Page 12 - John Hundley 2015

Credit Agreements Act Requires Both Signatures On Key Document

Leaving to another day whether a collection of documents, some of which are not signed by both of the
parties, can ever be aggregated to constitute an acceptable writing under § 2 of the Credit Agreements Act
(815 ILCS 160/2), the Appellate Court for the Second District has held that that act
is not satisfied where “the relevant terms and conditions” of the loan are not
discernible from documents that bear the signatures of both the debtor and the
creditor.
Distinguishing the statute of frauds, which requires the signature only of the party
to the charged, the court noted that § 2 requires that both parties to the credit
agreement sign the document and that it set forth those “relevant terms and conditions.” Avanti Med. Group,
LLC v. BMO Harris Bank, N.A., 2014 IL App (2d) 140401.

In Avanti, the plaintiff had signed some routine documents allegedly associated with the alleged credit
agreement, but had left unsigned the critical “Summary of Terms and Conditions” document. Since that
document contained the “relevant terms and conditions” required by § 2, its non-signature by plaintiff made it
unenforceable under the act, the court said.

Servicer Must Credit Online Payment Authorization Immediately

A mortgage servicer which collects the mortgagor’s payment electronically from a third-party bank
account by receiving payment-specific authorizations to initiate Automated Clearing House (ACH) transfers
must credit those transfers to the mortgagor’s mortgage account on the date the authorization is received,
the U.S. Court of Appeals for the Seventh Circuit has held.
In Fridman v. NYCB Mortgage Co., 780 F.3d 773 (7th Cir. 2015), the servicer permitted mortgagors to
make payments through its website by authorizing ACH withdrawals thereon.
However, the servicer did not credit the mortgagor’s account until funds were
received some two business days later, sometimes resulting in the assessment of
late fees.
The majority of the Seventh Circuit panel ruled that this practice violated the
federal Truth In Lending Act, 15 U.S.C. § 1601 et seq., and Regulation Z issued
thereunder. It analogized online payment authorizations to paper checks, which
“must be credited when received by the mortgage servicer,
not when the servicer acquires the funds.”
It distinguished where the mortgagor pre-authorized the third party bank to make
the payment, because in that situation the mortgagor was in control of the timing of the
transfer. In contrast, with the authorizations made on the servicer’s website, “it is the
servicer that decides how quickly to collect that payment through the banking system . .
. . The servicer is in control of the timing, and without the directive to credit the payment
instrument when it reaches the servicer, the servicer could decide to collect payment through a slower
method in order to rack up late fees.”
Brenda\Sharp Thinking\#130.pdf

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