Last Week, This Morning

April 20, 2026

Below you will find several key developments in the financial services industry, including related developments in information privacy and data security, from the past week. We add an "Amicus Brief(ly)¹" comment to each item, where we briefly (see what we did there?) note for friends (and again?) of CounselorLibrary the important takeaways from the developments outlined in the email. Our legal reporters - CARLAW, HouseLaw, InstallmentLaw, PrivacyLaw, and BizFinLaw - provide more comprehensive, real-time updates of federal and state laws, regulations, litigation, and other industry items of interest. For a personal guided tour and free trial of any of these legal reporters, please contact Michael Willer at 614-855-0505 or mwiller@counselorlibrary.com.

On April 14, the U.S. Department of Justice reached a settlement with the nation's largest home security company to resolve allegations that the company violated the Servicemembers Civil Relief Act by imposing a 30-day notice requirement on servicemembers terminating their home security services contracts.

Section 3956 of the SCRA allows servicemembers to terminate certain consumer contracts any time after the date the servicemember receives military orders to relocate, for a period of not less than 90 days, to a location that does not support the contract. When a servicemember terminates a contract under the SCRA, companies cannot charge any fees beyond the current billing period.

The DOJ alleged that, since January 5, 2023, when the SCRA was amended to allow servicemembers to terminate home security services contracts based on their receipt of military relocation orders, the company received over 3,400 requests from servicemember customers to terminate home security services contracts based on military relocation. The DOJ alleged that the company imposed a 30-day notice requirement on servicemembers, meaning that the servicemembers' contracts did not terminate until at least 30 days after the termination was requested in accordance with Section 3956, regardless of when the servicemember desired the termination to occur. In addition, the DOJ alleged, as a result of the company's 30-day notice policy, it charged servicemembers terminating contracts in accordance with Section 3956 additional amounts not permitted under that provision.

Under the settlement, the company will pay up to $1,260,000 in compensation to affected servicemembers, pay a $79,380 civil penalty, and make policy and training changes to avoid committing future SCRA violations.

Amicus Brief(ly): Two things strike us about this settlement. First, the 2023 SCRA amendment should have been on somebody's radar at the home security company. A strong compliance management system will include tools for monitoring legislative and other regulatory developments to pick up on changes that affect a company. Someone should have spotted this law change and adjusted a policy and/or procedure to carve out an exception for servicemembers from the otherwise-applicable 30-day termination notice requirement. Second, the DOJ's Servicemembers and Veterans Initiative is still in focus and is going strong. It began in 2014 but was formalized in early 2021 and has seen the DOJ bring and settle numerous cases with vehicle finance companies, banks, towing companies, storage facilities, and others. The DOJ is serious about this initiative, and companies would do well to review their policies and audit procedures to ensure that they are giving servicemembers the benefits to which they are entitled under the SCRA.

On April 13, Maine Governor Janet Mills signed Senate Bill 585, which clarifies the application of Finch v. U.S. Bank, N.A., a decision by the Supreme Judicial Court of Maine on January 11, 2024, that effectively held that lenders that violate foreclosure notice requirements do not automatically lose their right to the mortgaged property.

In Finch, U.S. Bank filed an action to foreclose on Charles Finch's mortgage. The court ruled in favor of Finch in the foreclosure action, finding that U.S. Bank's notice of default did not comply with 14 M.R.S. § 6111, which provides that a mortgagee may not accelerate a mortgage debt or enforce the mortgage until at least 35 days after issuing a written notice of default in compliance with the statute. The court declared that, by operation of the doctrine of res judicata, U.S. Bank's note and mortgage were unenforceable, U.S. Bank was required to discharge the mortgage, and Finch held title to the property free of U.S. Bank's mortgage. The court based its decision on Pushard v. Bank of America, N.A., which was decided in 2017 by the Maine high court and held that a lender is prohibited from bringing a future foreclosure claim against a borrower after failing to comply with foreclosure notice requirements. After U.S. Bank declined to discharge Finch's mortgage, Finch sued U.S. Bank for a declaratory judgment that the bank was required to discharge the mortgage. The trial court found that Finch was entitled to discharge of the mortgage. U.S. Bank recorded a discharge but appealed, arguing that Pushard should be overruled. The Maine high court overruled Pushard and vacated the trial court's judgment in favor of Finch, holding that the judgment in favor of Finch due to the fact that U.S. Bank's notice of default did not comply with Section 6111 did not bar a further foreclosure action or render the note and mortgage unenforceable, although it precluded U.S. Bank from recovering in the future any unaccelerated balance due on the note as of the date of the judgment.

S.B. 585 provides protections for homeowners whose foreclosure cases were resolved before the Finch decision by enacting subchapter 1-B of Section 6111, which states: "for any cause of action arising prior to January 11, 2024, for a claim in which a foreclosure action was dismissed due to a defective notice of a mortgagor's right to cure pursuant to this section, any subsequent cause of action asserting a claim for any sums due on the obligation as of the date of the final judgment dismissing the prior action is barred. The holding in the case of Finch v. U.S. Bank, N.A. ... may not be applied to any cause of action arising prior to January 11, 2024."

Amicus Brief(ly): A little clarity goes a long way, so it was good of Maine to enact this statute making clear that the impact of the Finch case was prospective only. That is not great news for mortgage holders that may have failed to comply with the cure notice requirements in Maine's foreclosure laws, but the statute is likely to affect just a few such foreclosure cases. To be clear, the Finch case gives the industry a far better outcome than Pushard did - losing the right to start the foreclosure process over in the event of a failure to comply with one of the earliest notice requirements in the process was an onerous result. With the ship righted on the cure notice issue since 2024, consumers, mortgage holders, and mortgage servicers affected by the Pushard case from 2017 through the Finch case now know where they stand vis-à-vis their foreclosure cases, and mortgage holders and servicers have clarity about what happens if they miss a required cure notice going forward.

On April 13, Virginia Governor Abigail Spanberger signed House Bill 304, which amends Section 6.2-419 of the Virginia Code concerning assumptions of mortgages or deeds of trust.

The new law requires "any lender, for any conventional home mortgage loan secured on or after July 1, 2026, by a mortgage or deed of trust on owner-occupied residential real estate located in [Virginia to] ... include provisions in such loan to allow for any of the existing borrowers to purchase the property interest of another borrower on the loan by assuming the seller's portion of the mortgage in connection with a decree of annulment or divorce if the assuming borrower qualifies for the underlying loan, as determined by the lender. The lender [must] disclose such assumption provision in writing to a conventional home mortgage loan applicant within three days of receiving a completed loan application." The new provision does not apply to any conventional home mortgage loan that is otherwise required to be assumable in connection with a divorce under state or federal law.

Amicus Brief(ly): About a year ago, Maryland passed a similar law allowing one of the joint obligors on a mortgage loan to assume the obligation of the other after divorce. This important provision of the real property provisions of the Virginia Code will expressly allow a spouse who goes through a divorce or annulment to buy out the other spouse's interest in mortgaged property and assume that spouse's obligations under the mortgage loan, if the assuming spouse qualifies based on the holder's underwriting criteria. This new law modifies existing law that allows a borrower generally to inquire about assumption, and, if the holder allows assumption, the holder has to provide certain information to the inquiring borrower. Under the amended law, the (conditional) assumption right is compelled under divorce and annulment scenarios, and lenders have to disclose that right at the same time they provide the TRID Loan Estimate (when TRID applies). Because interest rates available to a newly divorced homeowner who might otherwise have to refinance a mortgage to take full responsibility for the payment obligation could be higher than the interest rate on the existing loan, the rights conferred by this statute are important. The statute is effective in just a few months, so Virginia mortgage lenders and servicers have some updating work to do.

The U.S. Court of Appeals for the Eleventh Circuit recently held that a mortgage loan servicer's letter to a mortgagor denying her application to sell her home in a short sale was not sent in connection with the collection of her debt and, therefore, the federal Fair Debt Collection Practices Act did not apply to the servicer's letter.

The mortgagor alleged that, after she defaulted on a residential mortgage loan, she applied to sell her home in a short sale. Her mortgage servicer denied the application, stating that the short sale was not an arm's length transaction. The mortgagor sued the servicer, claiming that the notification denying her application violated the FDCPA. The servicer moved to dismiss the complaint, arguing that the denial was not sent in connection with the collection of the mortgagor's debt and, therefore, was not actionable under the FDCPA. The trial court dismissed the mortgagor's complaint, and the federal appellate court affirmed.

The appellate court reasoned that the FDCPA only prohibits acts or practices in connection with the collection of any debt. The appellate court, applying precedent, considered whether the denial conveyed information about a debt, whether its goal was to at least in part induce payment, and whether it was merely a ministerial response to a debtor's inquiry rather than part of a strategy to make payment more likely. The mortgagor argued that the purpose of the denial was to induce her to settle and, therefore, was in connection with the collection of her debt. The appellate court disagreed, instead finding that the denial was simply a rejection of a proposed short sale and that it did not identify any balance due, demand payment, or threaten any consequences for nonpayment. Further, the appellate court explained, the denial was in response to an action by the mortgagor. The appellate court additionally reasoned that the mini-Miranda warning in the denial did not necessarily mean that it was an attempt to collect a debt. As a result, the appellate court found that the FDCPA did not apply to the denial and the trial court properly dismissed the mortgagor's FDCPA claim.

Amicus Brief(ly): It should not be a relief when a federal circuit court reaches the right conclusion on an FDCPA claim, but it is. The Eleventh Circuit is the same federal circuit court that gave us the Hunstein decision in 2021, only to reverse itself on rehearing two years later. (It was a long two years for debt collectors that used letter vendors). But in this case, the court gave us the right answer on the first try, holding that responsive letters simply informing the debtor that the servicer denied her application for a short sale - but not asking for payment, not stating a balance, and not threatening consequences for failure to pay or settle the outstanding mortgage loan - were not communications attempting to collect a debt. It is possible for a debt collector to communicate with a consumer to provide information without attempting to collect payments, and this case underscores that reality. In a useful kicker, the court also confirmed that simple inclusion of the mini-Miranda notice in a letter does not, in and of itself, turn the communication into an attempt to collect a debt. (While the court did not have to decide this question, others have, including that the mini-Miranda notice in a letter does not, in and of itself, make the sender a "debt collector" if the sender is not otherwise a "debt collector" as defined under the FDCPA). Just like bad facts make bad law, good facts (and corresponding good reasoning) made good law in this case.

Two debtors filed adversary proceedings against a New York state-chartered bank in their bankruptcy cases, seeking damages under Section 362(k) of the Bankruptcy Code for the bank's alleged violation of the automatic stay by continuing to collect credit card debt after the debtors had filed their bankruptcy petitions. The bank moved to compel arbitration of the debtors' claims pursuant to an arbitration provision in their credit card agreements. The bankruptcy court denied the motion, and both the district court and, in this opinion, the U.S. Court of Appeals for the Fourth Circuit affirmed the trial court's decision.

Recognizing the tension between the public policy favoring arbitration of disputes and the need for a centralized forum for resolving disputes stemming from bankruptcy proceedings, the federal appellate court turned to the issue of whether there is a conflict between arbitration and the underlying purpose of the Bankruptcy Code. The appellate court noted "several inherent conflicts between arbitration and adjudication of the § 362(k) claim in bankruptcy - the degradation of the bankruptcy court's core purpose of conducting comprehensive bankruptcy proceedings, the lack of centrality for dispositions, the erosion of the bankruptcy shield, the lack of uniformity, the lack of bankruptcy expertise, and the deterrent purposes of punitive damages - that, together with the legislative history, amply demonstrate that arbitration here would conflict with the underlying purposes of the Bankruptcy Code."

A dissent argued that arbitration of the claims was warranted where "the success (or failure) [of the claims] would neither add nor subtract a new creditor to these bankruptcies, nor would it serve to 'frustrate credit distribution,'" given that one debtor's Chapter 7 case is closed and the other debtor's Chapter 13 case would be impacted only by an increase in the assets available to creditors.

Amicus Brief(ly): The bank in this case had a point - nothing in the Bankruptcy Code expressly precludes arbitration, and the consumers agreed in the bank's cardholder agreement to arbitrate all claims arising out of the agreement. But the bankruptcy court and the district court that affirmed its holding also had a point - the Bankruptcy Code presents unique disputes that give the bankruptcy courts "specialized experiences" that make those courts "particularly suited" to address bankruptcy disputes in a centralized forum. Ultimately, the Fourth Circuit agreed and affirmed the decision to keep resolution of the debtors' disputes with the bankruptcy court, but it took great pains to discuss the tension the case created as a function of the important public policy positions advanced by the bank under the Federal Arbitration Act and the debtors under the Bankruptcy Code. The decision to keep the debtors' disputes in the bankruptcy court conflicts with a Second Circuit case that came down the opposite way, setting the stage for a potential appeal to the U.S. Supreme Court to resolve the new circuit split.

---

¹ For the unfamiliar, an “Amicus Brief” is a legal brief submitted by an amicus curiae (friend of the court) in a case where the person or organization (the “friend”) submitting the brief is not a party to the case, but is allowed by the court to file the brief to share information or expertise that bears on the issues in the case.