The Court of Appeals for the Seventh Circuit held a mortgage payment made through a website must be credited at the time the borrower approves the payment. In Fridman v. NYCB Mortgage Co. ___ F.3d. ___ (7th Cir. 3-11-2015) 2015 WL 1046296 plaintiff paid her mortgage electronically, using the online payment system on the website of the defendant, NYCB Mortgage Company. She furnished the information required and then by clicking on the required spot authorized the defendant to collect funds from her bank account. Plaintiff did this within the grace period allowed by her note, however, defendant did not credit her payment for two business days because it had used an automated clearing house file to request that the funds be transferred from borrowers”? bank accounts. By the time this was done the grace period had expired. The delay caused plaintiff to incur a late fee. Plaintiff believed her payment should not have been treated as late and brought suit in the district court on behalf of herself and a putative class. She claimed NYCB”?s practice of not crediting online payments on the date that the consumer authorizes them violates the Truth in Lending Act which required that a mortgage servicer credit a payment “as of the date of receipt.” Defendant filed a motion for summary judgment claiming that an instruction to make a payment is not actually a payment. The district court agreed and entered summary judgment.
In a two-to-one decision the Seventh Circuit panel noted that what is the date of receipt is a question that “is more complicated than one might think.” It then rejected the argument that the federal Truth and Lending Act allows mortgage servicers to wait until the electronic of transfer of funds is completed before crediting a payment.
“Paper checks must be credited when received by the mortgage servicer, not when the servicer acquires the funds. Just like an electronic authorization, a check is in a sense “incomplete” when the mortgage services receives it. It is nothing more or less than the consumer”?s written permission to the payee to take another step” that is, to draw funds from the consumer”?s account – just like the electronic submission Fridman tendered. The servicer does not instantaneously have the funds promised by a paper check. It must use th banking system to have the funds transferred to it – a process that takes at least one or two days. If a check must be credited on the date of physical receipt, even though the recipient does not receive the funds that day and must take further steps to acquire them, then there is no reason why a mortgage servicer should not face a comparable process when it receives an electronic “check” or authorization to draw funds from the consumer”?s bank account.”