by Brigham J. Lundberg, Esq.

Halliday, Watkins & Mann, P.C.

USFN Member (UT, AK, AL, CO, ID, MN, MS, MT, ND, NE, SD, WY)

The Utah Consumer Sales Practices Act, Utah Code §§ 13-11-1 et seq. (“UCSPA”), is intended to protect consumers from deceptive, fraudulent, and unfair business practices and has frequently been used by the plaintiff’s bar in an effort to remedy perceived wrongs in various financial transactions. However, after the United States Court of Appeals for the 10th Circuit’s recent decision in Matchett v. BSI Financial Services, No. 21-4142, 2023 U.S. App. LEXIS 18563 (10th Cir. July 21, 2023), consumers ought to be wary about utilizing the UCSPA to sue mortgage servicers for charging the consumer improper fees.

Enacted in 1973, the UCSPA is meant to protect consumers in a wide array of transactions involving the sale of goods, service providers, real estate, leases, warranties, credit transactions, and the like. Violations of the UCSPA’s provisions may result in substantial penalties, such as monetary fines, injunctions, and even criminal charges. The UCSPA is intended to apply to both simple transactions (e.g., purchase of an item of furniture) and complex transactions (e.g., purchase of family home) by targeting misrepresentation, deceptive pricing, and failure to deliver products or services in a timely manner.

In Matchett, the borrower Radonna Matchett sued her mortgage servicer, claiming that BSI Financial Services (“BSI”) improperly charged her “convenience fees” on at least seven different occasions. She alleged that, between September 2017 and April 2018, BSI’s online payment system experienced frequent errors, forcing her to make her monthly payments over the phone instead of paying online. With each phone payment made, Matchett was charged a $20.00 “convenience fee.” Matchett alleged that the $20.00 fee amount was 10 to 50 times more than BSI’s actual cost of taking a phone payment. Accordingly, Matchett sued BSI in Utah state court, alleging violations of the UCSPA among other claims. The case was removed to federal district court and BSI moved to dismiss Matchett’s UCSPA claim.

The Utah federal district court granted BSI’s motion to dismiss, finding that Matchett could not state a claim for relief because the UCSPA does not regulate mortgage loans or mortgage servicers. Even if the UCSPA applied to mortgage servicers, the district court concluded, BSI’s alleged conduct did not plausibly violate the UCSPA. After Matchett’s claims were dismissed, her motions (A) to amend the complaint and re-file in state court and (B) to certify two questions of state law regarding the UCSPA to the Utah Supreme Court were both denied.

On appeal, the 10th Circuit agreed with BSI that the Court’s precedent in Berneike v. CitiMortgage, Inc., 708 F.3d 1141, 1149-50 (10th Cir. 2013), foreclosed Matchett’s UCSPA claim. In Berneike, similar facts were in play—a homeowner asserted UCSPA claims against her mortgage servicer for alleged overcharges and improper fees. The district court dismissed the homeowner’s claims and the 10th Circuit affirmed, relying on prior Utah Supreme Court precedent in Carlie v. Morgan, 922 P.2d 1 (Utah 1996) to bar UCSPA claims when the complained-of conduct is governed by other, more specific law. Because the Utah Fit Premises Act provides specific remedies to residential tenants whose rental units become uninhabitable because of health and safety violations, the Carlie court ruled that residential tenants are precluded from bringing UCSPA claims based on those violations. Similarly, the Berneike panel held that because the Mortgage Lending and Services Act (“MLSA”), Utah Code §§ 70D-2-101 et seq., specifically regulates mortgage servicing, UCSPA claims would not be allowed based on allegations of wrongful conduct in the mortgage servicing context.

By the same logic, Matchett’s UCSPA claims against BSI could not be allowed. She had alleged that BSI charged her improper fees while servicing her mortgage. And despite her argument that Utah law should only disallow UCSPA claims under Carlie when the other, more specific law provides a remedy for the defendant’s alleged conduct, the Berneike court’s broad reading of Carlie foreclosed her argument. Accordingly, in affirming the dismissal of Matchett’s claims, the 10th Circuit Court of Appeals held that it was bound by Berneike’s holding that Utah law forbids UCSPA claims by a mortgagor against a mortgage servicer based on allegedly wrongful overcharges and fees.

Going forward, mortgagors will want to carefully consider the claims they intend to bring against mortgage servicers for the purported improper charging of fees, as efforts to pursue such relief under the UCSPA will likely be unsuccessful.

Copyright @2023 USFN

USFNews - September 6