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Tellado v. Indymac Mortgage Services

Jose and Maria Tellado, low-income senior citizens who speak primarily Spanish, refinanced their mortgage in 2007 through a series of Spanish-language interactions with agents of the lending institution. Because, however, the loan papers were provided only in English, the Tellados did not understand that the loan papers included terms to which they had not agreed, including an adjustable interest rate instead of the fixed rate the Tellados thought they had gotten. Represented by Philadelphia Legal Assistance, the Tellados filed suit to exercise their right under Pennsylvania law to cancel the transaction, and the trial judge ruled in their favor. The defendant bank appealed, and Public Citizen joined Philadelphia Legal Assistance as co-counsel on appeal to defend the judgment in favor of the Tellados. Among the key legal issues in the case was whether federal banking regulations nullify state consumer protection laws, an issue that has implications for borrowers throughout the nation who are seeking judicial relief from banks’ unscrupulous conduct. In February 2013, the U.S. Court of Appeals for the Third Circuit held that the district court had lacked jurisdiction over the Tellados’ claims because they had not exhausted their administrative remedies under the Financial Institutions Reform, Recovery, and Enforcement Act of 1989. The Third Circuit therefore reversed the district court’s order.