In King v. Long Beach Mortg. Co. No. 06-11931-WGY (D. Mass., Dec.09, 2009) a debtor filed an action under TILA seeking damages and rescission against the FDIC, which was appointed the receiver of a failed lender, and against the lender’s successor, which purchased debtor’s mortgage from the FDIC. The District Court held that TILA barred the claims for monetary damages, rescission and attorney fees against the FDIC. The damages and attorney fees claim was easily disposed of because TILA expressly provides that a civil action against a creditor may only be brought against a voluntary assignee of that creditor. 15 U.S.C. § 1641(e)(1). The FDIC is not a voluntary assignee because it was statutorily obligated to accept appointment as the Receiver. The TILA rescission claim failed as well but for a different reason. The court agreed that any consumer with the right to rescind may rescind the transaction as against any assignee of the obligation, 15 U.S.C. § 1641(c) and that [a]ny assignee includes governmental agencies, such as the FDIC, that step into the shoes of a failed bank. But rescission against the FDIC was impossible because rescission is the unmaking of a transaction between parties to that transaction and another bank has replaced the FDIC as the party to the loan transaction. Applying the dictionary definition of assignee, the FDIC was an assignee when it first became receiver and acquired the assets of the failed lender but it is no longer an assignee because the rights in the mortgage were transferred to a new lender. Furthermore, the term any, which precedes the word assignee, in Section 1641(c) is not intended to refer to past or previous assignees. It would be absurd to interpret the use of ‘any’ as having the effect of making the rescission remedy available against every single person that had previously held rights to a loan transaction but has since transferred the rights to someone else. Rather, the term ‘any’ is used simply to emphasize that the rescission remedy applies to any assignee, regardless of their knowledge or involvement in the original TILA violation, or their status as holder in due course. Since it no longer holds any rights in the mortgage, the FDIC no longer fits the description of assignee or any assignee and the debtor cannot rescind against it.
Author
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Solomon has nearly two decades of experience representing financial institutions, real estate investors and privately owned business entities. Solomon concentrates his practice in the areas of banking, consumer financial services, real estate, business law and related litigation and appellate practice.
