Elbert v. Roundpoint Mortgage Servicing Corporation

Background

Amye Elbert alleged that she purchased a home in 2015 through a loan secured by a mortgage. The loan required a monthly payment of $2,044.55 on the first day of each month and stated that failing to pay the full amount when due would place her in default. She alleged that RoundPoint, the loan servicer, sometimes charged her a $12 fee when she made a mortgage payment by phone. She identified four such fees, allegedly charged on November 1, 2018, May 3, 2019, August 5, 2019, and September 4, 2019. She alleged that each payment was applied to a monthly payment at least 30 days overdue and that the fees were not authorized by her mortgage agreement or the applicable housing-agency servicing policy.

Elbert asserted four state-law counts on her own behalf and for a proposed class: breach of contract; violation of the Rosenthal Fair Debt Collection Practices Act; an Unfair Competition Law claim based on alleged violations of the Rosenthal Act and the federal Fair Debt Collection Practices Act; and another Unfair Competition Law claim based on alleged failure to comply with the housing-agency servicing policy. RoundPoint’s motion challenged only Counts II and III and the class allegations. It did not seek dismissal of Counts I or IV.

Count II: Rosenthal Act

The court held that the portion of Count II based on the November 1, 2018 fee was subject to the Rosenthal Act’s one-year statute of limitations and dismissed that portion of the claim. The court did not specify that this dismissal was with or without prejudice.

For the remaining allegations, the court rejected RoundPoint’s argument that the phone-payment fees could not support a claim under the federal Fair Debt Collection Practices Act and the Rosenthal Act because the fees themselves were not “debts.” The court explained that Elbert was not claiming that the fees themselves were debts. Instead, she alleged that RoundPoint collected an overdue mortgage payment and charged a fee incidental to that principal obligation. The court found more persuasive the decisions treating similar phone-payment fees as incidental to the underlying mortgage debt. It therefore denied dismissal of Count II to the extent the count relied on the federal statute, the Rosenthal Act provisions concerning false representations and collection fees, and fees charged on dates other than November 1, 2018.

Count III: Unfair Competition Law

The court denied dismissal of Count III. To the extent the claim relied on alleged Rosenthal Act violations, the court noted that the Unfair Competition Law has a four-year limitations period, rather than the Rosenthal Act’s one-year period. To the extent the claim relied on the federal statute, the court again rejected RoundPoint’s argument that Elbert had to allege that the phone-payment fees themselves were debts. The court concluded that Count III was not subject to dismissal.

Class Allegations

RoundPoint also asked the court to strike the proposed class allegations under Federal Rule of Civil Procedure 23. The proposed groups included California borrowers whose loans were serviced by RoundPoint and who paid a fee to make a mortgage payment by telephone. The proposed Rosenthal subclass included people who paid such a fee in connection with a payment made after its due date, and the proposed housing-agency subclass concerned loans using certain government-backed model mortgage documents.

The court found RoundPoint’s challenges premature at the pleading stage. It concluded that Elbert had sufficiently alleged that the proposed class members’ mortgage documents contained the relevant standard language concerning prohibited fees. It also found that RoundPoint had not shown at that stage that another state’s law would apply instead of California law. Finally, the court found that the Rosenthal subclass definition appeared to limit the subclass to people charged a fee in connection with a payment that was due. The court therefore denied the motion to strike the class allegations.

Disposition

The court granted in part and denied in part RoundPoint’s motion. It dismissed Count II only to the extent it was based on the fee allegedly charged on November 1, 2018. In all other respects, the motion was denied, including the challenges to the remaining portions of Count II, Count III, and the class allegations.