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Steven Nicolaides, et al. v. Bank of America Corporation Formerly Known As Countrywide Home Loans

July 11, 2012


The opinion of the court was delivered by: Surrick, J.


Presently before the Court is Defendant Bank of America's Motion to Dismiss. (ECF No. 16.) For the following reasons, the Motion will be granted in part and denied in part.


On April 21, 2010, Plaintiffs filed a Complaint (ECF No. 1) alleging claims against Defendants for violations of the Truth In Lending Act ("TILA"), 15 U.S.C. §§ 1601 et seq. (Count I), violations of the Credit Services Act ("CSA") 73 Pa. Cons. Stat. §§ 2182 et seq. (Count II), and violations of the Pennsylvania Unfair Trade Practices and Consumer Protection Law ("UTPCPL"), 73 Pa. Cons. Stat. §§ 201.1 et seq. (Count IV).*fn1 Defendants filed a Motion to Dismiss. (ECF No. 8.) Plaintiffs thereafter filed a First Amended Complaint, which includes claims for violations of TILA (Count I) and the UTPCPL(Count II). (Am. Compl., ECF No. 14.) Defendants then filed the instant Motion to Dismiss. (Defs.' Mot., ECF No. 16.) Plaintiffs have filed a response. (Pls.' Resp., ECF No. 19.)

Plaintiff's First Amended Complaint alleges that in April 2007, Plaintiffs Steven and Roberta Nicolaides approached Defendant Countrywide Home Loans ("Countrywide") to refinance the mortgage on their home in Exton, Pennsylvania.*fn2 Plaintiffs spoke with Timothy Atkinson, a Countrywide employee. Plaintiffs told Atkinson that they did not want a negative amortization loan, and Atkinson promised that he would avoid such loans.*fn3 Plaintiffs completed a loan application over the phone, and Atkinson thereafter sent Plaintiffs a copy of the application. (Am. Compl. ¶¶ 25-26.) Plaintiffs found multiple discrepancies in the application, including misstatements regarding Plaintiffs' finances and professions, and informed Atkinson of these issues. (Id. at ¶¶ 22-23.) After Atkinson advised them to sign the documents as they appeared, Plaintiffs acquiesced. (Id. at ¶ 30.)

The Amended Complaint further alleges that Atkinson later contacted Plaintiffs and told them that he had found a non-conforming adjustable rate mortgage ("ARM"). (Id. at ¶ 32.) The interest rate of the thirty-year ARM would adjust once a year during the first three years of the loan, and then become fixed in the fourth year. Atkinson stated that the mortgage had an introductory interest rate of 3.5% and the monthly payments would be approximately $1,600. (Id. at ¶ 33.)

The closing on Plaintiffs' loan was scheduled for May 22, 2007. (Id. at ¶ 34.) Plaintiffs noticed that the interest rate on the loan was 9.25%, rather than 3.5%. (Id. at ¶ 35.) Atkinson assured Plaintiffs that the applicable rate was 3.5%, as this amount was listed as the note's "Start Rate." (Id. at ¶ 36.) Relying on Atkinson's representations, Plaintiffs executed the loan documents. (Id. at ¶ 38.)

In July 2007, Plaintiffs received their first mortgage statement, which confirmed the details of the loan as promised. (Id. at ¶ 42.) In August, however, the interest rate increased. (Id. at ¶ 43.) Plaintiffs allege that the interest rate was not supposed to increase until July 1, 2008. (Id. at ¶ 44.) The August statement also included multiple payment options that had not been previously disclosed to Plaintiffs. (Id. at ¶ 46.) Under these options, Plaintiffs could only afford to make the minimum payments on the loan, which would result in negative amortization. Plaintiffs called Atkinson to complain about the payment features of the loan. Atkinson stated that it was not a negative amortization loan. (Id. at ¶ 49.) Plaintiffs allege that Atkinson's statements were misleading and confusing and that Atkinson concealed the true nature of the loan. (Id. at ¶ 51.) The minimum monthly payment currently available to Plaintiffs is approximately $2,400. (Id. at ¶ 54.) Plaintiffs allege that the loan is unaffordable. (Id. at ¶ 56.) Plaintiff Steven Nicolaides filed a Chapter 7 bankruptcy petition, which was discharged on February 9, 2009. (Id.)


Under Federal Rule of Civil Procedure 8, a complaint must contain a "short and plain statement of the claim showing that the pleader is entitled to relief." Federal Rule of Civil Procedure 12(b)(6) provides that a complaint may be dismissed for "failure to state a claim upon which relief can be granted." "To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to 'state a claim to relief that is plausible on its face.'" Ashcroft v. Iqbal, 129 S. Ct. 1937, 1949 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)).A complaint that merely alleges entitlement to relief, without alleging facts that show entitlement, must be dismissed. See Fowler v. UPMC Shadyside, 578 F.3d 203, 211 (3d Cir. 2009).This "'does not impose a probability requirement at the pleading stage,' but instead 'simply calls for enough facts to raise a reasonable expectation that discovery will reveal evidence of' the necessary elements." Phillips v. Cnty. of Allegheny, 515 F.3d 224, 234 (3d Cir. 2008) (quoting Twombly, 550 U.S. at 556).

Courts have discretion to address evidence outside of the complaint when ruling on a motion to dismiss. Pryor v. Nat'l Collegiate Athletic Ass'n, 288 F.3d 548, 559 (3d Cir. 2002). Courts may consider an undisputedly authentic document that a defendant attaches to the motion if the plaintiff's claims are based on that document. In re Burlington Coat Factory Sec. Litig., 114 F.3d 1410, 1426 (3d Cir. 1997) (citations omitted).


A. TILA Claims (Count I)

"TILA is a federal consumer protection statute, intended to promote the informed use of credit by requiring certain uniform disclosures from creditors." In re Cmty. Bank of N. Va., 418 F.3d 277, 303 (3d Cir. 2005). The statute is implemented by Regulation Z, 12 C.F.R. §§ 226.1 et seq. To accomplish its objectives, TILA requires lenders to make certain material disclosures.*fn4

Beach v. Ocwen Fed. Bank, 523 U.S. 410, 412 (1998) (citing sections). "Because the purpose of TILA is to assure meaningful disclosures, the issuer must not only disclose the required terms, it must do so accurately." Roberts v. Fleet Bank (R.I.), 342 F.3d 260, 266 (3d Cir. 2003) (internal citations and quotation marks omitted). A creditor who fails to comply with any requirement with respect to any person is liable to such person. 15 U.S.C. § 1640(a). If a creditor fails to provide a borrower with the required disclosures, the creditor is strictly liable and the borrower may exercise the right to rescind the loan up to three years after the consummation of the transaction. See 15 U.S.C. § 1635(f); In re Cmty. Bank, 418 F.3d at 304. "[O]nce the court finds a violation, no matter how technical, it has no discretion with respect to liability." Smith v. Fid. Consumer Disc. Co., 898 F.2d 896, 898 (3d Cir. 1990) (citations omitted).

Plaintiffs assert that Defendants violated TILA by failing to make certain required material disclosures. (Am. Compl. ΒΆ 65.) Specifically, Plaintiffs allege that Defendants did not provide each borrower with two notices of the right to rescind the loan. Plaintiffs also allege that Defendants disclosed an inaccurate payment schedule. Based on these violations, ...

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