Move Over Sundquist – 9th Circuit Says Enticing a Borrower to Apply for a Loan Mod It Knows Will be Rejected is a Violation of California B & P 17200

Oskoui v. JP Morgan Chase, 851 F.3d 851 (9th Cir. March, 2017)

Issue:   Did the bank’s offer to the borrower that she apply for a loan modification which it knew would be rejected because the borrower did not qualify constitute unfair competition under California B & P Section 17200?

Holding:   Yes, at least enough to overcome summary judgment.  The borrower “was the victim of an unconscionable process.”

Appeal from district court, Judge Fernando Olguin

Judge Stephen Trott

“Mahin Oskoui sued defendant J.P. Morgan Chase Bank, N.A. (“Chase”) for damages allegedly suffered when she unsuccessfully attempted over a two-year period to modify the loan on her home.”  When she became delinquent on her house payments, she began responding to Chase letters offering her loan modifications which she found out later she did not qualify for under any circumstances.  With each application, she made certain required payments to Chase.

On October 1, 2010, Oskoui sent a $2,988.49 payment to Chase.  Nevertheless, on October 25, 2010, a foreclosure notice appeared on her front door, listing a foreclosure sale date of November 18, 2010.  Remarkably, Chase allegedly sent her another letter dated November 1, 2010 encouraging her to continue to seek a modification.  Chase even told her she might “qualify for monetary incentives that will be used to pay down the principal balance of your loan if you make your modified payments on time.”  At this point, Oskoui withdrew from the process. She was now $33,738.00 poorer with nothing to show for her efforts to comply with Chase’s requests.

In her complaint she asserted “breach of contract, ‘breach of implied covenant of good faith and fair dealings,’ and a violation of California’s Unfair Competition Law … [B&P] § 17200, the latter based on an assertion that she had been victimized by Chase’s unfair or fraudulent business acts or practices.”  The district court granted summary judgment to the bank.

The 9th Circuit reversed as to the unfair competition.  “The facts we have arrayed plainly demonstrate a viable UCL claim.”  “It boils down to this. With its [first] letter, Chase deceptively enticed and invited Oskoui into a process with the demonstrably false promise that a loan modification was within her reach if she were to make [certain] monthly payments.”

Whether Chase’s Kafkaesque conduct was intentional or the result of corporate ineptitude . . . the result is the same: The facts in this record would amply support a verdict on this claim in Oskoui’s favor on the ground that she was the victim of an unconscionable process.  Chase knew that she was a 68 year old nurse in serious economic and personal distress, yet it strung her along for two years, kept moving the finish line, accepted her money, and then brushed her aside.  During this process, Oskoui made numerous frustrating attempts in person and by other means to seek guidance from Chase, only to be turned away.

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