make sure borrowers can get help they need.” 

CitiFinancial ServicingCitiFinancial Servicing is made up of four entities incorporated in Delaware, Minnesota, and West Virginia, and headquartered in O’Fallon, Mo. All are direct subsidiaries of CitiFinancial Credit Company, and an indirect subsidiary of New York-based Citigroup, Inc. As a mortgage servicer, CitiFinancial Servicing collects payments from borrowers for loans it originates. It also handles customer service, collections, loan modifications, and foreclosures. 

CitiFinancial Servicing originates and services residential daily simple interest mortgage loans. With these loans, the interest amount due is calculated on a day-to-day basis, unlike a typical mortgage, where interest is calculated monthly. With a daily simple interest loan, the consumer owes less interest and pays more toward principal when they make monthly payments before the due date. But if payments are late or irregular, more of the consumer’s payment goes to pay interest. Some consumers who notified CitiFinancial Servicing that they faced a financial hardship were offered “deferments.” This postponed the consumer’s next payment due date, and the consumer could still be considered current on payments. But CitiFinancial Servicing did not treat a deferment as a request for foreclosure relief options, also called loss mitigation options, as required by CFPB mortgage servicing rules. 

CitiFinancial Servicing violated the Real Estate Settlement Procedures Act, the Fair Credit Reporting Act, and the Dodd-Frank Wall Street Reform and Consumer Protection Act’s prohibition on deceptive acts or practices. Specifically, CitiFinancial Servicing: 

• Kept consumers in the dark about foreclosure relief options: When borrowers applied to have their payments deferred, CitiFinancial Servicing failed to consider it as a request for foreclosure relief options. As a result, borrowers may have missed out on options that may have been more appropriate for them. Such requests for foreclosure relief trigger protections required by CFPB mortgage servicing rules. The rules include helping borrowers complete their applications and considering them for all available foreclosure relief alternatives. 

• Misled consumers about the impact of deferring payment due dates: Consumers were kept in the dark about the true impact of postponing a payment due date. CitiFinancial Servicing misled borrowers into thinking that if they deferred the payment, the additional interest would be added to the end of the loan rather than become due when the deferment ended. In fact, the deferred interest became due immediately. As a result, more of the borrowers’ payment went to pay interest on the loan instead of principal when they resumed making payments. This made it harder for borrowers to pay down their loan principal.   

• Charged consumers for credit insurance that should have been canceled: Some borrowers bought CitiFinancial Servicing credit insurance, which is meant to cover the loan if the borrower can’t make the payments. Borrowers paid the credit insurance premium as part of their mortgage payment. Under its terms, CitiFinancial Servicing was supposed to cancel the insurance if the borrower missed four or more monthly payments. But between July 2011 and April 30, 2015, about 7,800 borrowers paid for credit insurance that CitiFinancial Servicing should have canceled under those terms. These payments were still directed to insurance premiums instead of unpaid interest, making it harder for borrowers to pay down their loan principal. 

• Prematurely canceled credit insurance for some borrowers: CitiFinancial Servicing prematurely canceled credit insurance for some consumers. Some of those borrowers later had claims denied because CitiFinancial Servicing had improperly canceled their insurance. 

• Sent inaccurate consumer information to credit reporting companies: CitiFinancial Servicing incorrectly reported some settled accounts as being charged off. A charged-off account is one the bank deems unlikely to be repaid, but may sell to a debt buyer. At times, the servicer continued to send inaccurate information about these accounts to credit reporting companies, and didn’t correct bad information it had already sent. 

• Failed to investigate consumer disputes: CitiFinancial did not investigate consumer disputes about incorrect information sent to credit reporting companies within the required time period. In some instances, they ignored a “notice of error” sent by consumers, which should have stopped the servicer from sending negative information to credit reporting companies for 60 days. 

Under the consent order, CitiFinancial Servicing must: 

• Pay $4.4 million in restitution to consumers: CitiFinancial Services must pay $4.4 million to wronged consumers who were charged premiums on credit insurance after it should be been canceled, or who were denied claims for insurance that was canceled prematurely. 

• Clearly disclose conditions of deferments for loans: CitiFinancial Servicing must make clear to consumers that interest accruing on daily simple interest loans during the deferment period becomes immediately due when the borrower resumes making payments. This means more of the borrowers’ loan payment will go toward paying interest instead of principal. CitiFinancial Servicing must also treat a consumer’s request for a deferment as a request for a loss mitigation option under the Bureau’s mortgage servicing rules. 

• Stop supplying bad information to credit reporting companies: CitiFinancial Servicing must stop reporting settled accounts as charged off to credit report companies, and stop sending negative information to those companies within 60 days after receiving a notice of error from a consumer. CitiFinancial Servicing must also investigate direct disputes from borrowers within 30 days. 

• Pay a civil money penalty: CitiFinancial Servicing must pay $4.4 million to the CFPB Civil Penalty Fund for illegal acts.  

The consent order against Citi Financial Services is available at: http://files.consumerfinance.gov/f/documents/201701_cfpb_CitiFinancial-consent-order.pdf 

CitiMortgageCitiMortgage is incorporated in New York, headquartered in O’Fallon, Mo., and is a subsidiary of Citibank, N.A. CitiMortgage is a mortgage servicer for Citibank and government-sponsored entities such as Fannie Mae and Freddie Mac. It also fields consumer requests for foreclosure relief, such as repayment plans, loan modification, or short sales. 

Borrowers at risk of foreclosure or otherwise struggling with their mortgage payments can apply to their servicer for foreclosure relief. In this process, the servicer requests documentation of the borrower’s finances for evaluation. Under CFPB rules, if a borrower does not submit all the required documentation with the initial application, servicers must let the borrowers know what additional documents are required and keep copies of all documents that are sent. 

However, some borrowers who asked for assistance were sent a letter by CitiMortgage demanding dozens of documents and forms that had no bearing on the application or that the consumer had already provided. Many of these documents had nothing to do with a borrower’s financial circumstances and were actually not needed to complete the application. Letters sent to borrowers in 2014 requested documents with descriptions such as “teacher contract,” and “Social Security award letter.” CitiMortgage sent such letters to about 41,000 consumers. 

In doing so, CitiMortgage violated the Real Estate Settlement Procedures Act, and the Dodd-Frank Act’s prohibition against deceptive acts or practices. Under the terms of the consent order, CitiMortgage must: 

• Pay $17 million to wronged consumers: CitiMortgage must pay $17 million to  approximately 41,000 consumers who received improper letters from CitiMortgage. CitiMortgage must identify affected consumers and mail each a bank check of the amount owed, along with a restitution notification letter. 

• Clearly identify documents consumers need when applying for foreclosure relief: If it does not get sufficient information from borrowers applying for foreclosure relief, CitiMortgage must comply with the Bureau’s mortgage servicing rules. The company must clearly identify specific documents or information needed from the borrower and whether any information needs to be resubmitted. Or it must provide the forms that a borrower must complete with the application, and describe any documents borrowers have to submit. 

• Freeze any foreclosures related to the flawed application process and reach out to harmed consumers: For consumers covered under the order who never received a decision on their application, CitiMortgage must stop all foreclosure-related activity, and reach out to these borrowers to determine if they want foreclosure relief options. 

• Pay a civil money penalty: CitiMortgage must pay $3 million to the CFPB Civil Penalty Fund for illegal acts.  

The consent order reflects that CitiMortgage took affirmative steps to reach out to some borrowers before it may have been required to by CFPB rules. While those borrowers also would have benefited from more tailored and accurate notices, and the institution will provide compliant notices to them going forward, those individuals were not included the affected group of consumers in this settlement. This will avoid penalizing the institution for making additional effort, which the Bureau encourages other institutions to make as well.   

The consent order against CitiMortgage is available at: http://files.consumerfinance.gov/f/documents/201701_cfpb_CitiMortgage-consent-order.pdf 

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The Consumer Financial Protection Bureau is a 21st century agency that helps consumer finance markets work by making rules more effective, by consistently and fairly enforcing those rules, and by empowering consumers to take more control over their economic lives. For more information, visit consumerfinance.gov.

Citibank to pay $35 million fine in enforcement action by CFPB over illegal credit card practices (7/21/2015 agency press release re-post)

FOR IMMEDIATE RELEASE: July 21, 2015 CONSUMER FINANCIAL PROTECTION BUREAU ORDERS CITIBANK TO PAY $700 MILLION IN CONSUMER RELIEF FOR ILLEGAL CREDIT CARD PRACTICES  Millions of Consumers Harmed by Bank's Deceptive Marketing and Unfair Billing of Credit Card Add-On Products and Services, and Other Unlawful Practices WASHINGTON, D.C. — The Consumer Financial Protection Bureau (CFPB) has ordered Citibank, N.A. and its subsidiaries to provide an estimated $700 million in relief to eligible consumers harmed by illegal practices related to credit card add-on products and services. Roughly 7 million consumer accounts were affected by Citibank’s deceptive marketing, billing, and administration of debt protection and credit monitoring add-on products. A Citibank subsidiary also deceptively charged expedited payment fees to nearly 1.8 million consumer accounts during collection calls. Citibank and its subsidiaries will pay $35 million in civil money penalties to the CFPB.  “We continue to uncover illegal credit card add-on practices that are costing unknowing consumers millions of dollars,” said CFPB Director Richard Cordray. “In our four years, this is the tenth action we’ve taken against companies in this space for deceiving consumers. We will remain on the lookout for similar conduct and will address it as we find it.”  Citibank, N.A. is a national bank and insured depository institution. Citibank, as well as its subsidiaries Department Stores National Bank, and Citicorp Credit Services, Inc. (USA), marketed or offered credit card add-on products to consumers nationwide. From at least 2003 through 2012, Citibank actively marketed and enrolled consumers in five debt protection add-on products: “AccountCare,” “Balance Protector,” “Credit Protection,” “Credit Protector,” and “Payment Safeguard.” These products promised to cancel a consumer’s payment or balance, or defer the payment due date, if the consumer experienced certain hardships, such as job loss, disability, hospitalization, and certain life events, such as marriage or divorce. Citibank also marketed and sold other add-on products – “IdentityMonitor,” “DirectAlert,” “PrivacyGuard,” and “Citi Credit Monitoring Services” – that offered credit-monitoring or credit-report-retrieval services. Citibank also offered “Watch-Guard Preferred,” a wallet-protection service that notified credit and debit card issuers if the consumers reported a card lost or stolen.  Deceptive MarketingThe Bureau found that Citibank or its service providers marketed these products deceptively during telemarketing calls, online enrollment, “point-of-sale” application and enrollment at retailers, or when enrolled consumers later called to cancel certain products. For example, confusing text on pin-pad offer screens at the point of sale increased the likelihood that consumers applying for credit cards at a retailer would not realize they were both applying for credit and purchasing debt-protection coverage. These illegal practices affected an estimated 4.8 million consumer accounts. Among other things, Citibank’s misleading or illegal marketing or retention practices included:  Misrepresenting cost and fees for coverage: In some cases, telemarketers misrepresented or did not inform the consumer about the cost of the products. In certain telemarketing scripts, Citibank instructed telemarketers to claim a blanket “free” 30-day trial period, when Citibank still charged consumers during the initial 30 days of membership. In other instances, Citibank failed to inform consumers that they would be billed after the 30-day trial period if they did not cancel the product. Citibank also told some consumers they could avoid the fee by paying their balance in full by the due date. But to avoid the fee, consumers had to pay off the balance before the end of their billing cycle so that there would be no balance on the account when billing statements went out.  Misrepresenting benefits of some products: For consumers who signed up for a credit-monitoring product, Citibank claimed the fraud alert service on credit card accounts would alert them of fraudulent purchases. In fact, the credit-monitoring product only provided alerts to changes in a consumer’s credit file maintained by major reporting companies, not at the transaction level. Citibank also misled consumers in telemarketing calls and in online marketing about the credit score benefit. It told consumers the credit score was generated from all the three major credit reporting companies, when in reality the score was generated by a third-party vendor.  Illegal practices in the enrollment process: During telemarketing calls, Citibank’s nonbank subsidiary, Citicorp Credit Services, Inc. (USA), used illegal practices to enroll consumers in these products. That company used leading questions to obtain billing authorizations from consumers for certain add-on products. It also enrolled some consumers without any billing authorization or by construing ambiguous responses during calls for a billing authorization as permission for enrollment, and then charged consumers for the products.  Misrepresenting or omitting information about eligibility for coverage: In some instances, consumers disclosed information to Citibank indicating that they would be ineligible for certain benefits. However, Citibank failed to inform them that they would be ineligible to receive the product benefits and still enrolled them in the product.  Unfair Billing PracticesUnder federal law, in order for Citibank or its vendors to obtain consumers’ credit information to provide the credit-monitoring or credit-report-retrieval services for certain add-on products, consumers generally must authorize access to that information. In many instances, however, Citibank billed consumers for these products without having the authorization necessary to perform the credit-monitoring and credit-report-retrieval services. In other cases, Citibank or its vendors could not provide the promised services for other reasons, such as when the consumer’s information could not be found in the consumer reporting companies’ files. As a result, Citibank:  Charged consumers for benefits they did not receive: Citibank charged consumers whose authorizations were not in order or who could not receive the credit monitoring or other benefits. The company continued to charge consumers for services they were not receiving, in some cases for the entire time the consumer had the product.  Failed to provide product benefits: Consumers may have been under the impression that their credit was being monitored for fraud and identity theft, when, in fact, these services were either not being performed at all, or were only partially performed.  Citibank engaged in these unfair billing practices from at least 2000 through 2013. About 2.2 million consumer accounts were improperly billed product fees while not receiving the full product services.  Deceptive Collection PracticesWhen collecting payment on delinquent retailer-affiliated credit card accounts, Citibank offered consumers the option to pay by phone using a checking account, so the payment would post to the account on the same day. There was a $14.95 fee associated with using this option. Citibank misled consumers by not disclosing the purpose of the expedited payment fee. It misrepresented the payment fee as a “processing” fee and did not explain that the fee was to post payment to the account on the same day it was made rather than a fee to allow payment. Citibank also failed to disclose other no-cost payment alternatives. The company charged the fee even though it was rarely in the consumer’s interest to pay the fee so that the payment would post on the same day.  Enforcement ActionPursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act, the CFPB has the authority to take action against institutions engaging in unfair, deceptive, or abusive practices, or other violations of federal consumer financial law. This is the tenth action the Bureau has taken against companies for illegal practices in the marketing or administration of add-on products and services. The CFPB’s order requires that Citibank:  Provide $700 million in relief to roughly 8.8 million consumer accounts:Citibank must provide approximately $479 million in consumer relief to about 4.8 million consumer accounts as a result of the deceptive marketing or retention practices. It also must pay approximately $196 million to roughly 2.2 million consumer accounts that enrolled in the credit monitoring products and were charged while Citibank did not perform all of the promised services. Department Stores National Bank must provide about $23.8 million in consumer relief to almost 1.8 million consumer accounts for charging expedited payment fees on these delinquent accounts.  Conveniently repay consumers: Citibank will reimburse consumers affected by these practices. Consumers who are eligible for a refund do not have to take any action to get their refund. For the unfair billing practices related to the credit-monitoring products, Citibank has completed reimbursement to eligible consumers. For eligible consumers who have not received refunds yet, Citibank will initiate and complete a remediation process to reimburse those consumers.  End unfair billing practices: Consumers will no longer be billed for the credit monitoring products if they are not receiving the promised benefits.  Cease engaging in illegal practices: Citibank is prohibited from marketing all add-on products by telephone or at the point of sale, or engaging in attempts to retain consumers in these products by telephone, until it submits a compliance plan to the CFPB.  Pay a $35 million penalty: Citibank will make a $35 million penalty payment to the CFPB’s Civil Penalty Fund.  The CFPB is taking this action in coordination with the Office of the Comptroller of the Currency, which is separately ordering a $35 million civil penalty and restitution from Citibank and Department Stores National Bank for some of the same illegal practices.  The full text of the CFPB’s consent order is available at:http://files.consumerfinance.gov/f/201507_cfpb_consent-order-citibank-na-department-stores-national-bank-and-citicorp-credit-services-inc-usa.pdf  ###

The Williams v. Unifund case: Significance

In Williams v. Unifund CCR Partners Assignee of CitiBank the First Court of Appeal, in an opinion by Justice Evelyn Keyes, held that Citibank assignee who sued on a credit card had not met the requirements of proof for breach of contract because it had not produced the underlying cardmember agreement from Citibank or any other document establishing the terms that governed the account, and the monthly account statements showed variation in the interest rate and corresponding accrual amounts for individual billing cycles.

THE WILLIAMS V. UNIFUND CASE (2008 opinion on proof requirements for credit card debt suit)  

This is a credit card case in which the consumer lost on Unifund's motion for summary judgment in the trial court, and then appealed. The appeal was assigned to the First Court of Appeals (Houston), which held that the assignee of Citibank was not entitled to summary judgment on its breach of contract case because it had not produced the cardmember agreement, nor any other documentary evidence of the terms that governed the account.

The interest rate printed on the Citibank account statements varied (--> variable APR), and the assignee claimed additional interest after chargeoff and sale of the account by the original creditor.

SIGNIFICANCE

This case is most usefully cited for the proposition that it is not enough for a creditor to establish the fact that some sort of contract existed; it must instead prove the terms of that contract.

The panel opinion does not mention that the interest rate was required to be set forth in writing pursuant to federal law (TILA & Regulation Z), but cites an old case from Texas for the proposition that the interest rate is a material term in a loan contract, and must therefore be proven when asserting a breach of contract claim involving such a type of debt. (Claims for debt may also arise from other sources, such performance of services).

The opinion also mentions alternative theories (sworn account and quantum meruit) and overrules the consumer's limitations defense.

The award of attorney's fees to Citibank's assignee was also reversed because Unifund was no longer the prevailing party, a requirement for fee recovery under Chapter 38 of the Civil Practice and Remedies Code. The fee claim, by an attorney associated with Hull & Associates, was high for a case of this nature. James Hull and his associates routinely claim much higher amounts as reasonable and necessary that other debt collection attorneys, including those that also litigate in other major cities.
-- > Amounts of fees in debt collection cases.

The court also rejected the sworn account theory as nonviable for collection of cc debt based on the substantive element of such suit: underlying sales transaction(s)

The defendant's SoL defense was overruled as the debt claim was found not to have been time-barred based on the date of the last payment and the date the suit was filed.

The appellate opinion in Williams v. Unifund was written by Justice Evelyn Keyes. It overturned a summary judgment for the debt buyer granted by Judge Lynn Bradshall-Hull, who was then a county court-at-law judge, and later became a District Judge in Harris County.

CAVEAT: This was an appeal from a summary judgment, not a bench trial.

CASE CITES: MSJ ON BREACH OF CONTRACT CLAIM WITH AND WITHOUT CREDIT CARD AGREEMENT

Compare Williams v. Unifund CCR Partners, 264 S.W.3d 231, 236 (Tex. App.-Houston [1st Dist.] 2008, no pet.) (reversing summary judgment because there was no document produced showing terms of credit card agreement), with Rogers v. Unifund CCR Partners Assignee of Citibank, No. 01-10-01146-CV, 2012 Tex. App. LEXIS 3027, at *14 (Tex. App.-Houston [1st Dist.] Apr. 19, 2012, pet. denied) (mem. op.) (affirming summary judgment based on Unifund's evidence of credit card agreement, although not original agreement, that reflected agreement's terms and cardholder's acceptance of those terms by his continued use of credit card).  

Anh H. Regent - Review and critique of standard pleadings filed by this Houston-based debt collection attorney [who is now a debtor in bankruptcy[

Anh Huynh Regent – Profile of debt collection attorney

Anh Regent (not Ann; this is a guy) has his own lawfirm, REGENT & ASSOCIATES, based in Houston, which specializes in debt collection, and has numerous corporate clients, including major credit card banks.

2015 UPDATE: Anh Regent filed for bankruptcy in March 2015 in the Southern District of Texas. He owes his process servers several hundred thousand dollars and one of his (former) debt buyer clients says he absconded with money advanced for payment of filing fees in cases he never filed. He also owes $200,000 to Chase, and smaller amounts to numerous other creditors. Anh Regent is a defendant (or represented the defendant) in numerous actions in which debtors allege that he or his firm violated the Fair Debt Collection Practices Act (FDCPA).    
   

NATURE OF PLEADINGS FILED BY ANH REGENT 

  

Regent files initial pleadings that are longer than those prepared by other debt collection attorneys because they include discovery requests as numbered sections, of which there are seven to nine, counting all. Some also includes attachments (or claim to include them, though they are actually omitted). 

  

Regent's original petition template is unique in pleading a hybrid causes of action titled "SUIT ON OPEN & STATED ACCOUNT/DEBT/BREACH OF CONTRACT" in a single paragraph. Although this is confusing, Regent has been presenting different banks' and debt buyer's cause of action or causes of action against the defendant in such fashion for years. Presumably it is meant to invoke the common-law cause of action of "suit on open account" (which is not applicable to credit card debt claims under long-standing precedents because the creditor does not sell goods or service); account stated (which has been approved for credit card debt collection by several courts of appeals in Texas, but not by all), and breach of contract, which is the correct and obvious legal theory for a debt claim based on a credit card agreement. As for "debt" generally, it is not a cause of action, and it is not clear what legal theory Regent intends to invoke by including it. 

  

DISCOVERY REQUESTS WITHIN THE BODY OF THE PLEADING 
[not proper under the TRCP]

  

The inclusion of discovery request within a pleading is a practice of dubious validity under the rules of civil procedure. One court of appeals has already taken Regent to task for embedding discovery requests within his petition, thus confounding the distinct purposes of pleadings and discovery, in violation of the TRCP, and creating confusion regarding the applicable due date for the answer to the lawsuit and the due date for discovery responses (which is longer). 

Be that as it may, it rarely becomes an issue. Pro se defendants generally do not know that the rules state that discovery is not to be filed, and consumer attorneys probably do not consider it worthwhile objecting, since the plaintiff can simply re-serve the discovery requests by fax or certified mail later. The improper form of service may, however, provide a defense for deemed admissions, or additional grounds for a motion to strike them. It may also provide a basis for an attack on a default judgment. 

           

Regent's typical petition encompasses two types of requests: Requests for Admissions, and Requests for Disclosures. Other debt suit attorneys also serve interrogatories with the citation and petition, but as separate document that also includes other discovery requests.

The purpose of requests for admissions is to use deemed admissions in lieu of evidence for summary judgment, or for default judgment purposes. Deemed admissions result automatically when the Defendant fails to respond to requests for admissions by the deadline. In the case of such default, all propositions which the cardholder is asked to admit, are considered admitted. (--> Deemed admissions in debt suit litigation). 
  
Requests for admissions are not supposed to be embedded in pleadings, but Anh Regent deliberately flouts that rule, and rarely gets taken to account when he uses the deemed admissions so obtained for default judgment purposes. See excerpt from motion for default judgment below:  

Regent uses the tactic because he can then use the return of citation, i.e. the proof that the petition was served, to also prove that the requests for admissions were served.

REGENT PLEADINGS IN COMPARATIVE VIEW

Regent's typical original petition also differs from pleadings filed by other debt collections attorneys in that it alleges (in the fact section) that the revolving balance was accelerated by the original creditor. The pleading typically does not identify the original creditor, however, unless the plaintiff expressly sues as assignee of such-and-such bank, and the original creditor thus appears in the case style.  

ATTORNEY FEES. Regent pleads for attorneys fees in a separate paragraph. He does not plead for a specific amount, but one of the items in the enumerated list of requests for admission asks the defendant to admit that a specific dollar figure is reasonable. That  dollar amount is 25% of the amount that the petition alleges is owed by the defendant.

SUIT-ON-ACCOUNT THEORIES. Regent pleads "open account" as a theory of recovery, and moves for summary judgment on it, as an alternative to breach of contract and account stated (discussed elsewhere). Suit on account, however, presupposes a sales transaction from the creditor to the debtor, and that does not apply in credit card debt cases. Under long-standing appellate decisions, the open account theory fails for the same reason the sworn account theory fails. Sworn account is, after all, not a theory of recovery, it is merely an expedited procedure for bringing a common-law open account suit by attaching verification and documentation to the original petition. If the procedural requisites of Rule 185 are not satisfied, the Plaintiff must prove its common-law account claim under the normal evidentiary standard. But the standard of proof does not affect the substantive requirement that the claim be based on sale of goods or services by the claimant to the defendant.

ORIGINAL CREDITOR SUITS VS LAWSUIT BY DEBT BUYERS. Regent apparently uses the same petition template for original creditors suits and collection suits by debt buyers. Some references in the standard pleading are in the disjunctive ("either/or") form so as to cover alternative scenarios, e.g. reference to "the terms of the agreement with Plaintiff/Plaintiff's predecessor in interest."  Discovery requests similarly refer to "Plaintiff or Plaintiff's predecessor in interest."

VENUE PARAGRAPH. Regent asserts alternative basis why venue would be appropriate in the county in which suit is filed: (1) because this is where the contract was signed; (2) where the Defendant resides, or (3) where the events giving rise to Plaintiff's claim occurred. What is noteworthy here is the inclusion of the first. Credit card accounts typically do not involve signed contracts, and even signed applications are rarely produced as summary judgment or trial exhibits.

APPELLATE REVIEW OF REGENT PLEADINGS 

One court of appeals  has had occasion to examine the quality and sufficiency of Regent's pleading in an appeal from a default judgment. Applying a more exacting standard because a default judgment was involved, it found fault with it for multiple reasons, and reversed the default judgment because none of the theories of recovery that Regent urged on appeal was supported by proper allegations in the petition. Hankston v. Equable Ascent Financial, 382 S.W.3d 631 (Tex.App.- Beaumont - 2012, no petition to Texas Supreme Court).

Here is an excerpt from what the appellate panel had to say about Regent's pleading:

In this case appellee, claiming to be the current owner of an indebtedness, sued two defendants. The pleading references supporting "attached documentation[,]" but neither the underlying contract nor an assignment is attached to the petition. 

Neither the petition nor any attached document names the original lender. The petition includes only an account number, but does not name the defendant who opened the account or signed the contract. See Lambert v. Dealers Elec. Supply, Inc., 629 S.W.2d 61, 63 (Tex.App.-Dallas 1981, writ ref'd n.r.e.) (op. on reh'g) ("[O]nly those matters alleged in the body of the petition are matters upon which defendant is placed upon notice that plaintiff intends to prove upon trial."). 

Appellant's name is misspelled in the preamble, the only place in the petition other than the style where he is named, and the petition (filed in Orange County) does not provide the appellant's residence (in Harris County), although that was known. See Tex.R. Civ. P. 79. The body of the pleading refers to only one defendant, though not by name, an allegation consistent with appellant's argument that he did not sign the contract or open the account. See Lambert, 629 S.W.2d at 63. But appellee seeks to hold both defendants liable for the alleged amount.

In the petition, appellee also states: "However, this amount may not include any payments or credits occurring after the date of this petition or the date of the affidavit of [p]laintiff's representative." The attached "affidavit" appears to be dated eleven months before the default judgment is signed, and refers to a single unnamed "defendant." The affidavit is an apparent attempt to support a suit on account under Rule 185, but the affidavit does not state the "claim is, within the knowledge of affiant, just and true...." See Tex.R. Civ. P. 185; see also Griswold, 249 S.W.2d at 61(reversing default judgment because affidavit did not meet the requirements of Rule 185). Although the affidavit uses the singular "defendant," it does not state which defendant allegedly owes the debt. 

The petition contains no assertion that the account was "for goods, wares and merchandise," for material furnished, for personal services rendered, or for labor done or furnished. See Tex.R. Civ. P. 185; see also Hollingsworth v. Nw. Nat'l Ins. Co., 522 S.W.2d 242, 245 (Tex. Civ.App.-Texarkana 1975, no writ). Furthermore, appellee was not a party to the original transaction. SeeVolvo Petroleum, Inc. v. Getty Oil Co., 717 S.W.2d 134, 138 (Tex.App.-Houston [14th Dist.] 1986, no writ) ("Such accounts, though verified, are hearsay as to such parties[.]"), overruled on other grounds by Sosa v. Cent. Power & Light, 909 S.W.2d 893, 895 (Tex.1995).

Appellee argues that the pleading nevertheless is sufficient as a suit on an open account and on an account stated. But the petition does not include an allegation that the appellant agreed that the balance alleged to be due is correct. See E. Dev. & Inv. Corp. v. City of San Antonio, 557 S.W.2d 823, 824-26 (Tex.Civ.App.-San Antonio 1977, writ ref'd n.r.e.); Unit, Inc. v. Ten Eyck-Shaw, Inc., 524 S.W.2d 330, 334 (Tex.Civ.App.-Dallas 1975, writ ref'd n.r.e.). Rather, the petition itself includes an assertion that the amount may not reflect all payments made. And while the appellee also attempts to assert an action for quantum meruit, the pleading contains no assertion that appellee provided valuable services or materials to appellant. See Vortt Exploration Co. v. Chevron U.S.A., Inc., 787 S.W.2d 942, 944 (Tex. 1990). Also, the discovery requests in the petition reference an express contract. See id. ("Generally, a party may recover under quantum meruit only when there is no express contract[.]").

ALL THREE THEORIES PLEADED BY REGENT FAILED IN TULLY VS. CITIBANK 

In Tully v Citibank, the Texarkana Court of Appeals held that the cardholder’s affidavit filed to counter Citibank’s motion for summary judgment was conclusory and therefore was ineffective, but that it did not matter because Citibank had not met its burden of proof on its only potentially viable theory of recovery: breach of contract. With respect to the other two theories on which Regent had moved for summary judgment, the court held that they were not viable as a matter of law.

The court rejected the proposition that the credit card suit can be brought as a sworn account suit, which a number of other courts of appeals have confirmed also; and held that Citibank could not recover in quantum meruit because it had proven the existence of a contract. The rule has long been that equitable remedies are not available when a plaintiff has a legal remedy for breach of contract. -- > Expresss contract defense to non-contract theories of recovery 

The opinion does not specifically address the implications of a credit card bank withholding the contract (so that it is not before the court), and moving for summary judgment only on the quantum meruit theory. That litigation tactic should fail because a written contract was required under federal law, and the plaintiff’s decision to withhold it does not alter the fact that the relationship between the parties was necessarily a contractual one. --> In re Tran, 351 B.R. 440, 445 (Bankr. S.D. Tex. 2006), aff'd, 369 B.R. 312 (S.D. Tex. 2007)(contract required by TILA).