Consumer Finance Litigation

Weller v. HSBC Mortgage Services, Inc., No. 13-cv-00185-REB-MJW, -- F. Supp. 2d -- , 2013 WL 4882758 (D. Colo. Sept. 11, 2013). The U.S. District Court for the District of Colorado recently held that the Dodd-Frank Act did not apply retroactively to nullify an arbitration agreement contained in a mortgage loan contract. In Weller, the plaintiff mortgagor brought a putative class action alleging violations of the civil RICO statute and Truth in Lending Act, breach of contract, and other claims arising from his mortgagee's "force placement" of insurance on the mortgaged property. The mortgagee moved to compel arbitration pursuant to an arbitration agreement entered by the parties upon execution of the plaintiff's loan contract. Plaintiff argued the arbitration agreement was unenforceable pursuant to section 1639c(e)(3) of the Dodd-Frank Act, which provides that "[n]o provision of any residential mortgage loan . . . shall be applied or interpreted so as to bar a consumer from bringing an action in an appropriate district court of the United States, or any other court of competent jurisdiction . . . ." 15 U.S.C. § 1639c(e)(3). Importantly, however, the effective date of the Dodd-Frank amendment was July 21, 2010, several years after the plaintiff executed the arbitration agreement at issue. The Court, therefore, turned to whether the Dodd-Frank amendment could be applied retroactively. Finding in the negative, the Court first noted that "Congress did not specifically articulate a clear intent to give section 1639c(e)(3) of the Dodd-Frank Act retroactive effect." 2013 WL 4882758 at 3. It then addressed whether retroactive application of the amendment would "affect substantive rights, liabilities, or duties arising from conduct prior to the date of enactment." Id. While noting there is "a split in authority among the district courts that have considered retroactive application of the Dodd-Frank amendments governing arbitrability," the Court ultimately agreed with decisions finding that "the right to insist on arbitration is not just a matter of where the claims may be heard but a question of vested, contractual rights, which may not be retroactively withdrawn absent clear congressional intent to that effect." Id. at 4 (citing cases). Thus, the Court held the Dodd-Frank amendments did not operate retroactively to nullify the plaintiff's arbitration agreement. Id. For more information on consumer finance litigation topics, please contact one of the Burr & Forman team members for assistance. We are happy to answer any questions or concerns you may have.