Boschma v. Home Loan Center: Misleading Loan Documents Are Actionable Under UCL

California’s Fourth Appellate District has made it more difficult for defendants to dismiss consumer claims brought under California’s Unfair Competition Law (UCL).  The court found that plaintiffs could adequately plead a cause of action under the UCL based on allegations that the defendant provided misleading, inaccurate, or incomplete disclosures in adjustable rate mortgage (ARM) loan documents.  Boschma v. Home Loan Center, 198 Cal. App. 4th 230, 243 (Aug. 10, 2011) (available here). 

The Boschma plaintiffs’ operative complaint alleged that the defendant’s loan documents failed to clearly state that making payments pursuant to the payment schedule would definitely result in negative amortization during the initial years of the loan.  Id. at 242.  Rather, the defendant only disclosed that negative amortization could occur.  Id.  The court concluded that the plaintiffs had adequately pled their UCL claim against the defendant lender for failure to accurately disclose the terms of its ARM loans.  Id. at 251-254.

Boschma thus represents an important contribution to California’s consumer protection doctrine.  In addition to upholding the UCL claim for misleading loan documents, the court also sustained the plaintiffs’ allegations of fraudulent concealment on the basis that pertinent loan information had been presented in a confusing manner.  Id. at 248-249.   This broad interpretation of fraudulent concealment may be applicable in other finance and home mortgage lawsuits, as well as in consumer class actions generally.