4th Circuit: TILA Prohibits Offsets for Overdue HELOC Credit Card Payments

Earlier this month, the Fourth Circuit found that TILA’s prohibition on creditors accessing consumer deposit accounts in order to offset overdue payments extends to home equity lines of credit (HELOCs) for which credit is accessed by credit card. 

The consumer plaintiff alleged that a national bank withdrew $1,400 from his deposit account in order to offset outstanding payments on a HELOC with the same bank, for which credit was accessed by credit card.  The consumer filed suit, alleging the bank’s conduct violated TILA.  The consumer also alleged that the bank violated RESPA by failing to respond to a letter, which he asserted was a Qualified Written Request to which a response was required.  The district court found for the bank, holding that neither TILA nor RESPA applied to HELOCs. 

The consumer appealed to the Fourth Circuit.  The CFPB filed an amicus brief, arguing that TILA did not allow creditors to access account holder’s balances to satisfy outstanding debt for HELOCs.  The CFPB agreed with the district court’s RESPA holding.

The Fourth Circuit agreed with the CFPB’s interpretation, holding that TILA’s definition of “credit card plan” applies to HELOCs for which a credit card is used to access credit.  Accordingly, it found that TILA’s offset prohibition on withdrawals applied to the consumer’s HELOC at issue.  In addition, the Fourth Circuit affirmed the district court’s RESPA holding because the CFPB has exempted HELOCs from the definition of “federally related mortgage loan[s]” covered by RESPA.