Third Circuit Confirms that TILA Recoupment or Set Off Claims Outside the Statute of Limitations Can Only Be Asserted Defensively

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The United States Court of Appeals for the Third Circuit has reaffirmed that exceptions to the statute of limitations for asserting certain claims regarding allegedly deceptive loan practices found in the Truth in Lending Act (“TILA”), apply only to assertion of those claims defensively, and not as an affirmative claim against a lender, in Gochin v. Markowitz.

Diane Gochin received a home mortgage loan modification in or around November 2007. In 2010, she defaulted on the loan, and her lenders moved to foreclose on the property. The lenders received a judgment of foreclosure from the Montgomery County Court of Common Pleas, which judgment was affirmed by the Pennsylvania Superior Court in 2018. Gochin then filed suit in the United States District Court for the Eastern District of Pennsylvania, alleging several state and federal consumer protection law violations, including violations of TILA. The District Court dismissed her claims, rejecting the TILA claims as time-barred under the relevant statutes of limitations.

On appeal, Gochin asserted that 15 U.S.C. § 1640(k)(1) provided that her TILA claims were excused from the statute of limitations. Section 1640(k)(1) provides that “when a creditor, assignee, or other holder of a residential mortgage loan…initiates a judicial or nonjudicial foreclosure of the residential mortgage loan, or any other action to collect the debt in connection with such loan,” the debtor can assert certain claims “as a matter of defense by recoupment or set off” regardless of TILA’s statutes of limitations.

The Third Circuit, however, affirmed the District Court’s dismissal. While Gochin was correct with regards to Section 1640(k)(1)’s abrogation of the statutes of limitations, it only applied to asserting those claims as defenses to a collection or foreclosure action by the creditor. Nothing in TILA’s statutory language allows for assertion outside the statute of limitations as an affirmative claim and Gochin’s claims in response to the completed foreclosure action were time-barred.

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