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In a matter of first impression, the Fifth Circuit upheld a dismissal by the Northern District of Texas holding that a lender cannot be held vicariously liable ...
In a matter of first impression, the Fifth Circuit upheld a
dismissal by the Northern District of Texas holding that a lender
cannot be held vicariously liable for a loan servicer’s
purported violation of the Real Estate Settlement Procedures Act
(“RESPA”). In upholding the decision, the Court held
that the borrower failed to plead an agency relationship, and that,
even if an agency relationship existed, the lender could not be
held vicariously liable as a matter of law for the servicer’s
alleged failure to comply with RESPA. In reaching its decision, the
Fifth Circuit relied upon a plain reading of RESPA, which imposes
duties only on loan servicers and restricts liability to those who
fail “to comply with any provision” of RESPA.
There is presently a split of authority nationally at the
district court level as to the viability of the vicarious liability
theory under RESPA. As always, we will continue to monitor and
report on key developments in this area.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
