The Lawletter Vol. 41, No. 2
The federal Truth in Lending Act ("TILA"), 15 U.S.C. §§ 1601–1667f, was enacted to, among other things, "protect the consumer against inaccurate and unfair credit billing and credit card practices." Id. § 1601(a). Prior to 2009, TILA required that borrowers be informed if the servicer of their mortgage loan changed, but there was no such notice requirement if the owner of their mortgage loan changed. To impose the latter requirement, Congress enacted Public Law No. 111-22, 123 Stat. 1632 (2009).
Specifically, the following new text was added to TILA: "[N]ot later than 30 days after the date on which a mortgage loan is sold or otherwise transferred or assigned to a third party, the creditor that is the new owner or assignee of the debt shall notify the borrower in writing of such transfer[.]" 15 U.S.C. § 1641(g)(1). Notably, if the new creditor does not comply, the borrower may bring suit to recover actual damages, a statutory penalty of up to $4,000 for individual claims ($1 million for a class action), plus costs and attorney's fees. See id. § 1640(a).
In a recent case out of the U.S. Court of Appeals for the Ninth Circuit, the appellate court was presented with an issue of first impression: Is the new requirement in § 1641(g) retroactive? See Talaie v. Wells Fargo Bank, 808 F.3d 410 (9th Cir. 2015).
In relevant part, the plaintiff homeowners sued Wells Fargo Bank and U.S. Bank, alleging that the plaintiffs were never notified of the 2006 transfer of the deed of trust for the plaintiffs' home from Wells Fargo to U.S. Bank as required by 15 U.S.C. § 1641(g). Because § 1641(g) was not enacted until 2009, it would apply to the subject transaction only if the amendment had retroactive effect. As described below, and in accord with several district court decisions on the matter, the Ninth Circuit held that § 1641(g) is not retroactive.
The U.S. Supreme Court has clearly articulated a presumption against retroactive legislation. See Landgraf v. USI Fil Prods., 511 U.S. 244, 265, 270 (1994) ("[T]he legal effect of conduct should ordinarily be assessed under the law that existed when the conduct took place * * * [in order to avoid the] unfairness of imposing new burdens on persons after the fact." (internal quotation marks omitted)). Accordingly, if new legislation would "impair rights a party possessed when he acted, increase a party's liability for past conduct, or impose new duties with respect to transactions already completed," then retroactive effect should not be given without "clear congressional intent favoring such a result." Id. at 280.
In Talaie, the Ninth Circuit noted that all three of the concerns identified in Landgraf were presented with regard to the retroactive application of § 1641(g).
First, retroactive application would impair rights Defendants possessed when they acted, because, consistent with the loan documents and the law at the time they were signed, Defendants had a right to sell or transfer the loan without notice to the borrower. Second, retroactive application of the statute would increase Defendants' "liability for past conduct," because the 2009 TILA amendments provide new private rights of action including damages, attorney's fees, and statutory penalties, for failure to give notice of a loan transfer. Third, retroactive application would impose "new duties" on transactions already completed; the very purpose of the statute was to require a loan transferee to give notice where none was previously required.
808 F.3d at 412 (citations omitted).
Furthermore, the plain and unambiguous text of the amendment did not clearly indicate an intention that § 1641(g) be given retroactive effect. Indeed, Congress has demonstrated that it knows how to specify its intent that an amendment be given retroactive effect. See id. at 413 (citing 15 U.S.C. § 1641(f) ("This subsection shall apply to all consumer credit transactions in existence or consummated on or after September 30, 1995.")).
Therefore, in accord with a handful of federal district court decisions, the Ninth Circuit held that 15 U.S.C. § 1641(g) does not apply retroactively. See id. (citing Bradford v. HSBC Mortg. Corp., 829 F. Supp. 2d 340, 353 (E.D. Va. 2011); Diunugala v. JP Morgan Chase Bank, No. 12-2106, 2015 WL 3966119, at *4 (S.D. Cal. Jun. 30, 2015); Zinzuwadia v. Mortg. Elec. Registr., Inc., No. 12-2281, 2013 WL 6782856, at *11-12 (E.D. Cal. Dec. 19, 2013)).