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Bank One, N.A. v. Witasick

A-2791-09T2 (N.J. Super. App. Div. 2011) (Unpublished)

FDCPA — A servicing agent who began servicing a loan before a borrower was in default is not a debt collector under the Fair Debt Collection Practices Act.

A bank financed an individual’s purchase of a motor home. The borrower made regular payments for approximately eighteen months and then began a pattern of late payments that sometimes resulted in double and triple payments on the loan. The bank continued to accept these payments until eventually declaring a default, accelerating the loan, and attempting to repossess the motor home. Its borrower did not cooperate in turning over the vehicle.

The bank’s servicing agent sued the borrower for breach of contract and conversion. It sought a writ of replevin and the balance due on the loan, plus interest, attorney’s fees, and costs. The borrower filed an answer denying the allegations and asserting a counterclaim for alleged violations of the Consumer Fraud Act (CFA), the Fair Debt Collection Practices Act (FDCPA), and the Fair Credit Reporting Act (FCRA).

Finding the borrower in default on the loan, the lower court granted summary judgment on the issue of liability and dismissed the FCRA counterclaim. It left the amount of judgment to be determined after a full accounting. It granted full possession of the collateral to the servicing agent, and authorized the Sheriff to seize the vehicle.

The servicing agent then sought entry of judgment on the balance of its claims and sought dismissal of the entire counterclaim. In a certification, the servicing agent informed the lower court that the borrower had failed to provide the accounting that was ordered; that the vehicle had been seized, but the borrower had not exercised its right of redemption; and that the vehicle would not be sold for a few months because of market conditions. The servicing agent argued that the FDCPA applies to debt collectors, not to the holder of a loan like the servicing agent. At oral argument, the borrower raised three issues, two of which related to damages and one of which related to its counterclaim. First, the borrower argued that the servicing agent’s motion was premature because the amount of the money judgment was not certain since the vehicle had not been sold, and the borrower might in fact, be entitled to a credit. Second, the buyer argued that it was a genuinely disputed issue of fact that the servicing agent violated the CFA by engaging in a course of conduct by acquiescing in the underpayments and overpayments of the note for years, leading the borrower to believe the method of payment was acceptable, and then declaring a default. Third, the borrower claimed that establishing the exact amount due on the note was not its burden, and if there was a genuine question of fact in the court’s mind related to credits due, summary judgment should be denied.

The lower court acknowledged that it was the servicing agent’s burden to establish the amount of the judgment, but the servicing agent had actually put forth its calculation and the borrower did not proffer any countervailing calculations for the court’s consideration. The lower court also rejected the argument that the servicing agent’s course of dealing acted as a waiver of the precise language in the agreement that permitted acceleration of the loan upon default. Finally, although recognizing that the amount of credit was uncertain because the vehicle had not been sold, the lower court noted that the borrower had contributed to the delay by refusing to disclose the location of the vehicle until the court entered its order, and, thus, there was no reason to delay enforcement. The lower court entered judgment in favor of the servicing agent. It ordered the servicing agent to file a post-judgment motion at a later date to adjust the amount of the judgment amount to give fair credit for the sale of the vehicle, and to provide for the servicing agent’s attorneys fees and costs incurred or to be incurred. Finally, the lower court dismissed the remaining counts in the counterclaim.

On appeal, the Appellate Division agreed that the servicing agent was not a debt collector at the time the borrower defaulted on the note because it began servicing the loan before the borrower was in default. The Court then found that the clear and unambiguous language of the financing agreement executed between the bank and borrower addressed the consequences of partial payments. That language mitigated against any finding that the borrower had been misled by the bank’s acceptance of sporadic payments over the years. Additionally, the borrower did not establish any ascertainable loss resulting from the bank’s acceptance of sporadic payments over the years.

Finally, the Court found no error in the award of damages prior to the vehicle’s liquidation. The borrower contributed to the delay in the sale of the vehicle by concealing it following default; the borrower did not undertake an accounting even after being afforded an opportunity to do so; and the borrower did not dispute the accuracy of the payment history presented by the servicing agent.

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