FDUTPA:”Per Se” Violations of Deceptive or Unfair trade Practices Under Federal or State Law

a per se violation of TILA or any other Federal or State law makes the act also per se violations of the FTC act, (and the applicable little FTC acts passed in various states). Florida is used here as an example. 

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Anyone who has done even the most cursory research knows that a pattern of behavior in which the name of the creditor or lender is withheld is a “per se” predatory loan. While Judges don’t care whether the borrower knows the actual lender, clearly Congress, the U.S. Supreme Court and the executive branch DO care ( and so their state counterparts); the courts are required to follow the law not create it by inaction or action contrary to the express wording of statutes. As we have discussed this will be shortly revealed as the rescission cases go back to SCOTUS which has already ruled unanimously that there is nothing wrong with the rescission statute, it clearly states the procedures and nothing unconstitutional about its process or effect.
Pretender lenders are rushing as many cases to forced sale through foreclosure because their days are numbered in which they can continue to do so. One reason is that their violations of Federal and State statutes prohibiting unfair trade practices are violations per se and another is that their violations are still prosecutable even if they are not on some list somewhere in some statute or group of cases interpreting deceptive trade and lending practices. 
For along time, it has been known, accepted and understood that withholding the name of the actual lender as a matter of practice makes each such loan and each such practice “predatory per se” under Reg Z of the Federal truth in Lending Act. The purpose of this article is to suggest that a per se violation of TILA or any other Federal or State law makes the act also per se violations of the FTC act, (and the applicable little FTC acts passed in various states). Florida is used here as an example. 
While the recognition that the alleged loan transaction was by definition unto itself predatory, there has been no attempt or agreement to arrive at any consequences that should befall the “ pretender lender” violator because TILA has enforcement provisions and self executing punishment like TILA rescission but it does not specifically provide an easy route to assessing substantial damages by way of disgorgement, which probably cannot be barred by the defense of the statute of limitations. 
If a loan is predatory per se under Reg Z as a table funded loan then it is hard to imagine how that act of “lending” would not also be a per se violation of the FTCA and, in Florida, the FDUTPA 501.204 et seq. A table funded loan by definition withholds the identity of the true lender. Table funded loans were not only part of the pattern and practice of creating illusions they called “loans” but became industry standard.
 It is neither an exaggeration nor over-reaching to say that table funded loans that were predatory per se became industry practice from around 2001 through the present. In other words it became industry standard to violate the Federal Truth in Lending Act, the FTC Act, and the state versions of the FTC act (in Florida §501.204 et seq). As we have seen with construction defect lawsuits starting back in the 1970’s, the fact that it became custom and practice to violate the the local building codes does not in any way raise a valid defense to violating those codes. 
This would fall under the Florida FDUTPA category of “Per Se by Description. “ It doesn’t matter whether the judge “feels” that some bank or “lender” or “servicer” might be hurt. That question has been decided by the Federal legislative branch, the Federal Executive Branch and the Federal Judicial branch as enunciated by the highest court in the land. Under the powers vested in the Federal government laws were passed in which the Federal government pre-empted or restricted state action in circumstances where ordinary consumers were fooled by deceptive practices. And the test is whether the least sophisticated and most gullible consumer was tricked and hurt by the trick. The same line of thought applies to state laws like the little FTC act in Florida.
Once the violation becomes a per se violation, the question is not whether there is injury but rather how much should be awarded to the consumer as a punishment to the violator and as a means to settle the score with the consumer. This calls for disgorgement which is not considered to be “damages” since it is described as merely preventing the violator from keeping ill-gotten gains. Attorneys fees and court costs are almost always provided by the Federal and state FTC statutes. The violations under the FDCPA may be barred by the expiration of a statute of limitations but the per se violations of the of the FDCPA and its equivalent state statutes probably is a trigger for declaring the FDCPA violation a per se violation which in turn triggers the rest of the applicable statutes for disgorgement of ill-gotten gains. 
Per Se by Description
The reference in §501.203(3)(a) and (c) to FDUTPA violations based on FTC or FDUTPA rules, or “[a]ny law, statute, rule, regulation, or ordinance” can further be interpreted as a formal acknowledgment of violations of a second type of per se violation which occurs when a rule, statute, or ordinance is violated, and the rule, statute, or other ordinance expressly describes unfair, deceptive, or unconscionable conduct, without necessarily referring expressly to FDUTPA.
Rules Adopted by the FTC
Pursuant to the FTC act, the FTC has adopted rules which describe unfair or deceptive acts in several contexts, and which appear in 16 C.F.R. ch. 1, subch. D, entitled “Trade Regulation Rules.” Some of the more well known of these include the FTC rules governing door-to-door sales,16 franchises,17 holders in due course,18 negative option sales plans,19 funeral industry practices,20 and mail or telephone order sales.21 According to the definition of “violation of this part,” in §501.203(3)(a) a violation of FDUTPA can occur when federal administrative rules promulgated by the Federal Trade Commission pursuant to the FTC act are violated. Along these lines, the 11th Circuit has confirmed that §501.203(3)(a) of FDUTPA creates a private cause of action for violation of an FTC rule even though none exists under federal law.22
[Whether  or not the facts alleged by the consumer are sufficient for rescission, damages remain available under the FTC act and little FTC acts in various states. The damages extend up to and including all money paid by the debtor. And according to recent case law following a long prior tradition, the statute of limitations does not apply to petitioners for disgorgement of ill-gotten gains.  16 CFR 433 — Preservation of consumer claims and defenses, unfair or deceptive acts or practices]


Much of the material for this article has been inspired by the following article:
Florida Bar Journal May, 2002, Volume LXXVI, No. 5 Page 62 by Mark S. Fistos. “Per Se Violations of Florida Deceptive and Unfair Practices Act §501.204(1)”
Relevant passages quoted:
FDUTPA broadly declares in §501.204(1) that “[u]nfair methods of competition, unconscionable acts or practices, and unfair or deceptive acts or practices in the conduct of any trade or commerce” are unlawful. By design, FDUTPA does not contain a definition or “laundry list” of just which acts can be “deceptive,” “unfair,” or “unconscionable.” No specific rule or regulation is required to find conduct unfair or deceptive under the statute.1
There is, however, an entire body of state and federal rules, ordinances, and statutes which serves to identify specific acts that constitute automatic violations of FDUTPA’s broad proscription in §501.204(1). These rules, ordinances, and statutes, if violated, constitute “per se” violations of FDUTPA, and could automatically expose parties to actual damages, injunctions, and civil penalties up to $15,000 per violation. An assessment of potential per se FDUTPA violations, therefore, should play a part in any commercial law practice, and is imperative for any lawyer bringing or defending against a claim for deceptive or unfair trade practices.
Approaches to FDUTPA Liability
There are two basic approaches to analyzing FDUTPA liability: one is to determine whether an act or practice in trade or commerce violates broadly worded standards relating to unfairness, deception, unconscionable acts or practices, or unfair methods of competition; a second is to assess whether conduct in trade or commerce constitutes a per se violation.2
FDUTPA tracks the broad language of the Federal Trade Commission Act (FTC act)3and declares “[u]nfair methods of competition, unconscionable acts or practices, and unfair or deceptive acts or practices in the conduct of any trade or commerce” to be unlawful. Subsection 501.204(2) of FDUTPA in turn provides that “due consideration and great weight” be given interpretations by federal courts and the Federal Trade Commission of what constitutes unfairness and deception.
Based on FTC interpretations and federal case law dating from the 1960s, Florida courts have adopted and applied in various contexts a broadly worded standard of unfairness under which a practice is unfair, “if it offends public policy and is immoral, unethical, oppressive, unscrupulous or substantially injurious to consumers.”4

Categories of Per Se Violations

The rules, regulations, ordinances, and statutes referenced in the above-quoted §501.203(3) refer to sources which may serve as a basis for a per se FDUTPA violation. These sources can be broken down into three categories:
1) Per se violations whereby a statute, ordinance, or rule expressly refers to FDUTPA and provides a violation thereof to be a violation of FDUTPA; [per se by reference]
2) Per se violations whereby a statute, ordinance, or rule expressly describes deceptive, unconscionable, or unfair conduct without referring expressly to FDUTPA and when violated constitutes a per se violation of FDUTPA; [per se by description] and
3) Per se violations whereby a court, in the absence of any such reference or description, construes a statute, ordinance, or rule to be a per se violation of FDUTPA.
Examples from Footnotes: Fla. Stat. §§210.185(5) (cigarette distribution), 320.03(1) (DHSMV agents), 320.27(2) (vehicle dealer licensing), 624.125(2) (service agreements), 681.111 (lemon law), 501.97(2) (location advertising), 400.464(4)(b) (home health agencies), 400.93(6)(b) (home medical equipment providers), 483.305(3) (multiphasic health testing centers), 496.416 (charitable contributions), 501.160(3) (price gouging), 501.0579 (weight loss centers), 501.34 (aftermarket crash parts), 509.511 (campground memberships), 559.934 (sellers of travel), 624.129(4) (location and recovery services), 817.62(3)(c) (credit card factoring);Code of Ordinances, City of Ft. Walton Beach, Florida §23-145(a) (title loans).

Problems with Lehman and Aurora

Lehman had nothing to do with the loan even at the beginning when the loan was funded, it acted as a conduit for investor funds that were being misappropriated, the loan was “sold” or “transferred” to a REMIC Trust, and the assets of Lehman were put into a bankruptcy estate as a matter of law.


I keep receiving the same question from multiple sources about the loans “originated” by Lehman, MERS involvement, and Aurora. Here is my short answer:

Yes it means that technically the mortgage and note went in two different directions. BUT in nearly all courts of law the Judge overlooks this problem despite clear law to the contrary in Florida Statutes adopting the UCC.

The stamped endorsement at closing indicates that the loan was pre-sold to Lehman in an Assignment and Assumption Agreement (AAA)— which is basically a contract that violates public policy. It violates public policy because it withholds the name of the lender — a basic disclosure contained in the Truth in Lending Act in order to make certain that the borrower knows with whom he is expected to do business.

Choice of lender is one of the fundamental requirements of TILA. For the past 20 years virtually everyone in the “lending chain” violated this basic principal of public policy and law. That includes originators, MERS, mortgage brokers, closing agents (to the extent they were actually aware of the switch), Trusts, Trustees, Master Servicers (were in most cases the underwriter of the nonexistent “Trust”) et al.
The AAA also requires withholding the name of the conduit (Lehman). This means it was a table funded loan on steroids. That is ruled as a matter of law to be “predatory per se” by Reg Z.  It allows Lehman, as a conduit, to immediately receive “ownership” of the note and mortgage (or its designated nominee/agent MERS).

Lehman was using funds from investors to fund the loan — a direct violation of (a) what they told investors, who thought their money was going into a trust for management and (b) what they told the court, was that they were the lender. In other words the funding of the loan is the point in time when Lehman converted (stole) the funds of the investors.

Knowing Lehman practices at the time, it is virtually certain that the loan was immediately subject to CLAIMS of securitization. The hidden problem is that the claims from the REMIC Trust were not true. The trust having never been funded, never purchased the loan.


The second hidden problem is that the Lehman bankruptcy would have put the loan into the bankruptcy estate. So regardless of whether the loan was already “sold” into the secondary market for securitization or “transferred” to a REMIC trust or it was in fact owned by Lehman after the bankruptcy, there can be no valid document or instrument executed by Lehman after that time (either the date of “closing” or the date of bankruptcy, 2008).


The reason is simple — Lehman had nothing to do with the loan even at the beginning when the loan was funded, it acted as a conduit for investor funds that were being misappropriated, the loan was “sold” or “transferred” to a REMIC Trust, and the assets of Lehman were put into a bankruptcy estate as a matter of law.


The problems are further compounded by the fact that the “servicer” (Aurora) now claims alternatively that it is either the owner or servicer of the loan or both. Aurora was basically a controlled entity of Lehman.

It is impossible to fund a trust that claims the loan because that “reporting” process was controlled by Lehman and then Aurora.


So they could say whatever they wanted to MERS and to the world. At one time there probably was a trust named as owner of the loan but that data has long since been erased unless it can be recovered from the MERS archives.


Now we have an emerging further complicating issue. Fannie claims it owns the loan, also a claim that is untrue like all the other claims. Fannie is not a lender. Fannie acts a guarantor or Master trustee of REMIC Trusts. It generally uses the mortgage bonds issued by the REMIC trust to “purchase” the loans. But those bonds were worthless because the Trust never received the proceeds of sale of the mortgage bonds to investors. Thus it had no ability to purchase loan because it had no money, business or other assets.

But in 2008-2009 the government funded the cash purchase of the loans by Fannie and Freddie while the Federal Reserve outright paid cash for the mortgage bonds, which they purchased from the banks.

The problem with that scenario is that the banks did not own the loans and did not own the bonds. Yet the banks were the “sellers.” So my conclusion is that the emergence of Fannie is just one more layer of confusion being added to an already convoluted scheme and the Judge will be looking for a way to “simplify” it thus raising the danger that the Judge will ignore the parts of the chain that are clearly broken.

Bottom Line: it was the investors funds that were used to fund loans — but only part of the investors funds went to loans. The rest went into the pocket of the underwriter (investment bank) as was recorded either as fees or “trading profits” from a trading desk that was performing nonexistent sales to nonexistent trusts of nonexistent loan contracts.

The essential legal problem is this: the investors involuntarily made loans without representation at closing. Hence no loan contract was ever formed to protect them. The parties in between were all acting as though the loan contract existed and reflected the intent of both the borrower and the “lender” investors.

The solution is for investors to fire the intermediaries and create their own and then approach the borrowers who in most cases would be happy to execute a real mortgage and note. This would fix the amount of damages to be recovered from the investment bankers. And it would stop the hemorrhaging of value from what should be (but isn’t) a secured asset. And of course it would end the foreclosure nightmare where those intermediaries are stealing both the debt and the property of others with whom thye have no contract.


https://www.vcita.com/v/lendinglies to schedule CONSULT, MAKE A DONATION, leave message or make payments.


Reverse Redlining: Targeting the Poor and the Unsophisticated for High Risk Mortgages

For further information please call 954-495-9867 or 520-405-1688


see https://www.aclu.org/sites/default/files/assets/aclumfy_mortgage_report.pdf

At this point it is clear that the banks actually targeted people of color and other demographics where the likelihood of “default” on a loan was extraordinarily high. The ACLU in its latest report on the mortgage crisis proves this to any remaining doubters. This report also shows that these disadvantaged groups are the least likely to get a modification or other settlement or assistance of the various mortgage issues that we all know now were pandemic throughout the period of 1996-present.

But what they are missing is an answer to the REAL question: Why would anyone target a demographic where “defaults” could be claimed in much higher proportion to the history in the general population? Why did they want the loans to fail, because “failure” of the loan was a basic assumption to anyone who understands the various iterations of highly complex and sophisticated loan products — a number which climbed from 5 in the 1970’s to 450 in 2008. Imagine that 450 different loan options offered to the poor, the people who don’t speak or understand English very well and the people who are poor enough that eventually when payments reset they will not pay and they won’t be able to fight for their house. The tragedy here, let me remind everyone, is that most of these were refinancing of existing home ownership — that’s right, most of the homes were in the family for generations.

The Banks targeted homes where the home values were low. Then they drove the prices up to many items the actual value by filling the bathtub with money and selling “payments” instead of principal or interest rate. They offered teaser payments that the homeowner could afford — but which changed to a monthly payment that was higher (sometimes a multiple) than the entire household income. Somehow the Banks have convinced courts to think that the disclosures were sufficient. They were not. And in my opinion if the courts would scrutinize these so-called loans the way they did before securitization none of the loans would survive any fair interpretation of disclosures required under Federal laws (TILA) and state laws, including common law.

Banks do economic analysis every day employing thousands of analysts. Those analysts knew that the prices were being driven above the value of the property, knew that the endgame was the drop of prices to resume relationship with values, and thus knew — because they rigged the game — that if they bet the mortgages would fail, they would make a lot of money. The trick was to lose somebody else’s money not their own. and that is what they did.

If the ACLU wants to do something that produces actual results, they should analyze the economics of the alleged securitization of these loans. What they will find is a note that cannot be enforced and a mortgage that was void from the start. They will find fraud with aggravating circumstances. the banks needed really “bad” loans in order to accomplish their goals. By using investor funds instead of their own, they could claim ownership of the loans when they reported their assets and liabilities to regulatory authorities; but they would assign the losses to investors, borrowers, insurers, guarantors, FDIC loss sharing, and credit default swap counterparties and take the proceeds for themselves — even though they had no losses.

The ACLU should bring actions on behalf of the demographics hit hardest by this Ponzi scheme. They should state the obvious — that the true source of funds had no idea how their money was being used, the banks that did know were intentionally creating bloated loan documents based upon fraudulent appraisals, and the real creditors were deprived of any protection for their investment while the borrowers were signing documents that recited fraudulent information as to the identity of the lender and the real cost of the loan.

The attack on enforceability of the mortgages is easiest simply because it is now fairly easy to show unclean hands. Where a loan is statutorily defined as “predatory per se” it is hard to argue for the banks that it isn’t subject to “unclean hands per se” and therefore cannot be enforced because it is against public policy.

In a court where rules of equity are applied, there is no enforcement of a deal that was, from the start, violation of Federal and State law, was “predatory per se” (Regulation Z) and was part of a fraudulent scheme. This scheme only works for the banks if the loan is secured by a mortgage on the property. That mortgage is mostly unenforceable and probably void, ab initio. True creditors can prove they lost money on the deal have an opportunity to sue and collect on money due them — (1)  from the borrower up to perhaps the amount that should have been the principal, and (2) from the banks for the rest of the money that was skimmed off the top. The amount skimmed in many cases especially in the disadvantaged demographics, was frequently more than the loan itself.

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