U.S. Court of Appeals For the Seventh Circuit
Consumer Protection – TILA
A mortgage server’s practice of not crediting online payments on the day that the consumer authorizes them violates the Truth in Lending Act (TILA), 15 U.S.C. § 1601 et seq.
“The interpretation we adopt promotes an important purpose of TILA: to protect consumers against unwarranted delay by mortgage servicers. When a consumer interacts directly with a mortgage servicer (such as by delivering a check, personally paying by telephone, or filling out an electronic authorization form on a servicer’s website), it is the servicer that decides how quickly to collect that payment through the banking system. Nothing dictates when the servicer must deposit the check, use the payment information given over the phone to receive payment, or place the electronic authorization information in an ACH file and collect the funds through the EPN. The servicer is in control of the timing, and without the directive to credit the payment instrument when it reaches the servicer, the servicer could decide to collect payment through a slower method in order to rack up late fees. In contrast, when a consumer interacts directly with a third-party payor to deliver payment at a set time in the future (such as through automatic bill payment services or third-party bill payment companies), the speed of the delivery of those payments is up to the third-party payor. There is no opportunity for the servicer to delay, and thus no potential strategic behavior to address. The servicer simply credits the third-party payor’s payment when the servicer receives it, as directed by the last sentence of Official Interpretations § 1026.36(c)(1)(i).”
14-2220 Fridman v. NYCB Mortgage Co, LLC
Appeal from the United States District Court for the Northern District of Illinois, Ellis, J., Wood, J.