Select Portfolio Servicing Class Action: Mishandled Credit Reporting After COVID-19 Forbearance

Case Overview: A class action lawsuit has been filed against Select Portfolio Servicing, alleging that the company mishandled credit reporting for homeowners who were in COVID-19 forbearance programs. 

Consumers Affected: Homeowners who were in COVID-19 forbearance programs and were serviced by Select Portfolio Servicing.

Court: U.S. Supreme Court of the State of New York, County of Rockland

Select Portfolio Servicing (SPS) has been hit with a new lawsuit accusing the mortgage servicing company of improperly handling a homeowner's credit report after they used a federal Covid Forbearance Plan. 

The lawsuit claims that SPS violated the Fair Credit Reporting Act by reporting late payments even though the homeowner was following the rules of the forbearance program, hurting their credit and financial stability.

Lawsuit Claims SPS Mishandled Credit Reporting After COVID-19 Forbearance

Monsey, New York, homeowner Yosef Rothman filed the proposed class action lawsuit against SBS alleging the violations of FCRA and improper business practices. Monsey entered into a Covid Forbearance Plan, meant to help people who were struggling financially by allowing them to pause their mortgage payments temporarily, when the pandemic hit.

According to the lawsuit, when the forbearance period ended, SPS demanded that Rothman pay the entire amount of deferred payments in one lump sum—threatening foreclosure if they didn’t.

Even though Rothman tried to resume making monthly payments, SPS refused to accept them, insisting on the full amount instead, the lawsuit alleges. Rotham scraped together the lump-sum payment to avoid losing his home, but SPS then reported him as being late on his payments to credit agencies, damaging his credit score, the lawsuit lays out. 

Rothman disputed the late payments with the credit agencies, but SPS doubled down confirming the inaccurate information, he alleges. Rothman says because of this, he suffered emotional distress, financial harm, and constant worry about the possibility of foreclosure.

Fair Credit Reporting Act Requires Accurate and Fair Credit Reporting

The lawsuit argues that SPS didn’t follow the rules laid out by the Fair Credit Reporting Act, which is designed to ensure accurate credit reporting. By reporting Rothman as late, despite him being in a forbearance plan, SPS allegedly made it harder for him to recover financially after the pandemic.

Rather than offering reasonable repayment options, the lawsuit claims SPS pushed for large lump-sum payments from homeowners like Rothman, adding unnecessary fees and interest along the way. In turn, homeowners’ credit scores took a hit, which could have long-term consequences for their financial health, the lawsuit argues.

CARES Act Protections Ignored, Lawsuit Alleges

The CARES Act, passed in March 2020, was created to give homeowners a break during the pandemic. Under the act, homeowners could pause their mortgage payments without penalties, fees, or damage to their credit. Once the forbearance period ended, they were supposed to be given options to pay back the missed payments over time, rather than being forced to pay everything all at once.

But according to the lawsuit, SPS ignored these protections. The company demanded full repayment immediately and failed to inform the homeowner about their right to spread out the payments over time. By doing so, SPS allegedly made the homeowner's financial situation even worse.

Mortgage Servicers and Credit Reporting Agencies Face Legal Challenges

This lawsuit is just one of many that have been filed against SPS and other financial institutions over credit reporting and mortgage handling. SPS has faced legal trouble before, including a settlement with New York regulators for operating unauthorized branches in Utah.

And it’s not just mortgage servicers—credit reporting agencies like Equifax have also been hit with lawsuits. One class action lawsuit suit accuses Equifax of failing to investigate credit report disputes properly, leading to significant financial harm for consumers. Other companies have been sued for making unauthorized credit checks and mismanaging consumer data.

Rothman wants to represent homeowners from across the country who have been affected by SBS’s practices in his claims of violations of the FCRA and New York business law, as well as unjust enrichment. He is seeking damages, costs, and fees.

Case Details

• Lawsuit: Rothman v. Select Portfolio Servicing, Inc.
• Case Number: 7:24-Cv-07249
• Court: U.S. Supreme Court of the State of New York, County of Rockland 

Plaintiffs' Attorneys

• Daniel Zemel (Zemel Law LLC)

Have you experienced similar issues with Select Portfolio Servicing or other mortgage companies regarding credit reporting after COVID-19 forbearance? Share your experiences and thoughts in the comments below.