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    Your mortgage company must credit your electronic payment on the date it is authorized on the mortgage company’s website

    The Seventh Circuit Court of Appeals, in a case argued by Mr. Edelman, holds (2-1) that when you pay your mortgage electronically, the payment must be credited as of the date you fill out the authorization on the mortgage company’s web site, assuming you do so before a reasonable cutoff time, not some later date when the mortgage company chooses to turn the authorization into money:

    Like many consumers today, [plaintiff] paid her mortgage electronically, using the online payment system on the website of her mortgage servicer, NYCB Mortgage Company, LLC. By furnishing the required information and clicking on the required spot, she authorized NYCB to collect funds from her Bank of America account. The question before us concerns the time when NYCB received one of her payments. Although [plaintiff] filled out the form within the grace period allowed by her note, NYCB did not credit her payment for two business days. This delay caused [plaintiff] to incur a late fee. . . .

    [The Truth in Lending Act] generally requires mortgage servicers to credit payments to consumer accounts “as of the date of receipt” of payment, unless delayed crediting has no effect on either late fees or consumers’ credit reports. 15 U.S.C. § 1639f(a). This provision’s implementing regulation, known as Regulation Z, essentially repeats this requirement. See 12 C.F.R. § 1026.36(c)(1)(i) (“No servicer shall fail to credit a periodic payment to the consumer’s loan account as of the date of receipt … .”). But what is the date of receipt? That question, on which the result in this case turns, is more complicated than one might think. . . .

    TILA expressly requires servicers to “credit a payment … as of the date of receipt,” and the Official Interpretations define the “date of receipt” as when the “payment instrument or other means of payment reaches the mortgage servicer.” (Emphasis added.) This definition is far from irrational. While the CFPB (and the FRB before it) could have determined that “payment” means the receipt of funds by the servicer, the conclusion that “payment” refers to the consumer’s act of making a payment is equally sensible.

    The definition is not limited to one type of payment instrument versus another type. It instead covers all instruments used to effect payment, and then it specifies that no matter what the means of payment, the relevant date of receipt is the day when the payment mechanism reaches the mortgage servicer, not any later potentially relevant time.

    With this much established, we are left with the question how electronic authorizations fit into the statutory and regulatory system. [Plaintiff] argues that an electronic authorization of payment, such as the authorization she gave when she filled out NYCB’s online form, qualifies as a “payment instrument or other means of payment.” . . .

    NYCB . . . argues that electronic authorizations are merely the first step of an electronic fund transfer (EFT). It urges that the EFT is not complete— and the payment does not “reach” NYCB as required by the Official Interpretations—until the requested funds are transferred from the consumer’s external bank account to the mortgage servicer. This means, in NYCB’s view, that the EFT, not the electronic authorization, is the “payment instrument or other means of payment.”

    The problem with that reasoning is that the same is true of a paper check, which the Official Interpretations specifically include in the definition of “payment instrument or other means of 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 servicer 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 the 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. . . .

    Fridman v. NYCB Mortgage Co., No. 14-2220 (7th Cir., March 11, 2015).