Fridman v. Nycb Mortg. Co.
| Decision Date | 27 May 2014 |
| Docket Number | No. 13 C 03094,13 C 03094 |
| Parties | ELENA FRIDMAN, Plaintiff, v. NYCB MORTGAGE COMPANY, LLC, Defendant. |
| Court | U.S. District Court — Northern District of Illinois |
OPINION AND ORDER
Elena Fridman ("Fridman") brings a putative class action against her mortgage servicer, NYCB Mortgage Company, LLC ("NYCB"), alleging NYCB violated the Truth in Lending Act ("TILA"), 15 U.S.C. § 1601 et seq. and implementing Regulation Z ("Reg. Z"), 12. C.F.R. § 1026 et seq., by failing to promptly credit her on-line payments. NYCB moves for summary judgment on the question of whether, by crediting her payment two days after she submitted an online payment form, NYCB failed to credit Fridman's payments as of the "date of receipt." Because the Court finds that the ACH system utilized by NYCB is an electronic fund transfer system and the Official Interpretation of Reg. Z defines the date of receipt as "when the mortgage servicer receives the . . . electronic fund transfer," NYCB was in compliance with Reg. Z. NYCB is thus entitled to judgment as a matter of law and its motion [34] is granted.
Fridman filed her initial Complaint [1] on April 24, 2013 and her Amended Complaint [13] on May 16, 2013. On September 6, 2013, NYCB filed its motion for summary judgment [34]. Fridman responded with a Rule 56(d) motion for leave to pursue discovery before responding to NYCB's motion [38], which was denied [41]. Fridman filed an opposition to themotion for summary judgment [43] and a sur-reply [47]. NYCB filed a reply [46] and response to the sur-reply [56]. At the status on November 18, 2013, the parties represented that they have voluntarily paused discovery pending disposition of the motion for summary judgment.
Fridman has a home mortgage serviced by NYCB. Her mortgage requires payment on the first of the month, with a fifteen-day grace period. If a payment is made after the grace period, a late fee is assessed. NYCB provides several methods for borrowers to make their payments, including by mail, by telephone, by wire transfer, or electronically through NYCB's online banking system, www.mynycb.com. The payment options available through NYCB's website include same-day transfers from the borrower's internal NYCB deposit account and two-business-day transfers from the borrower's account at an external financial institution.
NYCB uses Electronic Payment Network ("EPN"), an Automated Clearing House ("ACH"), to process transfers from a borrower's external bank accounts for mortgage payments. EPN is a central clearing facility that receives and transfers ACH entries from depository financial institutions. To make an online payment, a borrower must gain online access to his or her NYCB mortgage loan account. Then the borrower views a screen with instructions for using online banking to make a mortgage payment. Those instructions alert the borrower that NYCB requires two business days to post a payment to the borrower's account. The borrower initiates the transfer of funds by providing information about his or her external financial institution account and selects a date for the payment to post to his or her account. The date may not besooner than two business days from the date of the initiation of payment. Once the borrower has entered his or her information, the borrower must acknowledge, via a separate screen, that it takes two business days to post the payment. NYCB updates its processing of third-party-operated residential lending nightly, and it is in this processing that the ACH file requesting the transfer of funds from the borrower's external financial institution is output. If the borrower makes the request before 8:00 p.m. Eastern Time on a business day, the ACH file will be output that night. If the request is made after 8:00 p.m. Eastern Time, the ACH file output process will not happen until NYCB's nightly update processing on the next business day.
Once the ACH file is output, on the next business day NYCB forwards the ACH file (with the transaction effective posting date) to the ACH Operator at EPN. The ACH Operator forwards the ACH transaction information to the borrower's financial institution. The borrower's financial institution debits the funds from the borrower's account as instructed by the ACH Operator-established settlement date. NYCB posts the payments to the borrower's mortgage account on the effective posting date selected by the borrower. NYCB will credit the payment to the borrower's account on the selected posting date even if there is a delay in the ACH processing system.
Fridman used NYCB's online system to make her December 2012 mortgage payment. At some point in either the evening of Thursday, December 13, or the early morning of Friday, December 14, 2012, Fridman initiated a payment on her mortgage through the NYCB website. When Fridman requested that payment, she would have to have acknowledged, and then separately confirmed, that the date that payment would be posted to her account would be Tuesday, December 18, 2012. NYCB followed its ACH batch file processing procedure, outputting the ACH file after the Friday nightly update of NYCB's residential lending system.NYCB forwarded the ACH file to the ACH operator on the next business day, Monday, December 17, 2012. NYCB credited that payment on Tuesday, December 18, 2012, the same day the funds were debited from Fridman's Bank of America account and the same day NYCB received credits for all customer credit transactions with a December 18, 2012 settlement date. Fridman was charged an $88.54 late fee for her December payment.2
This two-day policy was a change for Fridman, who had been accustomed to having her on-line payments posted the same day. In August 2012, NYCB consolidated its ACH processing and converted them all to a two-day system. Fridman received notice of this change in procedures by mail on June 15, 2012 and in her July and August 2012 mortgage statements. Fridman also discussed the change with a customer service representative in a phone call to NYCB on September 25, 2012—a call initiated by Fridman because she noticed that her on-line mortgage payment for September posted later than expected. That late fee was waived.
Summary judgment obviates the need for a trial where there is no genuine issue as to any material fact and the moving party is entitled to judgment as a matter of law. Fed. R. Civ. P. 56. To determine whether a genuine issue of fact exists, the Court must pierce the pleadings and assess the proof as presented in depositions, answers to interrogatories, admissions, and affidavits that are part of the record. Fed. R. Civ. P. 56 & advisory committee's notes. The party seeking summary judgment bears the initial burden of proving that no genuine issue of material fact exists. Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S. Ct. 2548, 91 L. Ed. 2d 265 (1986). In response, the non-moving party cannot rest on mere pleadings alone but must use theevidentiary tools listed above to identify specific material facts that demonstrate a genuine issue for trial. Id. at 324; Insolia v. Philip Morris Inc., 216 F.3d 596, 598-99 (7th Cir. 2000). Although a bare contention that an issue of fact exists is insufficient to create a factual dispute, Bellaver v. Quanex Corp., 200 F.3d 485, 492 (7th Cir. 2000), the Court must construe all facts in a light most favorable to the non-moving party and draw all reasonable inferences in that party's favor. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255, 106 S. Ct. 2505, 91 L. Ed. 2d 202 (1986).
I. Reg. Z's Prompt Crediting of Payment Language
The Dodd-Frank Wall Street Reform and Consumer Protection Act recently amended TILA to increase protections for credit consumers. Pub. L. No. 111-203, 124 Stat. 1376 (2010). One of those recent additions is a prompt crediting of payment requirement for home mortgages:
In connection with a consumer credit transaction secured by a consumer's principal dwelling, no servicer shall fail to credit a payment to the consumer's loan account as of the date of receipt, except when a delay in crediting does not result in any charge to the consumer or in the reporting of negative information to a consumer reporting agency . . . .
15 U.S.C. § 1639(f) (2010). Section 1639's implementing regulation, Reg. Z, contains substantially similar language: "No servicer shall fail to credit a periodic payment to the consumer's loan account as of the date of receipt . . . ." 12 C.F.R. § 1026.36(c)(1)(i) (2013).
Courts give particular deference to staff commentary on TILA and Reg. Z and "[u]nless demonstrably irrational, . . . staff opinions construing the Act or Regulation should be dispositive." See Hamm v. Ameriquest Mortg. Co., 506 F.3d 525, 528 (7th Cir. 2007) (citationomitted) (internal quotation marks omitted). The Official Consumer Financial Protection Bureau Staff Commentary on Reg. Z ("Staff Commentary") explains:
Under 1026.36(c)(1)(i), a mortgage servicer must credit a payment to a consumer's loan account as of the date of receipt. This does not require that a mortgage servicer post the payment to the consumer's loan account on a particular date; the servicer is only required to credit the payment as of the date of receipt.
12 C.F.R. pt. 1026, Supp. I § 1026.36(c)(1)(i), para. (1). As for "date of receipt," the Staff Commentary provides the following guidance:
The "date of receipt" is the date that the payment instrument or other means of payment reaches the mortgage servicer. For example, payment by check is received when the mortgage servicer receives it, not when the funds are collected. If the consumer elects to have payment made by a third-party payor such as a financial institution, through a preauthorized payment or telephone bill-payment arrangement, payment is received when the mortgage servicer receives the third-party payor's check or other...
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