Has your bank or other business been sued for violating the Truth In Lending Act’s (“TILA”) requirement for a notice of mortgage transfer based on a mortgage you acquired before May 20, 2009? If so, then a recent Ninth Circuit decision may be helpful.15 U.S.C § 1641(g), an amendment to the Truth In Lending Act effective May 20, 2009, requires a creditor buying a mortgage loan to provide written notice to the borrower of the transfer and the new creditor’s contact information within 30 days after acquiring the mortgage. Failing to provide the required notice can subject the new creditor to the plaintiff’s actual damages, a statutory penalty of $4,000 for individual claims, or up to a $1 million in a class action, plus attorneys’ fees and costs.

Section 1641(g) of TILA provides that a creditor who is the new owner or assignee of an existing mortgage loan must provide written notice to the borrower within thirty days of the date on which the new creditor acquired the loan. See 15 U.S.C. § 1641(g). The 11th Circuit explained, “[b]ased on its plain language, section 1641(g)’s disclosure obligation is triggered only when ownership of the ‘mortgage loan’ or ‘debt’ itself is transferred, not when the instrument securing the debt (that is, the mortgage) is transferred.”

See 15 USC 1640. An assignee on the other hand, has more limited liability, and is liable only for those violations, which among other things, are “apparent on the face of the disclosure statement . . . .” 15 USC 1641(e)(1)(A). The term “disclosure statement” is not defined.

The Robertsons’ response was a “notice of rescission” to U.S. Bank and the trustee—and a lawsuit. Before the Sixth Circuit, the plaintiffs argued (among other things) that they had a right, under 15 U.S.C. § 1635 of the Truth-in-Lending Act (TILA), to rescind the loan because U.S. Bank failed to notify them of the assignment of the deed of trust as it was allegedly required to under 15 U.S.C. § 1641(g). No circuit court of appeals had yet addressed this novel theory.

Interestingly, in this context Cordray raised the issue of liability for statutory and class action damages, noting that “consistent with existing . . . TILA principles, liability for statutory and class action damages would be assessed with reference to the final closing disclosure issued, not to the loan estimate, meaning that a corrected closing disclosure could, in many cases, forestall any such private liability.” Cordray went on to say that, despite the fact that TRID integrates the disclosures in TILA and RESPA, it did not change the “prior, fundamental principles of liability” under either statute and as a result that: (i) there is no general assignee liability unless the violation is apparent on the face of the disclosure documents and the assignment is voluntary. 15 U.S.C. §1641(e). (ii) By statute, TILA limits statutory damages for mortgage disclosures, in both individual and class actions to failure to provide a closed-set of disclosures.

The plaintiff alleged that, after foreclosure proceedings began, his servicer failed to provide the payoff balance of his mortgage within seven business days, as required under TILA 15 U.S.C. § 1639(g). Relying on the “plain meaning” of 15 U.S.C. § 1641(e), the court ruled that for an assignee of a creditor to be held liable under TILA, the violation must be apparent in the face of the “disclosure statement,” which, according to the court, the payoff statement requested by the plaintiff was not because it is provided after consummation. The court opined that “[t]here is no way that the failure to provide a payoff balance can appear on the face of the disclosure statement . . . .

The 11th Circuit affirmed the dismissal, holding that the assignee owner had no liability for the servicer’s failure to provide the statement. In a case of first impression, the Court noted that 15 U.S.C. § 1641(e) of TILA creates a cause of action against a voluntary assignee only for a violation of the act that is ''apparent on the face of the disclosure statement.'' Because the disclosure statement is provided prior to the loan being made, and because a payoff statement cannot be requested until after the loan is made, the Court reasoned that a failure to provide a payoff statement could not possibly be apparent on the face of the disclosure statement.Therefore, the assignee could not be held liable.

Interestingly, in this context Cordray raised the issue of liability for statutory and class action damages, noting that “consistent with existing . . . TILA principles, liability for statutory and class action damages would be assessed with reference to the final closing disclosure issued, not to the loan estimate, meaning that a corrected closing disclosure could, in many cases, forestall any such private liability.” Cordray went on to say that, despite the fact that TRID integrates the disclosures in TILA and RESPA, it did not change the “prior, fundamental principles of liability” under either statute and as a result that: (i) there is no general assignee liability unless the violation is apparent on the face of the disclosure documents and the assignment is voluntary. 15 U.S.C. §1641(e). (ii) By statute, TILA limits statutory damages for mortgage disclosures, in both individual and class actions to failure to provide a closed-set of disclosures.

The 11th Circuit affirmed the dismissal, holding that the assignee owner had no liability for the servicer’s failure to provide the statement. In a case of first impression, the Court noted that 15 U.S.C. § 1641(e) of TILA creates a cause of action against a voluntary assignee only for a violation of the act that is ''apparent on the face of the disclosure statement.'' Because the disclosure statement is provided prior to the loan being made, and because a payoff statement cannot be requested until after the loan is made, the Court reasoned that a failure to provide a payoff statement could not possibly be apparent on the face of the disclosure statement.

Second, when a creditor or servicer assigns its interest to a second party, the second party may also be liable under TILA, but the statute limits the scope of that liability. Specifically, two elements must be present to establish TILA assignee liability: (1) the violation must be “apparent on the face of the disclosure statement,” and (2) the assignment must be voluntary (these are found in the statute at 15 USC Sections 1641(e)(1)(A) and (B)). The determinative question for TILA assignee liability in Evanto was whether failure to provide a payoff balance statement was “apparent on the face of the disclosure statement.”