Illinois Federal Court Rules on Dodd-Frank’s Truth in Lending Act Amendment


The United States District Court for the Northern District of Illinois granted summary judgment denying a putative class action suit against a mortgage servicer for alleged violations of the Truth in Lending Act concerning the prompt crediting of payments. Plaintiffs alleged that the mortgage servicer failed to credit their payments as of the date of receipt in violation of TILA and Regulation Z. According to plaintiffs, the mortgage servicer did not promptly credit online payments at the time plaintiffs completed the online payment form. As a result of the mortgage servicer’s policy, plaintiffs’ payments were not credited to their account within two days and they were assessed late fees. The mortgage servicer moved for summary judgment.

Section 1464 of the Dodd-Frank Act amends TILA and requires servicers to credit a payment to the consumer’s loan account as of the date of receipt. In rejecting the argument that the online payment form was the equivalent of a check because the form used the image of a check, the Court took the position that it was an instruction for plaintiffs’ banks to wire payment (an electronic transfer). The Court also relied on the CFPB’s staff commentary to Regulation Z on the “date of receipt”, to conclude that the mortgage servicer’s crediting of the payments at the time it received the payments from the third-party bank, and not at the time the payment instruction was sent, was appropriate.

IRS Circular 230 Disclosure: To ensure compliance with requirements imposed by the IRS, we inform you that any U.S. tax advice contained in this informational piece (including any attachments) is not intended or written to be used, and may not be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein.


Topics:  Class Action, Dodd-Frank, Mortgage Servicers, Mortgages, Popular, Putative Class Actions, Regulation Z, TILA

Published In: Civil Procedure Updates, Consumer Protection Updates, Finance & Banking Updates, Residential Real Estate Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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