Federal District Court Holds TILA Supports Vicarious Liability for Creditors

TILA Mortgage Servicing

On August 30, The U.S. District Court for the Southern District of Florida held that a creditor may be vicariously liable for certain Truth in Lending Act (TILA) violations committed by its servicer. Kissinger v. Wells Fargo Bank, N.A. No. 12-60878, 2012 WL 3759034 (S.D. Fla. Aug. 30, 2012). In this case, a creditor sought to dismiss two borrowers' complaint alleging that the creditor was liable for its servicer's failure to provide information the borrowers requested about the owner of the promissory note. In response to the borrowers' request, the servicer had provided the name of the owner of the note, along with the servicer's address and telephone number. The borrowers claimed that the servicer's failure to provide the owner's address and telephone number constituted a violation of TILA. The creditor argued the case should be dismissed because TILA does not support vicarious liability, and in any event, the servicer was acting as a master servicer and was allowed under TILA to provide its own contact information. The court rejected the latter argument as one not suited to a decision on the law at this stage, ruling that the creditor must reserve the argument as a defense to be raised later. With regard to vicarious liability, the court relied in part on Davis v. Greenpoint Mortg. Funding, Inc., No 09-2719, 2011 WL 7070221 (N.D. Ga. Mar. 1, 2011), which held that a finding of no vicarious liability for creditors would render TILA's private right of action clause superfluous. The court thus held that TILA allows the application of agency principles so that creditors can be held liable for the actions of their servicers. Declining to follow another Florida case, Holcomb v. Fed. Home Loan Mortg. Corp., No 10-81186, 2011 WL 5080324 (S.D. Fla. Oct. 26, 2011) -- which held Congress did not intend to apply agency principles to TILA -- the court denied the creditor's motion to dismiss.