TILA 1641(f)(2) and (g) and more.....Lucien V. Federal National Mortgage Association- Judges are confuses, banks try to assert loopholes or confuse the statute meanings, and consumers protection statutes are not user friendly or clear when it comes to enforcement. Whose fault is it? CONGRESS WHO DRAFTS THESE LAWS!!!! WE NEED TO DEMAND THEY FIX THEM. Defendants argue that Fannie Mae cannot be held vicariously liable for Green Trees servicing errors. The majority of opinions out of this district have held that a creditor can be held vicariously liable for a servicers TILA violations. Runkle, 905 F.Supp.2d at 1331 (holding that a creditor can be vicariously liable under TILA for a servicers violations); Khan, 849 F.Supp.2d at 1382 (same); Galeano, 2012 WL 3613890, at *6 (same); Kissinger v. Wells Fargo Bank, N.A., 888 F.Supp.2d 1309, 1315 (S.D.Fla.2012) (same); Montano, 2012 WL 5233653, at *3 (same); see also Signori v. Fed. Natl Mortg. Assoc., 937 F.Supp.2d 1364, 1367 n. 3 (S.D.Fla.2013) (noting split in authority in the Southern District of Florida regarding vicarious liability without reaching the issue). Courts in other districts have also found that creditors can be vicariously liability for TILA violations. Rinegard–Guirma v. Bank of Am. N.A., No. 3:10–cv–01065–PK, 2012 WL 1110071, at *9(D.Oregon, Apr. 2, 2012); Consumer Solutions REO, LLC v. Hillery, No. C–08–4357 EM, 2010 WL 1222739, at *5 (N.D .Ca. Mar. 24, 2010). These courts have found vicarious liability to reconcile TILAs civil damages provision—which makes only a creditor liable for TILA violations—with TILA provisions that impose obligations on servicers. In this analysis, courts have often considered 15 U.S.C § 1641(f)(2), which provides, (f) Treatment of servicer ... (2) ... Upon written request by the obligor, the servicer shall provide the obligor, to the best knowledge of the servicer, with the name, address, and telephone number of the obligation or the master servicer of the obligation. 15 U.S.C. § 1641(f)(2).FN4 As Judge Dimitrouleas explained in Khan, if vicarious liability were not available against creditors, FN4. Although § 1641(f)(2) is not at issue here, courts application of that provision is instructive because, like the payoff statement required by Regulation Z, § 1641(f)(2) deals with servicers post-origination obligations to debtors. neither a servicer/nonlender nor a lender/non-servicer [would be] liable for damages based upon a § 1602(f)(2) violation. The provision would as a result be left without effect, notwithstanding the rule that statutes should be read to avoid rendering superfluous any parts thereof. Acknowledging the limited case law on the issue, the imperfect character of the statutory provisions as drafted, and the admonishment that we must liberally construe this remedial consumer protection statute, the Court is persuaded that Congress meant to extend agency principles to creditors or make creditors liable under § 1641(f)(2) by intentionally inserting the private right of action for violations of § 1641(f)(2) into § 1640, a remedy section that provides for civil liability against creditors. Khan, 849 F.Supp.2d at 1377. The Court adopts the reasoning of the majority of courts in this district, and holds that creditors can be held vicariously liable for their servicers TILA violations. FN5 Therefore, Defendants motion to dismiss on this ground is denied. D. Private right of action for Regulation Z violations Defendants argue that there is no private right of action for Regulation Z violations. However, a majority of courts in this district have held otherwise. Compare Runkle, 905 F.Supp.2d at 1330–31 (holding that a private right of action exists for violations of § 226.36(c)(1)(iii) of Regulation Z); Cenat, 930 F.Supp.2d at 1355 (same); Danier, 2013 WL 462385, at *4 (same); with Kievman, 901 F.Supp.2d at 1363 (holding that there is no private right of action for violations of Regulation Z); see also Alaimo v. HSBC Mortg. Servs., Inc., 13–CV–62437, 2014 WL 930787, at *3 (S.D.Fla. Mar. 10, 2014) (noting the split of authority in the Southern District of Florida regarding private right of action under Section 226.36(c)(1)(iii) of Regulation Z, but not deciding the issue). As Judge Dimitrouleas explained in Runkle, TILA provides, “The [Consumer Financial Protection] Bureau, by regulation or order, shall prohibit acts or practices in connection with—(A)a mortgage loan that the Bureau finds to be unfair, deceptive, or designed to evade the provisions of this section....” 15 U.S.C. § 1639(p)(2)(A) (emphasis added). Failure to provide a payoff statement has been found to be “unfair.” 905 F.Supp.2d at 1331. “Because the Bureau has prohibited the refusal to provide a payoff statement, it has imposed a requirement, and therefore a creditor can be liable for failing to comply with that requirement. As a result, the Court finds that a violation of 15 U.S . C. [§ 1639(p)(2) ] can be brought as a private cause of action.” Id. This Court agrees. Instead of addressing head-on the case law in this district that discusses whether there is a private cause of action to enforce Regulation Z, Defendants instead independently analyze the statute to determine whether a private cause of action can be inferred. Defendants argue that to impose liability on Fannie Mae here “would constitute an impermissible creation of a private right of action in contravention of the mandate set forth in Alexander v. Sandoval, 532 U.S. 275 (2001) against judicial creation of a private right of action for violation of a federal statute, when § 1639(l) (2) does not, directly or by implication, provide a private right of action.” Mot. to Dismiss at 15–16. Defendants Sandoval analysis relies on their arguments about TILAs applicability to creditors and their assignees, with which this Court disagrees. By doing so, Defendants improperly read Regulation Z in isolation, rather than in concert with other applicable TILA provisions. In Sandoval, the Court held that there was no private right of action to enforce disparate impact regulations promulgated under § 602 of Title VI of the Civil Rights Act of 1964. 532 U.S. at 293. The Court noted that § 602 did not contain “rights-creating language.” Id. at 288–89. The Court also explained that the complex regulatory scheme created for enforcing regulations promulgated under § 602 “tend[ed] to contradict a congressional intent to create privately enforceable rights under § 602 itself.” Id. at 290. Here, Defendants argue that neither § 1641(a) nor (e) provide a private right of action against Fannie Mae, and, read in isolation, that § 1639(l ) (2), under which Regulation Z was promulgated, does not contain “rights-creating” language. Therefore, they argue, as with the provision at issue in Sandoval, “Section 1639(l )(2)(A) ... does not contain rights-creating language and is focused on providing rule-making authority to a federal agency.” Mot. to Dismiss at 17. Defendants argument, however, ignores the rights-creating language in § 1641(a) of TILA, because Defendants have already concluded that § 1641(a) cannot reach Fannie Mae—both because they argue that Fannie Mae cannot be held vicariously liable for a servicers acts, and because Fannie Mae cannot be liable as an assignee under § 1641(e). The Court rejects both of Defendants premises for why the rights-creating language in § 1641(a) does not apply to Fannie Mae. Section 1641(a) creates a private right of action for “any violation ” of its provisions, which includes violation of Regulation Z, promulgated pursuant to TILAs § 1639(l )(2)(A). Therefore, the Court holds that there is a private right of action to enforce § 226.36(c)(1)(iii) of Regulation Z, and Defendants motion to dismiss on this ground is denied. E. Assignee liability Under TILA, “[t]he term ‘creditor’ refers only to a person who ... (2) is the person to whom the debt arising from the consumer credit transaction is initially payable on the face of the evidence of indebtedness....” 15 U.S.C. § 1602(g). Thus, Fannie Mae is not a “creditor,” but an assignee of the original creditor. Fannie Mae argues that TILA limits assignee liability to two specific situations, neither of which is presented here. TILA provides, (e) Liability of assignee for consumer credit transactions secured by real property (1) In general Except as otherwise specifically provided in this subchapter, any civil action against a creditor for a violation of this subchapter, and any proceeding under section 1607 of this title against a creditor, with respect to a consumer credit transaction secured by real property may be maintained against any assignee of such creditor only if— (A) the violation for which such action or proceeding is brought is apparent on the face of the disclosure statement provided in connection with such transaction pursuant to this subchapter; and (B) the assignment to the assignee was voluntary. 15 U.S.C. § 1641(e) (emphasis added). Thus, Fannie Mae argues, liability attaches to an assignee only where a TILA provision specifically provides for assignee liability or where “an original lenders failure to make the required pre-loan disclosures is apparent on the face of the disclosure document.” Mot. to Dismiss at 3 (emphasis added). The payoff statement request at issue in this case occurred after the original creditors initial disclosures, and indeed after Fannie Mae became the assignee of the original creditor. Thus, Fannie Mae argues, the request could not have been “apparent on the face” of any disclosure statement Fannie Mae received from the original creditor, and therefore, Fannie Mae as assignee cannot be liable under TILA. In response, Lucien argues that “disclosure statements” as used in § 1641(e) are not limited to pre-loan disclosures. While the term “disclosure statement” is not defined in TILA, Lucien argues that § 1641(f)(2) imposes a “disclosure” requirement upon servicers to provide the borrower with information about the owner or master servicer of the loan, and § 1641(g) similarly imposes a “disclosure” requirement upon new creditors.FN6 FN6. It should be noted that neither § 1641(f) nor (g) uses the words “disclosure statement” to describe servicers and creditors informational requirements. The courts that have considered this issue have reached different conclusions, but all agree that the statute, as drafted, makes little sense. Judge Scola and the Second Circuit have chosen to apply the statute literally, and held that assignees cannot be liable under TILA for obligations that arose after the assignment took place because, by definition, those violations could not have been “apparent on the face of the disclosure statements” provided by the original creditor. Vincent v. The Money Store, information about the owner or master servicer of the loan, and § 1641(g) similarly imposes a “disclosure” requirement upon new creditors.FN6 FN6. It should be noted that neither § 1641(f) nor (g) uses the words “disclosure statement” to describe servicers and creditors informational requirements. The courts that have considered this issue have reached different conclusions, but all agree that the statute, as drafted, makes little sense. Judge Scola and the Second Circuit have chosen to apply the statute literally, and held that assignees cannot be liable under TILA for obligations that arose after the assignment took place because, by definition, those violations could not have been “apparent on the face of the disclosure statements” provided by the original creditor. Vincent v. TheMoney Store, 736 F.3d 88, 109 (2d Cir.2013); Signori, 934 F.Supp.2d at 1368 (Scola, J.); Alaimo, 2014 WL 930787, at *3 (Scola, J.); Alaimo, 2014 WL 930787, at *3 (Scola, J.). Both courts note that such a construction creates a loophole for assignees, but reason that it is up to Congress to close that loophole. Judges Dimitrouleas and Marra, and one decision out of the Northern District of California have held that assignees can be liable for servicing failures, reasoning that creditors and assignees are identically situated with regards to post-origination violations, and should be treated the same under the statute. Runkle, 905 F.Supp.2d at 1333 (Dimitrouleas, J.); St. Breux v.U.S. Bank N.A., 919 F.Supp.2d 1371 (S.D.Fla.2013) (Dimitrouleas, J.); Cenat, 930 F.Supp.2d at 1355 (Marra, J.); Hillery, 2010 WL 1222739, at *4; Rinegard–Guirma, 2012 WL 1110071, at *10. The Court holds that because the informational requirements, such as the request for a payoff statement in this case, can only arise after origination, Congresss limitation on Assignee liability in § 1641(e) was not intended for these situations. Rather, the limitation on assignee liability properly refers only to the “assignees liability for the original creditors violation of the act,” Vincent, 736 F.3d at 107 (quoting S.Rep. No. 96–73, at 18 (1979)), and does not limit the assignees liability for post-assignment violations. As Judge Dimitrouleas reasoned in Runkle, “if a creditor is going to be liable for employing an irresponsible servicer, an assignee, who is acting just like a creditor, should also be liable for its irresponsible servicers.” Id. TILA is a consumer protection statute. One of the protections it offers is a mechanism for borrowers to obtain the payoff information for their loans. That Congress would offer this protection only to borrowers whose loans happen to be owned by the original creditor defies the very purpose of the statute—particularly given how common it was in 2009, when Congress amended TILA, for loans to be sold off for securitization. Thus, Fannie Mae may be held liable as an assignee, and the Motion to Dismiss on this ground is denied.FN7 FN7. In holding that assignees can be liable for post-assignment servicing violations, the Court does not adopt Plaintiffs suggestion that the term “disclosure statement” as used in § 1641(e) can refer to post-closing TILA requirements. The term “disclosure statement” is not defined in TILA, but in the lending industry, “TILA disclosures” is a term of art that generally refers to specific pre-closing disclosures required of the lender. See Mot. to Dismiss at 7–9. The Second Circuit reviewed the legislative history of the limitation on assignee liability in Vincent, and stated, “it appears reasonable to conclude that when Congress amended TILA, its primary concern was limiting assignee liability for an initial creditors violations of TILAs disclosure requirements. Indeed, in the same breath, the Senate Banking Committee Report clarified that consumers could continue to exercise their right to rescission against assignees, in the absence of which the right would provide little or no effective remedy.” 736 F.3d at 108 (emphasis in original); see also Hillery, 2010 WL 1222739, at *3 (reasoning that a failure to supply the name of the loans owner or master servicer as required under § 1641(f)(2) “has nothing to do with a disclosure statement”). To read the phrase “disclosure statement” as used in § 1641(e) to apply to post-closing documents would ignore the reality as reflected in industrys use of the term. F. Declaratory judgment Defendants argue that because § 226.36(c)(1)(iii) of Regulation Z does not provide a private right of action, Lucien is not entitled to declaratory judgment. Because the Court holds that § 226.36(c)(1)(iii) does provide a private right of action, it will not dismiss Luciens claim for declaratory judgment.
Posted on: Tue, 11 Nov 2014 21:46:38 +0000
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