The Fourth Circuit held today that SunTrust Mortgage did not violate TILA when, in the course of extending additional credit to an existing creditor in a refinancing, it used a disclosure form derived from Model Form H-8 in the Appendix to Regulation Z, rather than a form derived from Model Form H-9. Judge Niemeyer wrote the majority opinion for a split Fourth Circuit panel in Watkins v. SunTrust Mortgage, Inc. Judge Diaz joined Judge Niemeyer’s opinion. Judge Wynn dissented.
Judge Niemeyer’s opinion begins as follows:
The issue presented is whether a lender violates the Truth in Lending Act, 15 U.S.C. § 1601 et seq. (“TILA”), in providing notice to a borrower who is refinancing his mortgage of the right to rescind the transaction, using a form of notice substantially similar to Model Form H-8 in the Appendix to Regulation Z, 12 C.F.R. pt. 226, rather than using Model Form H-9, which was designed for refinancing transactions.
The district court dismissed the borrower’s complaint for failure to state a claim upon which relief could be granted, concluding that although Model Form H-8 is somewhat different from Model Form H-9, the use of Model Form H-8 in a refinancing transaction did not amount to a TILA violation.
We agree. Model Form H-8 includes all of the information required by TILA and Regulation Z to advise borrowers of the right to rescind a consumer credit transaction, including a refinancing transaction, and accordingly we affirm.
In dissent, Judge Wynn accuses the majority of ignoring binding circuit authority requiring strict conformity with TILA:
Whereas the majority holds that the notice provided by Form H-8 is close enough to meet the disclosure requirements of the Truth in Lending Act, this Court in Mars v. Spartanburg Chrysler Plymouth, Inc., 713 F.2d 65, 67 (4th Cir. 1983), made it plain that the Truth in Lending Act requires strict compliance. But, tellingly, the majority ignores our binding and controlling decision in Mars by not even citing to it.
Judge Wynn argues that the majority should not have looked for substantial similarity, for once SunTrust Mortgage decided to comply by relying on the appropriate model form, it needed to pick the right model form:
Here, SunTrust chose to use the “appropriate model form in Appendix H” disclosure method rather than to devise its own form to provide “substantially similar notice” required under the Truth In Lending Act. Thus, the dispositive issue on appeal is whether a lender that chooses to use the “appropriate model form in Appendix H” must use the appropriate form to comply with the Truth in Lending Act. Certainly yes. As it is undisputed that SunTrust did not use the appropriate model form, it follows that SunTrust was not in compliance with the Truth in Lending Act. It is a simple and straightforward result that is readily understood by both the lender and borrower. In short, the intervention of courts should end when it is determined that a lender who chose to use the appropriate model disclosure form method used the wrong form.
Judge Wynn also twice suggests that the majority’s holding results from a failure to exercise “judicial restraint.”