The borrower entered into a retail installment contract with the lender to obtain an auto loan for the purchase of her vehicle. The borrower claimed the lender violated the Truth in Lending Act (TILA), the Uniform Commercial Code (UCC), and Ohio Rev. Code § 1303.31 (UCC 3-301) by failing to perfect its security interest, selling the note evidencing the loan and “converting it ‘into an asset-backed security,’” and by failing to disclose the securitization process. She further asserted that because the lender sold the note, it was unenforceable and the lender “voluntarily discharged [the borrower’s] debt…, absolving [the borrower] of any liability under the note.” The borrower sought damages, declaratory relief, and an order requiring the lender to produce the original note in order to show it was not securitized and, therefore, unenforceable. The lender moved to dismiss, arguing that the borrower had failed to identify any required TILA disclosures required to be made and that securitization does not render a loan unenforceable. Although the borrower filed a response, she did not address the merits of these arguments, and the lender asserted that she waived her claims.
In Cox v. Bank of Am., No. 1:23-cv-01977, 2025 WL 638905, 2025 U.S. Dist. LEXIS 35180 (N.D. Ohio Feb. 27, 2025) (opinion not yet released for publication), the court granted the lender’s motion to dismiss. The court noted that a plaintiff’s failure to address the merits of the argument in a motion to dismiss can itself warrant dismissal. However, the court also addressed why the borrower’s claims failed. First, it explained that TILA requires creditors to make principal disclosure obligations before the consummation of a credit transaction; it does not require disclosures for later actions. The TILA also requires borrowers to raise TILA related disputes at the time of the loan extension. Therefore, the borrower’s claim failed because she did not contest the adequacy of the material disclosures when the credit was extended, only after. The court explained that her allegations “fail[ed] to support a contention that any ‘mandatory disclosure was not properly or timely submitted.”’ Next, the court explained that securitization creates a separate, distinct contract from the borrower’s contract with the creditor, which establishes their payment obligations. Therefore, the court rejected the borrower’s additional claims under TILA and the UCC, holding that securitization alone does not render a note unenforceable or alter a borrower’s obligations under a loan.
By Callighan Ard [email protected]
Edited By Taylor O’Brien [email protected]
Edited By Kristin Meurer [email protected]
Edited By Hayden Mariott [email protected]