Carrington v. HSBC Bank USA, N.A.
760 F. Supp. 2d 589
E.D. Va.2010Background
- Carrington refinanced her primary residence on July 20, 2007 with Decision One Mortgage for $206,000; note later assigned to HSBC.
- Carrington alleges Decision One failed to disclose certain charges, including a $653.28 title insurance fee, which she claims was not bona fide and should have been included in the finance charge.
- Carrington contends the title insurance fee was improper because it was tied to a requirement to use a specific insurer in violation of Virginia law.
- She asserts the improper disclosures breached TILA and seeks a declaratory judgment of rescission and statutory damages of $4,000.
- HSBC foreclosed on Carrington’s home; notices of rescission were sent but there was no tender of rescission by Decision One or HSBC.
- The court granted in part and denied in part HSBC’s Rule 12(b)(6) motion, allowing amendment on certain claims and denying dismissal on others.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Carrington states a TILA under-disclosure claim | Carrington alleges title insurance was not bona fide and improperly excluded from the finance charge. | The fee may be bona fide; Carrington failed to plead facts showing violation. | Under-disclosure claim dismissed with leave to amend |
| Whether rescission claim lies against an assignee | Rescission against assignee is allowed to the same extent as against the original creditor. | Rescission may be raised against an assignee only if violation is apparent on the face of the disclosure. | Rescission against HSBC (assignee) is permitted |
| Whether Carrington adequately pled ability to tender | Plaintiff would be able to tender the funds by refinancing or sale of the home. | Plaintiff cannot tender due to default and lack of precise amount. | Counseling that pleading enough to show ability to tender survives; denial of dismissal |
Key Cases Cited
- Postow v. OBA Fed. Sav. & Loan Ass'n., 627 F.2d 1370 (D.C. Cir. 1980) (fees imposed in violation of state law may not be bona fide)
- Rowland v. Novus Fin. Corp., 949 F. Supp. 1447 (D. Haw. 1996) (rescission against assignee not limited by apparent-on-face standard)
- Moore v. Wells Fargo Bank, N.A., 597 F. Supp. 2d 612 (E.D. Va. 2009) (tender plausibility need not be conclusively established at pleading stage)
- Parker v. Potter, 232 F. App'x 861 (11th Cir. 2007) (rescission against assignee related to §1641(c) guidance)
- Miranda v. Universal Fin. Grp., Inc., 459 F. Supp. 2d 760 (N.D. Ill. 2006) (rescission rights unaffected by assignment in some contexts)
- In re Grigsby, 119 B.R. 479 (Bankr. E.D. Pa. 1990) (title insurance not bona fide where state-law violation exists)
- Cheche v. Wittstat Title & Escrow Co., 2010 WL 2802396 (E.D. Va. 2010) (illustrative of tender considerations in TILA actions)