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Herzog v. Indymac Bank, FSB

2011 WL 5513205 (U.S. Dist. Ct. D. N.J. 2011) (Unpublished)

TILA; STATUTE OF LIMITATIONS — The statute of limitations to file suit under the Truth in Lending Act is one year and that begins to run when the underlying contract is executed unless the lender does something to prevent the borrower from recognizing the validity of the borrower’s claim within the limitations period or otherwise acted in a deceptive manner.

A mortgage borrower sued her lender alleging, among other things, that the lender’s failure to have furnished her with a copy of her Uniform Residential Loan Application (URLA) was a violation of the Real Estate Settlement Procedure Act (RESPA). She also alleged “that the Loan was predatory because it ‘provided negative amortization without properly informing [her] of what this entailed’” and this violated the Truth in Lending Act (TILA). In turn, she alleged that the TILA violation constitutes a violation of the New Jersey Consumer Fraud Act (CFA). The lender moved to have the complaint struck for its “failure to state a claim upon which relief can be granted.”

The Court recited the fundamental purposes of RESPA, but held that “RESPA, although requiring lenders to provide some disclosures, such as settlement statements, does not require disclosure of loan applications.” Consequently, the lender’s alleged failure to provide its borrower with a copy of the URLA did not constitute violation of the RESPA.

As to the TILA claim, the Court noted that borrowers must file suit within the one-year statute of limitations “which begins to run when the underlying contract is executed.” The borrower’s complaint was filed two years after the contract was executed. In very limited circumstances, the limitations period is subject to equitable tolling. This is an extraordinary remedy to be applied when a claimant “has been prevented from filing in a timely matter due to sufficiently inequitable circumstances. ... Because equitable tolling is an extraordinary remedy courts grant it only sparingly.” Here, the Court did not equitably toll the statute of limitations period because the borrower never “alleged facts demonstrating either that the bank’s failure to disclose the full finance charge on the loan prevented her from recognizing the validity of her claim within the limitations period” or that “her failure to recognize her claim stemmed from [the lender’s] deception rather than from her failure to uncover and investigate relevant facts.” Thus, the TILA claim was dismissed without prejudice to the borrower “to move for leave to file an amended complaint.”

Lastly, because there were no federal claims remaining, the Court remanded the CFA claims to the New Jersey court system without offering any “opinion on the merits of the viability of such claims.”

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