Insurer Off the Hook in Lawsuit Against Loan Servicing Company

Inside Subprime: Oct 30, 2018

By Grace Austin

An insurer is off the hook in a loan servicing company’s lawsuit over debt-collecting calls, according to a federal judge.

The loan servicer Loan Servicing is being hit with several lawsuits after customers claim they’re being harassed by loan repayment phone calls. The insurer for the loan company, the insurer North America, does not have to pay out under its liability insurance, a Chicago-based judge ruled in early October.

The judge says that’s because the loan servicer’s conduct violates federal law — the Fair Debt Collections Practice Act and the Telephone Consumer Protection Act.

The lawsuits’ plaintiffs are saying that their privacy was invaded by robocalls to their personal phone lines. The judge went further, saying that one plaintiff’s privacy was invaded after the company got ahold of her credit report, and that the loan servicer called dozens of times despite the plaintiff allegedly telling them to stop.

U.S. District Judge Charles Kocoras also said the Illinois-based the insurer North America does not have to pay out on bodily injury coverage. That’s after one claim that the loan servicer’s relentless debt-collecting calls led to a customer’s miscarriage.

The insurer doled out several general liability and umbrella policies over six years to the loan servicer, ending in 2016. They declined to provide coverage on the loan servicer, leading the insurer North America to ask a federal judge to declare the insurer off the hook in a declaratory judgment lawsuit. This comes as judges are coming down harder on companies’ use of unconsenting robocalls.

The loan servicer Financial is based in West Palm Beach, Florida, and has thousands of employees, with a main focus on subprime loans. It’s the largest non-bank mortgage servicer in the country, according to the Consumer Financial Protection Bureau.

But this is not the first time the loan servicing company has gotten in trouble with the law. Lawsuits from the CFPB and several states last year claimed that mortgage mistakes cost thousands of people their homes. And in 2013, the loan servicer came under fire< from the federal consumer watchdog agency. The CFPB forced the loan servicer to repay millions to borrowers who were foreclosed upon and required the loan servicer to provide more homeowner safeguarding. For more information about subprime loans and predatory payday loans, check out all of our Subprime Reports including Illinois, ChicagoPeoriaRockford, and  Springfield.

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