Absence of Private Right of Action for Unlicensed Loan Servicing Fees Under R.I. Gen. Laws § 19-14-26.1

Introduction

This commentary examines the Rhode Island Supreme Court’s March 24, 2025 decision in Francisco Rosario v. Nationstar Mortgage, LLC NKA Mr. Cooper et al., No. 2024-145-Appeal (PC 23-663). In an uncertified class action, plaintiff Francisco Rosario alleged that his mortgage servicer (Mr. Cooper) and trustee (BNYM) collected illegal, unlicensed third-party servicing fees in violation of Rhode Island’s newly enacted servicer‐licensing statute, G.L. 1956 §§ 19-14.11-1 et seq., and that they thereby breached the “Applicable Law” provision of his mortgage contract. The Superior Court granted defendants’ motion to dismiss, and the Supreme Court affirmed, holding that (1) § 19-14-26.1(b), which allows recoupment of fees for unlicensed lending or loan brokering activities, does not extend to servicing, and (2) the statute contains no private right of action for borrowers against unlicensed servicers.

Summary of the Judgment

The Court took the facts in Rosario’s complaint as true and focused on the issue whether a borrower may enforce the licensing requirement for third-party servicers by way of a breach‐of‐contract claim. Paragraph 14 of Rosario’s mortgage prohibited charging fees “expressly prohibited by this Security Instrument or by Applicable Law.” The servicer-licensing statute (§ 19-14.11-1) made it unlawful to serve a Rhode Island mortgage without a Department of Business Regulation license. Section 19-14-26.1(b) provided that, in an unlicensed lending or brokering transaction, fees collected must be credited back to the borrower. Rosario argued that § 19-14-26.1(b) authorized him to recoup the fees. The Court held that the statutory definitions of “lender” and “loan broker” exclude servicing and that § 19-14-26.1(b) does not create a private cause of action for borrowers against unlicensed servicers. As the General Assembly did not supply any other enforcement mechanism, the contractual claim failed and dismissal was proper.

Analysis

Precedents Cited

EDC Investment, LLC v. UTGR, Inc., 275 A.3d 537 (R.I. 2022) – Standard for motion to dismiss, documents central to the claim.
DiLibero v. Mortgage Electronic Registration Systems, Inc., 108 A.3d 1013 (R.I. 2015) – Legal conclusions vs. factual assumptions.
Maltais v. Maltais, 306 A.3d 449 (R.I. 2024) – Rule 12(b) standard of review.
Botelho v. City of Pawtucket School Department, 130 A.3d 172 (R.I. 2016) – Contract ambiguity and plain‐meaning rules.
Progressive Casualty Insurance Co. v. Dias, 151 A.3d 308 (R.I. 2017) – Clear and unambiguous statutory language must be given literal effect.
Stebbins v. Wells, 818 A.2d 711 (R.I. 2003) – Remedial schemes are for the Legislature; absence of a private right means none exists.
Shine v. Moreau, 119 A.3d 1 (R.I. 2015) – Courts will not read language into a statute that the Legislature omitted.
Finnimore & Fisher Inc. v. Town of New Shoreham, 291 A.3d 977 (R.I. 2023) – Expressio unius maxim; listing lenders and brokers excludes others.
Cummings v. Shorey, 761 A.2d 680 (R.I. 2000) – Lack of enforcement provision denotes no private action intended.
Federal decisions Leone v. Nationstar Mortgage, LLC (D.R.I. 2021) and Gaskell v. Ocwen Loan Servicing, LLC (R.I. Super. Ct.)—Superior Court declined to adopt these persuasive precedents.

Legal Reasoning

The Court’s analysis turned on two interpretive principles:

Statutory Plain Meaning: Sections 19-14-1(10)(i) and (13) define “lender” and “loan broker” without reference to servicing. Section 19-14-1(35) separately defines “servicing.” Section 19-14-26.1(b) applies only to lending and loan brokering. The Court declined to expand “involving lending” to cover servicing in the face of unambiguous statutory definitions.
No Implied Private Right of Action: The Legislature expressly provided a remedy for unlicensed lending and brokering transactions, but remained silent as to servicing. Under Stebbins v. Wells and Cummings v. Shorey, the Court will not judicially create a private cause of action where the statute contains none.

The Court applied expressio unius est exclusio alterius (the express enumeration of lenders and brokers excludes servicers) and reaffirmed that contract terms referring to “Applicable Law” incorporate only those statutes that a private party may enforce. The absence of an enforcement provision for servicers meant that Paragraph 14 provided no basis for a breach of contract action.

Impact

This decision clarifies that Rhode Island borrowers cannot sue under their mortgage contracts to recoup fees collected by unlicensed servicers. Instead, only the Department of Business Regulation may impose administrative penalties. A legislative amendment would be required to create a private remedy for borrowers harmed by unlicensed servicing. Mortgage servicers and trustees should ensure servicer licensure to avoid administrative fines; borrowers should look to administrative law rather than contract law for relief against unlicensed servicers.

Complex Concepts Simplified

Servicing: Managing loan payments and the foreclosure process on behalf of the loan owner.
Licensure Requirement: A state law mandate that third-party servicers obtain a DBR license to operate.
Private Right of Action: A borrower’s ability to sue directly under a statute; here, the Court ruled none exists for servicing.
Expressio Unius: A rule of statutory construction meaning “the express mention of one thing excludes others.”
Statutory Remedial Scheme: Legislative framework prescribing who may enforce a law and how; courts will not add remedies beyond those prescribed.

Conclusion

The Rhode Island Supreme Court’s ruling in Rosario v. Nationstar Mortgage reaffirms that statutory licensing requirements for third-party loan servicers do not carry an implied private right of action absent explicit legislative provision. By strictly construing § 19-14-26.1(b) to apply only to lending and brokering, and by respecting the Legislature’s choice not to create a private remedy against unlicensed servicers, the decision preserves the separation of powers and underscores the primacy of legislative intent in crafting enforcement mechanisms.