Consumer Finance Insights
September 11, 2015

N.D. Illinois: Bank’s HAMP Procedures Weren’t Unfair or Deceptive

A U.S. District Judge in the Northern District of Illinois recently granted summary judgment in favor of defendant PNC Bank on a borrower’s promissory estoppel and Illinois Consumer Fraud Act (ICFA) claims in connection with PNC’s HAMP procedures.  In its August 25, 2015 decision the court found that PNC’s actions did not amount to a violation of an unambiguous promise and were not unfair or deceptive.

The case, McGann v. PNC Bank, Nat’l Ass’n, Case No. 1:11-cv-06894 (N.D. Ill.), was brought by Plaintiff McGann after PNC foreclosed on her house.  After Plaintiff and her husband divorced, Plaintiff remained in the house and took over responsibility for making the mortgage payments, but her ex-husband remained the sole borrower listed on the promissory note and PNC would not allow Plaintiff to assume the loan because her credit score was too low.

Plaintiff applied to PNC for a HAMP modification when she defaulted, but under the existing HAMP guidelines an individual was only eligible for a HAMP modification if the applicant was the borrower or had assumed the loan and if the borrower occupied the property. Plaintiff, who was not the borrower on the loan, was ineligible for the program (as was her ex-husband, who, though he was the borrower, did not occupy the property). Plaintiff alleged she was not told that she was ineligible, however, and instead submitting and resubmitting paperwork, made trial payments, and worked with PNC employees repeatedly to have the loan put into forbearance before PNC ultimately filed for foreclosure.  This conduct, Plaintiff argued, rendered PNC liable under a theory of promissory estoppel and for violation of the ICFA.

The court disagreed, however.  As to Plaintiff ’s promissory estoppel claim, the court found that there was no evidence that PNC made an unambiguous promise to that if McGann completed the modification application and made the trial payments, she would receive a loan modification.  The court held that PNC employees’ alleged promises to review or reinstate her application were not promises that the application would result in a loan modification, and that PNC’s continued acceptance of her trial modification plan payments was not evidence of an unambiguous promise that a permanent modification would follow. Opinion at 9-10.  And, the court held, even if continued acceptance of trial plan payments had been an unambiguous promise of a permanent modification, McGann could not show that her reliance on that promise was reasonable or foreseeable.  Id. at 11.

As to Plaintiff ’s ICFA claim, the court held that PNC’s alleged conduct was not actionable because it was not the proximate cause of Plaintiff ’s injury.  The court noted that some of the alleged conduct – that PNC purportedly knew she was ineligible for a HAMP modification but never disclosed that to her, instead instructing her to resubmit various modification documents – could be found to be deceptive.  Id. at 13, 15.  However, the court held that even if it were deceptive, the “failure to be more expeditious in communicating” her ineligibility was not the cause of her injury (defaulting on the loan and foreclosure of her home).  Id. at 15. Plaintiff had argued that, but for PNC’s misrepresentations, she might have refinanced, made a short sale, or applied for bankruptcy, but the court noted the lack of evidence that any of these alternatives would have been feasible or would have mitigated her injury.  Id. at 15-16.

Finally, the court held that, since Plaintiff did not qualify for a HAMP modification, PNC’s alleged failure to review Plaintiff’s most recent application, to give her time to submit documentation, and to work with her to complete the modification process was not unfair conduct and did not cause the foreclosure.  Id. at 16-17.  The court concluded, “Certainly [Plaintiff] could have benefited had PNC Bank been more clear, definite, and expeditious in responding to the application, but PNC Bank did not engage in unfair practices under the ICFA.”  Id. at 17.

The court’s ruling in this case is instructive because it considers elements common to many state and federal consumer protection statutes governing unfair or deceptive practices.  For instance, the Dodd-Frank Act’s prohibition on Unfair, Deceptive, or Abusive Acts or Practices (UDAAPs) includes a causation or materiality requirement for both “unfair” and “deceptive” practices.  (For the CFPB’s brief description of UDAAPs, see CFPB Bulletin 2013-07.)  Thus, defendants faced with similar claims, even outside of Illinois, may be able to look to McGann v. PNC Bank as an example of the proper application of unfair or deceptive practices standards to loan modification procedures.