TILA Notice Requirement Not Retroactive: Ninth Circuit

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TILA Notice Requirement Not Retroactive: Ninth CircuitThe Ninth Circuit Court of Appeals recently ruled that a 2009 amendment to the Truth in Lending Act (TILA) does not apply retroactively.

In a putative class action, Plaintiffs Mohammad and Rosa Talaie brought a claim under § 1641(g) of TILA, which requires a creditor to notify borrowers within 30 days of a transfer or assignment of their mortgage loan. The Plaintiffs’ deed of trust was transferred from Wells Fargo to U.S. Bank three years before Congress enacted § 1641(g). If the statute were to apply retroactively, the Plaintiffs could have recovered actual damages, statutory penalties and attorneys’ fees and costs.

The decision—Talaie v. Wells Fargo Bank—looks to Supreme Court precedent and § 1641(g)’s legislative history in determining that the notice requirement does not apply retroactively. In the court’s analysis of the issue, it first noted a clear presumption against retroactivity in Supreme Court jurisprudence. The court then set out the Supreme Court’s standard for retroactive application of a statute: where retroactivity would affect a party’s rights, liabilities or duties that existed before the statute was enacted, Congressional intent must be clear and unambiguous.

The court in Talaie then turned to the legislative history of § 1641(g), which indicates that the purpose of the notice requirement was to provide borrowers with a right to know who owns their loan, but the legislative history also makes it clear that the amendment was intended to be narrow and low-cost for the industry. In that context, the court found that each of the three concerns highlighted by the Supreme Court would be affected by retroactive application of the notice requirements of § 1641(g). At the time of the transfer, the bank had the right to transfer the Plaintiffs’ mortgage loan without notice, and that right would be impaired if the notice requirement applied after the fact. The bank’s liabilities would increase as well because the statute provides a new private right of action and makes damages available for failure to provide the required notice. Finally, the bank would be subject to new duties that did not exist when the transfer was completed.

After determining that the rights, duties and liabilities of the bank would be affected, the court next concluded that the statute lacks a clear and unambiguous Congressional intent that the notice requirement apply retroactively. The court pointed out that Congress did not provide any manner for creditors to comply with the requirements of § 1641(g) for transfers already completed. Further, the court emphasized that whereas § 1641(g) lacks any effective date, Congress chose to specify a retroactive effective date in both a parallel provision of the same amendment and in an unrelated section of the implementing statute for the same bill. Based on that analysis, the court concluded that the notice requirement for new creditors does not apply retroactively because the amendment lacks any indication of Congressional intent that it should do so.