Definition of a "Creditor"

The first full-service mortgage risk management firm in the United States.

November 30, 2023

QUESTION

We are a mid-size lender. I am the company’s Chief Compliance Officer. I do not believe a claim can be brought against a lender if the lender is not the creditor. We are no longer involved in the loan, having sold it. We do not own it, and we do not service it.

Yet we are being caught up in litigation that alleges we have assignee liability. We are being forced to defend against a claim I do not think has merit. I would like some clarification about the meaning of the term “creditor” and whether assignee liability can reach us.

What is the meaning of “creditor?”

Do we have assignee liability?

ANSWER

My response will be somewhat limited without knowing more facts than you provided in your question. I strongly urge you to seek appropriate legal counsel with substantial experience in these matters. My reply is not meant to be taken as legal advice and does not infer same. Not all lawyers are sufficiently expert in issues like the one you describe. Faced with a lawsuit along these lines, you need an attorney who is an expert with considerable experience, not someone who is going to learn on the job. If you want a recommendation, please contact me separately here.

I will offer a working definition of the term “creditor” under the Truth in Lending Act (TILA). Based on your question, I think TILA would be foundational to providing a worthwhile response.

Regulation Z, the implementing regulation of TILA, defines the term “creditor” to mean:

“A person (a) who regularly extends consumer credit that is subject to a finance charge or is payable by written agreement in more than four installments (not including a down payment), and (b) to whom the obligation is initially payable, either on the face of the note or contract, or by agreement where there is no note or contract.”