Alert September 05, 2012

Florida Federal Court Upholds Vicarious Liability under TILA

The United States District Court for the Southern District of Florida ruled that a creditor may be vicariously liable under the Truth in Lending Act for the actions of its loan servicer. In this case, plaintiffs requested that defendant’s loan servicer identify the owner of their note, including the owner or master servicer’s name, address, and telephone number. The loan servicer responded with only the name of the owner and the servicer’s address and contact information. Plaintiffs alleged that because the servicer, as an agent of defendant, did not provide the complete contact information of the owner, defendant was vicariously liable for the alleged TILA violations. Defendant moved to dismiss, arguing, among other things, that the statutory language of TILA did not support vicarious liability. In particular, defendant argued that TILA only imposes vicarious liability on creditors when the creditor both owns and services the loan. The Court disagreed. According to the Court, Congress created a cause of action under TILA, but at the same time, mandated that servicers would not be liable for a TILA violation. Citing a long line of cases, the Court concluded that “Congress intended the servicer’s agent to liable, otherwise, Congress created a cause of action with no one to sue for relief.”