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Thomas A. Oates, Jr v. Wells Fargo Bank

July 31, 2012

THOMAS A. OATES, JR.,
PLAINTIFF,
v.
WELLS FARGO BANK, N.A., DEFENDANT.



The opinion of the court was delivered by: Eduardo C. Robreno, J.

MEMORANDUM

Thomas A. Oates, Jr. ("Plaintiff") brings this civil action against Wells Fargo Bank, N.A. ("Defendant"), for violations of the Fair Credit Reporting Act ("FCRA"), the Fair Debt Collection Practices Act ("FDCPA"), and Pennsylvania law. Defendant removed from the Court of Common Pleas for Chester County, Pennsylvania, and moved to dismiss Plaintiff's Complaint pursuant to Federal Rule of Civil Procedure 12(b)(1) and (6). For the reasons that follow, the Court will grant in part and deny in part the Motion to Dismiss.

I.BACKGROUND

Because the facts of this case occur in the foreground of a complex regulatory scheme involving a national flood insurance program, a discussion of the facts follows an explanation of that statutory and regulatory scheme.

A. National Flood Insurance Act of 1968 and Subsequent Amendments

Congress enacted the National Flood Insurance Act of 1968 ("NFIA") to share the risk of flood losses by establishing a national flood insurance program. See 42 U.S.C. § 4001(a) (2006). Congress amended the NFIA to require property owners assisted by federal programs or federally insured institutions to obtain flood insurance if the subject property is located in a special flood hazard area ("SFHA").*fn1 See Flood Disaster Protection Act of 1973 ("FDPA") § 102, 42 U.S.C. § 4012a (2006). And Congress further amended the NFIA to require lenders to notify purchasers of property, in writing, within a reasonable time before signing the purchase agreement, that the property is located in a SFHA.*fn2 National Flood Insurance Reform Act of 1994 ("Reform Act") § 527, 42 U.S.C. § 4104a(a)(1); 12 C.F.R. § 339.9(a).

If the lender determines at any time during the term of a loan that the property securing the loan is either not covered by flood insurance or is covered inadequately, the lender must notify the borrower that the borrower should obtain insurance at the borrower's expense. 42 U.S.C. § 4012a(e)(1); 12 C.F.R. § 339.7. If the borrower fails to purchase flood insurance coverage within forty-five days after the lender provides notice, the lender must purchase flood insurance on behalf of the borrower and may charge the borrower any associated costs of premiums and fees. 42 U.S.C. § 4012a(e)(2); 12 C.F.R. § 339.7. Lenders may rely on a third party to determine whether a property falls within a SFHA but "only to the extent that such person guarantees the accuracy of the information." 42 U.S.C. § 4104b(d) (2006). Finally, the borrower and lender may jointly request the Administrator of the Federal Emergency Management Agency ("Director") to review whether a property is located in a SFHA. Id. § 4012a(e)(3).

A federal agency may assess a civil penalty against a lender demonstrating a pattern or practice of failing to provide notice or purchase flood insurance coverage as required. Id. § 4012a(f)(2)(B). And the Reform Act protects lenders, in certain circumstances, from liability under state law when the lender purchases flood insurance on behalf of a borrower:

Notwithstanding any State or local law, for purposes of this subsection, any regulated lending institution that purchases flood insurance or renews a contract for flood insurance on behalf of or as an agent of a borrower of a loan for which flood insurance is required shall be considered to have complied with the regulations issued under subsection (b) of this section.

Id. § 4012a(f)(6).

B. Facts

On June 29, 2007, Defendant loaned Plaintiff $241,500. Compl. ¶¶ 4-5, ECF No. 1. The loan was secured by a mortgage on real property and improvements located at 1019 Kimberton Road, West Pikeland Township, Pennsylvania ("the Property").*fn3 Id. By the time of closing on June 27, 2007, Defendant obtained a flood zone certification that the Property was not located within a SFHA. Id. ¶ 8. Plaintiff commenced making monthly payments on the loan. Id. ¶ 9.

On August 9, 2007, Defendant obtained a second flood zone certification that the Property was located in a SFHA. Id. ¶¶ 11-12. Accordingly, Defendant advised Plaintiff that the Property was in a SFHA and that Plaintiff must obtain flood insurance on the Property. Id. ¶ 13.

Defendant acquired flood insurance on the Property and assessed the premiums paid to the monthly loan payments. Id. ¶¶ 14, 36. Plaintiff refused to pay the additional flood insurance premiums because he believed the second flood zone certification to be in error.*fn4 Id. ¶ 15.

In 2008, however, Defendant reported to certain credit reporting agencies that Plaintiff was in default or late in making payments on the loan. Id. ¶ 18. And on August 2, 2010, Defendant initiated a mortgage foreclosure action against Plaintiff because the loan was in default. Id. ¶ 19-20. Both actions were the result of the additional insurance premium charges Defendant assessed, which, Plaintiff contends, were erroneous. Id. ¶ 17-34. Plaintiff continued to make monthly payments on the loan less any premiums assessed for the flood insurance policy.*fn5 Id. ¶ 36.

Plaintiff suffered damages in the form of costs for obtaining a surveyor and providing information to Defendant that the Property was not in a SFHA, unreimbursed and improperly assessed flood insurance premiums, attorney's fees and costs, and lost profits relating to Plaintiff's business, Tom Oates Automotive Center, arising from Plaintiff's inability to obtain ...


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