Commercial Division Blog

Posted: June 20, 2014 / Categories Commercial, Fraud/Misrepresentation

Decision Illustrates Limits to the Scope of General Business Law Section 349

On June 12, 2014, the First Department issued a decision in Seller v. Citimortgage, Inc., 2014 NY Slip Op. 04243, affirming the dismissal of a cause of action alleging a violation of General Business Law § 349.

The First Department's decision in Seller illustrates several of the limits to the scope of GBL § 349:

The complaint fails to allege any of the elements of a General Business Law § 349 claim in connection with defendant's implementation of its private mortgage loan modification program. It alleges that defendant told plaintiffs that to qualify for a loan modification they had to be delinquent in their mortgage payments, and instructed them, since they were not at that time delinquent, to make four mortgage payments at a reduced rate. In so advising plaintiffs, defendant was not engaging in the requisite consumer-oriented conduct. The conduct was specific to them; it had no broader impact on consumers at large.

As to the element of a materially misleading act or practice, plaintiffs allege that defendant told them that to qualify for a loan modification they had to be delinquent, but they do not allege that this representation was false, nor did they submit documentary evidence refuting it. Plaintiffs also allege that defendant said it would block negative credit reporting, but they do not allege that defendant reported their delinquency during the private loan modification application period.

While the adverse consequences of a negative credit report could constitute the requisite injury for a cause of action under General Business Law § 349, as indicated, plaintiffs do not allege that a negative credit report was issued.

The complaint also alleges that defendant violated General Business Law § 349 in connection with its processing of plaintiffs' application for a permanent loan modification under the federal Home Affordable Modification Program (HAMP). [A] cause of action under General Business Law § 349 alleging violations of HAMP rules and directives would constitute an impermissible end run around the absence of a private right of action under HAMP.

(Internal quotations and citations omitted) (emphasis added).