Assignee Liable For Servicer’s Violation Of TILA Rule That Requires The Servicer To Timely Respond To Mortgagor’s Pay-off Request

The court in Lucien v. Federal National Mortgage Ass’n, 13-CV-62399 (S.D. Fla. May 23, 2014) was called upon to construe TILA’s confusing and often conflicting statutory scheme, which has resulted in fractured decisions in this district. In Lucien, the mortgagor sued the holder of her loan and its loan servicer alleging that the servicer violated TILA’s recent amendment for failing to timely provide an accurate payoff statement upon her demand. 12 C.F.R. § 226.36. According to the Complaint, the servicer did not respond with the payoff information, but instead commenced foreclosure proceedings. Both defendants moved to dismiss. The servicer contended that it cannot be liable under TILA because it did not also own the loan. The owner argued that as an assignee of the original lender, its liability under TILA is limited to two circumstances, neither of which was present. Additionally, even if the Court were to find assignee liability under TILA, the holder cannot be held vicariously liable for the servicer’s actions. The court granted the servicer’s motion to dismiss agreeing that servicer’s cannot be held liable for damages because TILA’s civil damages provision only provides for creditor liability – not servicer liability. The holder of the loan was not so fortunate. Despite the questionable nature of the suit, the court denied the holder’s motion to dismiss finding that a majority of courts have held that a creditor can be held vicariously liable for a servicer’s TILA violations. It undertook very little independent analysis of the statute instead relying on the reality that if vicarious liability were not available against creditors, neither a servicer/non-lender nor a lender/non-servicer [would be] liable for damages based upon a § 1602(f)(2) violation. As a result, the provision would be left without effect. Acknowledging the limited case law on the issue, the imperfect character of the statutory provisions as drafted, and the admonishment that courts must liberally construe a remedial consumer protection statute, the Court was 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 § 16 a remedy section that provides for civil liability against creditors. The court also rejected the holder’s argument that this section of TILA did not support a private right of action. The court said the holder’s argument ignored the rights-creating language in § 1641(a) that bestows a private right of action for any violation of its provisions, again relying on other district court decisions which have rejected the same argument.

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