In 2009, Congress amended the Truth in Lending Act (TILA) to require lenders that acquire existing mortgages to notify borrowers of the transfer. Until now, it has been unclear whether pre-2009 transfers fall under that amendment.
The United States Court of Appeals for the Ninth Circuit, one of the most plaintiff-friendly courts in the country, faced that question in a recent case, Talaie v. Wells Fargo Bank, N.A. California residents Mohammad and Rosa Talaie sued Wells Fargo Bank and U.S. Bank, alleging that the lenders violated TILA by not telling them about the transfer of their mortgage in 2006. The couple sought to represent themselves and a class of similarly situated individuals.
The potential liability was huge. TILA permits $4,000 in damages for individual claims and up to $1 million for class relief, plus court costs and attorneys’ fees.
The Ninth Circuit had little difficulty finding that the 2009 amendment did not apply retroactively. In general, new laws are presumed not to apply to past conduct, the appellate court noted. That sort of effect is unfair because the defendant was likely acting lawfully at the time and had no ability to know what future legal requirements would be. Also, there was nothing in the congressional record to suggest that the legislature intended the TILA amendment to affect past transfers. “It is unlikely,” the Ninth Circuit ruled, “that Congress would have broadly subjected creditors to civil liability and statutory penalties without at least giving them a way to comply with [the amendment] for loan transfers that predated its enactment.”
It is unlikely that Congress would have broadly subjected creditors to civil liability and statutory penalties without at least giving them a way to comply with [the new TILA amendment] for loan transfers that predated its enactment.
Talaie v. Wells Fargo Bank, N.A. (9th Cir. Nov. 2, 2015)
Although several lower courts had reached this same conclusion, no circuit court had yet confronted this issue. So, at this point, relevant judicial interpretations are unanimous. That should deter potential copy-cat suits in other jurisdictions, giving lenders peace of mind.