Ninth Circuit Holds Loan to Trustee for Benefit of Beneficiary May Be Subject to TILA and RESPA

The United States Court of Appeals for the Ninth Circuit recently held that a loan to a trustee that was used to repair the trust beneficiary’s home could be a consumer credit transaction subject to TILA and RESPA.  See Gilliam, Tr. of Lou Easter Ross Revocable Tr. v. Levine , Tr. of Joel Sherman Revocable Tr., 955 F.3d 1117 (9th Cir. 2020).  In the case, the borrower was the trustee of a trust created by her sister and for the benefit of her niece.  The trustee took out a loan to make repairs on the niece’s home.  She later brought this action alleging that the loan disclosures misrepresented the payment schedule on the loan, and that the defendant lender therefore violated TILA and RESPA.  Defendant moved to dismiss, arguing that this was a commercial transaction with a trust and not a “consumer credit transaction” subject to RESPA and TILA.  The District Court agreed and dismissed the action.

On appeal, the Court reversed the dismissal.  The Court found that the Commentary to Regulation Z requires courts to look at the substance of a loan to a trust to determine whether the loan was “obtained for a consumer purpose.”  The Commentary further states that, with regard to a loan to a trust, “[r]egardless of the capacity or capacities in which the loan documents are executed, assuming the transaction is primarily for personal, family, or household purposes, the transaction is subject to the regulation because in substance (if not form) consumer credit is being extended.”  See 12 C.F.R. § 1026.3 Comment 3(a)-10.i.  Thus, the Court found that it did not matter whether the loan proceeds were used by the borrower herself or for the beneficiary, and that this action could proceed.

For a copy of the decision, please contact Michael O’Donnell at, Michael Crowley at, or Anthony Lombardo at