Loan Payment Administration, LLC. v. Hubanks

This case involves a business that charges homeowners fees to collect their mortgage payments on a biweekly basis and send the money to the lender every four weeks (thus making 13 mortgage payments in the course of a year). The company claims its services benefit homeowners by effectively reducing the terms of their mortgages and reducing interest charges over the life of the loan, although homeowners seeking these arguable benefits could get the same results by making additional payments to their lenders directly.

In its solicitation letters to homeowners, the company has used the name of the lender and information about the homeowners’ mortgage loans in ways that could suggest that the solicitation comes from someone affiliated with or authorized by the lender. California law requires that such solicitation letters include specified disclosures making clear that the offer is not from, sponsored by, or authorized by the lender and that information it may contain about the homeowners’ loan amount does not come from the lender. The company has not included the required disclosures. When California district attorneys threatened enforcement action, the company filed suit claiming that the disclosure requirement violates the First Amendment.

A federal district court denied preliminary injunctive relief on the First Amendment claim, and the Ninth Circuit affirmed, holding that California law imposed permissible commercial disclosure requirements aimed at preventing possible deception of consumers. Such disclosure requirements that are reasonably related to legitimate government interests are permissible under the Supreme Court’s decision in Zauderer v. Office of Disciplinary Counsel. The district court then dismissed the lawsuit. In a new appeal, the company argued that the Supreme Court’s 2018 decision in National Institute of Family and Life Advocates v. Becerra (NIFLA) narrowed Zauderer’s applicability so that it covers only disclosure requirements relating to the terms under which a company provides goods or services. The company also argued that NIFLA requires reconsideration of the court of appeals’ earlier conclusion that the disclosure requirement was reasonably related to the interest in preventing consumer deception, and that NIFLA supports its claim that the disclosure requirement is unduly burdensome.

Public Citizen filed a brief as amicus curiae in support of the district attorneys defending the California law. The brief argues that NIFLA does not limit Zauderer’s application to disclosure requirements about a company’s terms of service, and that it does not change the law with respect to the justification required for anti-deception measures or burdensomeness of disclosure requirements.