A consumer’s allegation that the value in the residence declined, rather than the value of the equity in the residence declined, is sufficient to state a claim that the creditor improperly reduced consumer’s HELOC

A recent decision from the Northern District of Illinois, Hickman v. Wells Fargo Bank, 09-cv-5090 (N.D. Ill., Jan. 26, 2010) followed the holding in _Levin v. Citibank, N.A._, 2009 WL 3008378 (N.D.Cal., 2009) that a complaint contending that a creditor violated TILA and Regulation Z by impermissibly reducing the consumer’s line of credit cannot be dismissed where it specifically alleges that the value of his home had declined significantly. In this case, the consumer obtained an appraisal subsequent to receiving notice of a reduction in his credit line and that the appraisal indicated that the value of his home had declined less than ten percent from its value at the time plaintiff opened the HELOC. The creditor moved to dismiss the complaint. It did not dispute that the consumer had alleged that the creditor reduced his HELOC. Instead, relying on _Ashcroft v. Iqbal_, 129 S.Ct. 1937 (2009), it argued that the consumer ’s conclusory statement that on information and belief, neither [the consumer’s] property nor the property of the Class members has significantly declined in value, was insufficient to survive a 12(b)(6) motion to dismiss. Following the reasoning in _Levin_, the district court held that the consumer’s allegations that the value of his home had declined significantly were sufficient to survive a motion to dismiss. The consumer did not have to allege that the equity in his home did not decline significantly. The court rejected the consumer’s theory that the creditor also violated TILA by not including in its notice specific reasons for the reduction. The consumer suggested that the notice should have disclosed such information as the creditor’s valuation of the property, how it came to that valuation, the methods used to support that valuation, etc. The court held that the stated reason which was a substantial decline in the value of the property sufficed.

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