Texas Passes Statutory Rescission of Acceleration for Promissory Notes

Texas recently passed a statutory rescission law that provides clarity for lenders to unilaterally rescind acceleration of a defaulted loan. The new law is not the only method for rescinding acceleration and the common law principles of abandonment still remain.  H.B. 2067, the new statutory rescission provision, is codified at Texas Civil Practice and Remedies Code 16.038 and it applies to all promissory notes accelerated before, on, or after June 17, 2015, as well as all notices of rescission served before, on, or after June 17, 2015. Before your eyes glaze over, this new law helps lienholders and loan servicers especially in light of increasing challenges that their liens are unenforceable due to the statute of limitations running. It also provides a less expensive alternative to litigating as to whether common law abandonment of acceleration has occurred.

Prior to the enactment of H.B. 2067, if a note or deed of trust contained an acceleration clause, default did not by itself start limitations running on the note. Rather the cause of action accrued when the holder of the note actually exercised its option to accelerate the note. Absent evidence of abandonment (or an agreement between the parties), a clear and unequivocal notice of intent to accelerate and notice of acceleration was enough to conclusively establish acceleration. See Holy Cross Church v. Wolf, 44 S.W.3d 562, 566 (Tex. 2001). A note holder could be deemed to abandon acceleration if it continued to accept payments from a borrower without using any of the remedies available to it once the note was declared to have matured. See Khan v. GBAK Props., Inc., 371 S.W.3d 347, 353 (Tex. App.-Houston [1st Dist.] 2012, no pet.); Rivera v. Bank of America, et al.; Summary Calendar No. 14-40837 (5th Cir. 2015) (unpublished opinion).

Section 16.038 of the Texas Practice and Remedies Code now allows unilateral rescission or waiver of acceleration by a simple written notice. Written notice is effective if mailed by the lienholder, the servicer of the debt or the attorney representing the lien holder on each debtor. The statute does require that an attorney for the servicer can send out the notice, but only if that attorney also acts as counsel for the mortgagee. The notice must be made via first-class or certified mail to the debtor’s last known address, and is complete when mailed. An affidavit that service was complete is prima facie evidence of service and proof of receipt is not required for the rescission or waiver to be effective. While the new statutory provision offers great benefits, it does not allow rescission after the four-year limitations period has already run.

Lienholders and loan servicers have a new tool for their toolbox. It will not cure all the challenges but should greatly assist lienholders and servicers and reduce the amount of litigation over the abandonment issue. The opinions in this blog are solely the author’s and any comments or suggestions should be sent to john@jrjoneslaw.com.


The Telephone Consumer Protection Act and Autodialed and Prerecorded Calls

The Federal Communications Commission issued its long-awaited ruling on the Telephone Consumer Protection Act (“TCPA”) Friday, July 10, 2015 when it issued its TCPA Omnibus Declaratory Ruling and Order. You can read the full text of the 138 page ruling and dissent here (https://www.fcc.gov/document/tcpa-omnibus-declaratory-ruling-and-order). Because of the technical nature of the opinion, I am providing an extract from the FCC’s introduction and summary of what the Order ultimately does. If you are involved with an auto dialing system or use prerecorded telephone messages, you are encouraged to go to the FCC link above. The extract is below:

“In enacting the TCPA, Congress made clear that “[i]ndividuals’ privacy rights, public
safety interests, and commercial freedoms of speech and trade must be balanced in a way that protects the privacy of individuals and permits legitimate telemarketing practices.” Since the TCPA’s enactment, calling technology has changed, and businesses have grown more vocal that modern dialing equipment should not be covered by the TCPA and its consumer protections. At the same time, consumers have also made it clear that despite such technological changes, they still want to avoid most robocalls they have not agreed to receive. With this order—which resolves 21 separate requests for clarification or other action regarding the TCPA or the Commission’s rules and orders—we affirm the vital consumer protections of the TCPA while at the same time encouraging pro-consumer uses of modern calling technology. Further, the clarity we provide in this Declaratory Ruling and Order will benefit consumers and good-faith callers alike by clarifying whether conduct violates the TCPA and by detailing simple guidance intended to assist callers in avoiding violations and consequent litigation. Among other actions, we [The FCC]:

Strengthen the core protections of the TCPA by confirming that:
o Callers cannot avoid obtaining consumer consent for a robocall simply because they
are not “currently” or “presently” dialing random or sequential phone numbers;
o Simply being on an acquaintance’s phone contact list does not amount to consent to
receive robocalls from third-party applications downloaded by the acquaintance;
o Callers are liable for robocalls to reassigned wireless numbers when the current
subscriber to or customary user of the number has not consented, subject to a limited,
one-call exception for cases in which the caller does not have actual or constructive
knowledge of the reassignment;
o Internet-to-phone text messages require consumer consent; and
o Text messages are “calls” subject to the TCPA, as previously determined by the
Empower consumers to stop unwanted calls by confirming that:
o Consumers may revoke consent at any time and through any reasonable means; and
o Nothing in the Communications Act or our implementing rules prohibits carriers or
Voice over Internet Protocol (VoIP) providers from implementing consumer-initiated
call-blocking technology that can help consumers stop unwanted robocalls.
Recognize the legitimate interests of callers by:
o Clarifying that application providers that play a minimal role in sending text
messages are not per se liable for unwanted robocalls;
o Clarifying that when collect-call services provide consumers with valuable call set-up
information, those providers are not liable for making unwanted robocalls;
o Clarifying that “on demand” text messages sent in response to a consumer request are
not subject to TCPA liability;
o Waiving our 2012 “prior express written consent” rule for certain parties for a limited
period of time to allow them to obtain updated consent; and
o Exempting certain free, pro-consumer financial and healthcare-related messages
from the consumer-consent requirement, subject to strict conditions and limitations to
protect consumer privacy.
o Providing and reiterating guidance regarding the TCPA and our rules, empowering
callers to mitigate litigation through compliance and dispose of litigation quickly
where they have complied.

The new ruling is a lot to digest, but does provide some clarity to the TCPA. The new ruling is also being challenged and a lawsuit has been filed by ACA International against the FCC, citing the ruling is at odds with the original intent of the law and seeking judicial review of the order. I am sure there will be more to come on this issue, but the Omnibus Ruling should be reviewed by anyone using autodialer or prerecorded messages.

The opinions in this blog are solely the author’s and any comments or suggestions should be addressed to me at john@jrjoneslaw.com.