Yesterday, the Eighth District Ohio Court of Appeals affirmed the dismissal of a putative class action raising claims against a noteholder, mortgage servicer, and law firm under Ohio’s Consumer Sales Practices Act (“CSPA”). In Glazer v. Chase Home Finance L.L.C., 2013-Ohio-5589 (Ohio App. 2013), the Eighth District held that servicing defaulted mortgage loans is not a “consumer transaction” subject to the CSPA. The court also reinforced that there is no private right of action to enforce alleged violations of R.C. 1319.12, a statute imposing certain regulations on debt collectors. The court’s ruling limits the exposure of the mortgage servicing industry to class action litigation in Ohio—a substantial win given that Ohio was one of the epicenters of the foreclosure crisis.
The plaintiffs alleged that the defendants violated the CSPA by prosecuting a foreclosure case in which they allegedly wrongfully held Chase (the putative noteholder) out as a noteholder when the note was allegedly still held by Fannie Mae. The plaintiff argued that the CSPA applied because the defendants were “suppliers” under the CSPA, made material misrepresentations in a residential mortgage consumer transaction, and engaged in unfair and deceptive debt collection practices.
The court rejected this argument, relying on the Ohio Supreme Court’s recent decision in Anderson v. Barclay’s Capital Real Estate, Inc., 136 Ohio St.3d 31, 2013-Ohio-1933, 989 N.E.2d 997, that residential mortgage servicers are not covered by the CSPA. While the plaintiff attempted to distinguish Anderson, reasoning that Anderson focused on “primary mortgages” rather than mortgages that had gone into default or foreclosure, the Eighth District rejected that distinction because Anderson expressly held the “management of loans in default” was not covered. As a result, the court found the foreclosure-related actions were not “consumer transactions” and dismissed the plaintiff’s CSPA claim for lack of standing. Likewise, for similar reasons, the court also found that mortgage servicers were not “suppliers” subject to CSPA.