U.S. Bank Wins Truth in Lending Test on Retroactivity

By Chris Bruce

Dec. 14 — A Truth in Lending Act (TILA) mandate to alert borrowers about loan transfers does not apply retroactively, a federal appeals court said Dec. 14, blocking a would-be class suit against U.S. Bank.

The ruling by the U.S. Court of Appeals for the Ninth Circuit rejects a theory that, if adopted, could have imposed significant new liability on some creditors with respect to loans obtained prior to 2009.

At issue is a TILA requirement found at 15 U.S.C. 1641(g) that gives creditors who obtain mortgage loans by sale or transfer 30 days to notify borrowers in writing about the transfer. Borrowers who sought to represent a class said U.S. Bank, which obtained the loan from Wells Fargo, failed to provide notice, and claimed the TILA notice requirement applies retroactively.

Ruling a First

The Ninth Circuit disagreed, calling the ruling its first decision on the question. According to the court, Wells Fargo transferred the loan to U.S. Bank in 2006, three years before Congress amended TILA and added the 30-day transfer notice requirement, found at 15 U.S.C. 1641(g).

“There is no clear indication, in § 1641(g)’s text or in its legislative history, that Congress intended for it to apply to loans that had been transferred before its enactment,” Judge Ronald M. Gould said for a three-judge panel.

The case involved Mohammad and Rosa Talaie, who filed a putative class action against Wells Fargo Bank and U.S. Bank in connection with a modified deed of trust.

According to the court, the notice requirement of Section 1641(g) applies to the new creditor, in this case, U.S. Bank. The statute provides for actual damages, a statutory penalty of up to $4,000 in individual claims, or as much as $1 million in a class action, plus fees.

To contact the reporter on this story: Chris Bruce in Washington at cbruce@bna.com

To contact the editor responsible for this story: Mike Ferullo at mferullo@bna.com

For More Information

The ruling is at http://www.bloomberglaw.com/public/document/MOHAMMAD_ALI_TALAIE_an_individual_on_behalf_of_himself_and_all_ot.