9th Cir. Says Residential Trust Remained A “Consumer Credit Transaction” Under TILA/Rosenthal Act

This case presents an issue of first impression under federal and state regulation of consumer credit transactions. The issue arises because the Truth-in-Lending Act (“TILA“), Real Estate Settlement Procedures Act (“RESPA”), Regulation Z, and California’s Rosenthal Fair Debt Collection Practices Act all provide certain protections to borrowers in consumer credit transactions. See 15 U.S.C. §§ 1631-1634; 12 U.S.C. § 2603; 12 C.F.R. §§ 226.17-226.20; Cal. Civ. Code § 1788.22. The case concerns a loan obtained by Appellant-Borrower Maxine Gilliam, acting in her capacity as a trustee. She obtained that loan to make repairs to a personal residence that is occupied by her niece, who is the trust beneficiary. The issue is whether this loan should be considered a consumer credit [*3]  transaction. Because the Borrower did not herself intend to live in the house, the district court held that this was not a consumer credit transaction, and dismissed the complaint. The district court reached this conclusion even though the loan was for the benefit of the trust beneficiary, a member of the Borrower’s family. Under applicable statutes and regulations, however, a trust created by an individual for tax and estate planning purposes, like the one in this case, does not lose all state and federal consumer disclosure protections when it seeks to finance repairs to a personal residence for the trust beneficiary, rather than for the trustee herself. The transaction remains a consumer credit transaction. We therefore reverse and remand.