The Truth in Lending Act (“TILA”) requires lenders to make certain disclosures to borrowers about the terms of residential mortgages. For example, TILA requires a lender to provide a payoff balance to a borrower within seven business days of a written request. See 15 U.S.C. § 1639g. An original “creditor” who fails to comply with TILA’s requirements for mortgage transactions is subject to civil liability. However, a voluntary assignee of a loan is only liable if the TILA violation “is apparent on the face of the disclosure statement” that details the terms and costs of the loan prior to closing. Id. § 1641(e)(1)(A).
In a case of first impression, the Eleventh Circuit Court of Appeals considered a challenge to the protection TILA affords assignees of mortgage loans. In Evanto v. Federal National Mortgage Association, a borrower sued the assignee of his mortgage for violation of section 1639g for failing to timely provide a payoff balance statement. The district court dismissed the borrower’s claim because the failure to provide a payoff balance was not apparent from the face of the disclosure statement.
On appeal, the borrower argued that section 1641(e)(1)’s limitation on an assignee’s liability for a post-closing violation of TILA is a “loophole” that defeats the purpose of TILA. Because a disclosure statement is provided prior to closing, section 1641(e)(1) effectively protects assignees from all liability for post-closing TILA violations. In other words, the statute lacks an enforcement mechanism for an assignee’s own violations of TILA. The borrower requested that the Eleventh Circuit close this loophole by holding assignees liable for post-closing TILA violations.
In a unanimous decision, a panel of the Eleventh Circuit affirmed the dismissal of the borrower’s complaint. The court explained that it must follow the plain language of a statute even when the result supposedly undermines the statute’s purpose. Because section 1641(e)(1) expressly limits the liability of voluntary assignees to only those violations that are apparent on the face of the pre-closing disclosure statement, the Eleventh Circuit declined to expand TILA to impose liability on an assignee for post-closing violations.
The impact of the Evanto decision could be significant. Assignees may use Evanto for the proposition that section 1641(e)(1) protects them from civil liability for most post-closing TILA violations. Nonetheless, assignees should recognize that administrative agencies may still enforce regulatory compliance with TILA even when a legal remedy is not available through the courts.
The full text of the case is available here.
