Horry County (County in SC) residents have filed two class-action lawsuits against Vanderbilt Mortgage and Finance Inc., accusing one of the nation's largest manufactured home lenders of making harassing telephone calls to collect monthly payments that were not late and forcing customers to buy expensive homeowners insurance sold through the company.
Vanderbilt, a mortgage company affiliated with Clayton Homes, denies the allegations and has asked a federal judge to dismiss the lawsuits, saying there is no evidence the company did anything illegal.
"Vanderbilt operates within the law, and we look forward to our day in court, if it comes to that," said Rush Smith, a Columbia lawyer who represents Vanderbilt and Clayton Homes. "We feel confident we will be vindicated."
David Breen, a lawyer representing two Horry County homeowners in one of the lawsuits, said he hopes the class-action lawsuits will help homeowners nationwide stop abuses by the manufactured home finance leader.
Decisions made in the two cases could apply to all of Vanderbilt's 290,000 customers nationwide.
"The harassment creates pretty severe emotional stress, quite a bit of marital strife and problems at work because the boss wonders why his worker is getting so many phone calls," Breen said. "What you have is a big company terrorizing the little guy. And if they're doing it to my clients, they're probably doing it to a lot of people."
An argument over calls
Rebecca Peters-Mone of Conway says Vanderbilt representatives called her as often as eight times a day asking her to make a payment even when her mortgage was not past due, but was in a grace period before late fees could be assessed.
"They would call me at all hours of the day, while I was at work, on my cellular phone and my telephone at home," Peters-Mone said. "I would return their calls and tell them when I was going to make a payment and they would call me even on the day that I was making a payment."
Peters-Mone started keeping a written log of Vanderbilt's telephone calls, which shows the mortgage company called her 260 times over a 12-month period starting in November 2004. The log shows Vanderbilt called her 76 times in March 2005. The telephone calls during the 12-month period started as early as 8:15 a.m. and lasted as late as 8:23 p.m.
Federal law allows debt collectors to call customers between 8 a.m. and 9 p.m., but debt collectors are not allowed to call customers several times in one day and they cannot use the telephone to harass debtors.
Smith, the Vanderbilt lawyer, said the company does not violate the law with its phone calls to debtors.
In addition to the frequent calls, Peters-Mone said Vanderbilt representatives were rude and demeaning.
"I have perfect credit, but every time they called they would try to make me feel like a deadbeat even though my payment wasn't late," she said.
Stacey Dalbec of Myrtle Beach says in court papers that Vanderbilt shouldn't have been calling her at all, because she was not late with her mortgage payments.
Dalbec's mortgage was due the first of each month, but Vanderbilt gave her an 11-day grace period before it considered the payment past-due and added late fees.
Dalbec could not be reached for comment last week, but she detailed her experiences with Vanderbilt in an affidavit included with court filings.
"Vanderbilt began calling my residence immediately after the first day of the month," Dalbec said in the affidavit. "Vanderbilt would call several times a day."
Dalbec said Vanderbilt representatives "always instilled a sense of urgency in their messages" and said payments had to be made immediately.
"When I returned their calls and told them I would be sending in the payment, it made no difference," Dalbec said in the affidavit. "They would call again the next day."
When Vanderbilt couldn't get Dalbec on the phone, the company's representatives called Dalbec's mother in Columbia, according to court documents.
"They contacted my mother on four separate occasions," Dalbec said in the affidavit. "They also contacted my father-in-law who lives in Columbia, with whom we had not had contact for over two years."
Breen, who represents Peters-Mone and Dalbec, said Vanderbilt calls customers' relatives in attempts to collect monthly mortgage payments.
"[Vanderbilt will] say things like, 'You need to tell so-and-so to make her house payment,'" Breen said.
Federal law allows debt collectors to contact relatives and other third parties, but only to get a debtor's phone number or find out where a debtor lives and works. Debt collectors are not allowed to disclose nonpublic information about a loan to third parties. That includes telling someone that their relative's debt is past due.
"We have no idea where they got the contact information for our relatives, and we definitely did not give anyone connected with Vanderbilt permission to call our relatives," Dalbec said in the affidavit.
Breen is trying to get Vanderbilt's phone records to show the company makes it a policy to call customers several times a day to collect payments that aren't yet late.
"They're fighting us on that, which leads me to believe there's something there they don't want us to see," Breen said.
The second lawsuit, which includes six Horry County residents and four people from Florence and Summerville, also alleges that Vanderbilt harassed and threatened customers over payments.
That lawsuit also says Vanderbilt forced some customers to pay for expensive homeowners insurance they didn't need. Those customers said they already had homeowners insurance through different companies.
The S.C. homeowners who filed the lawsuit are: Douglas and Kelly Leung of Myrtle Beach; April Moore of Myrtle Beach; Robert Darbee of Conway; Ernestine Jaeger of Conway; Kathleen Aponte of Conway; Shawn and Lisa Firestine of Florence; and Claria and Chastity Gethers of Summerville.
Those homeowners also are suing American Bankers Insurance Co. of Florida, which provided the insurance coverage through Vanderbilt.
The lawsuit stems from a practice known as "force-placed insurance," which occurs when a lender takes out an insurance policy to protect its interest in a home or automobile. Lenders then charge the cost of the insurance to the home or car owner.
Lenders typically do that when a home or car owner fails to get his or her own policy, and the force-placed insurance is almost always more expensive than insurance consumers can get themselves.
The lawsuit says Vanderbilt force-placed insurance on customers even when the company knew those customers had their own policies. Vanderbilt did that, the lawsuit says, because it received commissions on the force-placed policies.
When some of Vanderbilt's customers failed to pay or refused to pay for the insurance, the lawsuit says Vanderbilt added late fees to their mortgage payments, continued to bill them for the unnecessary insurance or threatened to foreclose on their homes.
Vanderbilt denies the allegations and has asked a judge to dismiss the lawsuit.
Lawyers representing consumers in that case did not return telephone calls last week.
Combination for success
Vanderbilt is the finance division for Clayton Homes, which is a subsidiary of billionaire Warren Buffett's Berkshire Hathaway Inc.
Clayton is the nation's most successful manufactured home dealer and one of the few to turn a profit during the industry's five-year slump, with earnings of $416 million in 2005.
That more than doubled the previous year's earnings of $192 million.
Much of that financial success is due to the home loans that Vanderbilt services.
Vanderbilt finances about two-thirds of the homes that Clayton dealers sell and has bought thousands of additional loans from other banks since Berkshire Hathaway acquired Clayton in 2003. Clayton and Vanderbilt have a $10 billion loan portfolio compared with about $2.5 billion three years ago.
Buffett, in his 2004 letter to Berkshire Hathaway shareholders, said the Clayton purchase was a gamble because the manufactured home industry is in shambles.
"Delinquencies continue high, repossessed units still abound and the number of retailers has been halved," Buffett wrote.
Buffett wrote that Berkshire Hathaway's deep financial pockets and Clayton's manufacturing and operating expertise were a combination that would allow the home seller to succeed even in the harsh industry environment.
Some consumer advocates, however, say that success has come at the expense of homeowners' peace of mind.
The consumer watchdog group RipoffReport.com has logged 181 complaints about Vanderbilt, most of them dealing with harassing and abusive debt collection practices and force-placed insurance.
The Better Business Bureau in Maryville, Tenn., where Vanderbilt is located, has a file with 215 complaints against the company in the past 36 months.
The S.C. Department of Consumer Affairs has had 22 complaints against Vanderbilt in the past two years.
"That's a lot," said department spokesman Darrell Jackson. "We usually don't get that many complaints about one company."
Jackson said consumers who have complaints about debt collectors should file a written report with the consumer affairs office.
"If debt collectors are breaking the law, we need to know about it," Jackson said.
Myrtle Beach, South Carolina