Tag Archives: tila

tila statute of limitations

22 May

Statutes of Limitations for TILA and RESPA Claims – For TILA
claims, the statute of limitations for actions for damages runs one
year after the loan origination.  15 U.S.C. § 1640(e).  For actions
seeking rescission, the statute of limitations is three years from
loan origination.  15 U.S.C. § 1635(f).  For RESPA, actions brought
for lack of notice of change of loan servicer have a statute of
limitation of three years from the date of the occurrence, and actions
brought for payment of kickbacks for real estate settlement services,
or the conditioning of the sale on selection of certain title services
have a statute of limitations of one year from the date of the
occurrence.  12 U.S.C. § 2614.

TILA law: Truth in Lending $2,000.00 for violation, statutory damages; I paid more for the Audit ?? !!

8 Jan




TILA seeks to assure meaningful disclosure of credit terms and conditions that the consumer will be informed with accurate costs and benefits of their credit transaction, allowing them to shop for the best credit terms available on the market. 15 U.S.C. § 1601(a).


Since TILA specifically remedial in nature, its provisions must be strictly construed. A creditor must comply with TILA in all credit transactions and “misleading disclosure is as much a violation of TILA as a failure to disclose at all.” Smith v. Chapman, 614 F.2d 968, 977 (5th Cir. 1980). It is not sufficient to attempt to comply with the Act, but rather, creditors are required to strictly comply with all the requirements of the Act. There is no need to show that the consumer was misled or deceived by ambiguous credit terms in order to prevail. Noel v. Fleet Finance, Inc., 971 F. Supp. 1102 (E.D. Mich. 1997).

Congress did not intend for creditors to escape liability for merely technical violations, that even minor or technical violations impose liability upon the creditors. Huff v. Steward-Gwinn Furniture Co., 713 F.2d 67, 69 (4th Cir. 1983). See also, Washington v. Ameriquest Mortg. Co., 2006 W.L. 1980201 (N.D. Ill.).


TILA applies to most consumer credit transactions and was specifically enacted to ensure accurate and meaningful disclosure of the charges involved in a transaction, allowing consumers to make their own decisions about obtaining a loan.

A lawsuit for violation of TILA may be based upon a lenders failure to comply with disclosure requirements. U.S.C. §§ 1631-34. Most of TILA violations involve the creditor’s failure to charge the correct amount, failure to disclose all the material terms, or failure to provide necessary forms or documents required by the Act.

TILA does not apply to the following transactions:

  1. Transactions that are made for business, commercial, or agricultural purposes. 15 U.S.C. § 1603(1); Reg. Z § 226.3(a)(1).
  2. Extensions of Credit to Organizations as opposed to natural persons. U.S.C. § 1603(1); Reg. Z. § 2026.3(a)(2).
  3. Credit over $25,000 Not Secured by Real Property or a Dwelling. U.S.C. § 1603(3); Reg. Z. § 226.3(b).
  4. Student Loans. U.S.C. § 1603(7); Reg. Z. § 226.3(f).
  5. Transactions under Public Utility Tariffs. U.S.C. § 1603(4); Reg. Z. § 226.3(c).
  6. Securities or Commodities transactions that are registered with the Securities and Exchange Commission. U.S.C. § 1603(2); Reg. Z. § 226.3(d).


When a violation of TILA occurs, the one-year limitations period applicable to actions for statutory and actual damages begins to run. U.S.C. § 1641(e).

A TILA violation may occur at the consummation of the transaction between a creditor and its consumer if the transaction is made without the required disclosures.

A creditor may also violate TILA by engaging in fraudulent, misleading, and deceptive practices that conceal the TILA violation occurring at the time of closing. Often consumers do not discover any violation until after they have paid excessive charges imposed by their creditors. Consumers who later learn of the creditor’s TILA violations can allege an equitable tolling of the statute of limitations. When the consumer has an extended right to rescind or pursue other statutory remedies because a violation occurs, the statute of limitations for all the damages the consumers seek extends to three years from the date the violation is revealed. McIntosh v. Irwin Union Bank & Trust Co., 215 F.R.D. 26, 30 (D. Mass. 2003).


Congress delegated authority for the implementation of TILA to the Federal Reserve Board (FRB). The Board of Governors (the Board) of the FRB interpreted TILA and promulgated a detailed and comprehensive set of rules that sets out the Board’s interpretation known as Regulation Z. Regulation Z is an official set of rules and most pleadings alleging TILA violations also alleging violations of Regulation Z as well.


  1. 1. Form Of Disclosure

TILA requires specific disclosures before the closing of a credit transaction. Disclosures must be “clear and conspicuously, in writing, in a form that the consumer may keep.” § 1632(a); § 226.5(a)(1).

Disclosure statement is a written document that a creditor is required to provide the consumer prior to closing, which contains TILA required material terms[1] related to the costs of the credit transaction. In this statement, a creditor must disclose to the person who is obligated on a consumer credit transaction the information required under TILA.

The Act calls for disclosures to be made in a manner that is reasonably to understand by ordinary persons. Most courts agree that “sufficiency of TILA mandated disclosures is to be viewed from the standpoint of an ordinary consumer, not the perspective of a Federal Reserve Board member, federal judge, or English professor.” Smith v. Cash Store Mgmt., 195 F.3d 325, 328 (7th Cir. 1999). Edmondson v. Allen-Russell Ford, Inc., 577 F.2d 291, 296 (5th Cir. 1978) (“we must assess the adequacy of disclosure […] by the audience for which disclosure was intended).

  1. a. Required Disclosures Must be Clear and Conspicuous. U.S.C. § 1632(a). Courts usually look at the particular Disclosure Statement and its content to determine whether it was sufficiently clear and conspicuous.

1)                  Creditor violates TILA for failure to clearly and conspicuously disclose the requirements by disclosing required information in fine print. There was “nothing in the disclosure statement that would call a person’s attention to the relevant clause.” Violation found when disclosures were buried near the bottom of the form. Re Wright, 11 B.R. 590, 592 (S.D. Miss. 1981).

2)                  TILA violation found where a financial company fails to disclose the cost of credit life and disability insurance in the disclosure statement, making the interest of the loan appear less than its actual cost. Woods v. Beneficial Finance Co. of Eugene, 395 F. Supp. 9, 12 (DC Or 1975).

3)                  Disclosures are not clear and conspicuous when the disclosure statement includes contradicting terms. Varner v. Century Finance Co. Inc., 738 F.2d 1143 (11th Cir. 1984) (disclosing two different dollar amounts under the same heading is confusing). See also Andrews v. Chevy Chase Bank, 240 F.R.D 612, 618 (E.D. Wis. 2007) (Disclosure found unclear where the Truth-In-Lending Disclosure Statement shows the APR is 4.047 percent and other disclosure that “strongly implie[s] that the cost of the loan expressed as a yearly rate” at 1.950 percent); Ralls v. Bank of N.Y., 230 B.R. 508, 516 (E.D. Pa. 1999) (where there is a contradiction between TILA disclosures and other information provided by the lender, the disclosures are unclear).

  1. b. The terms “finance charge” and “annual percentage rate” (APR) shall be more conspicuous than any other terms. U.S.C. § 1632(a). These terms can be disclosed more conspicuously by using a contrasting type size or boldness and/or placing borders around them. Commentary § 226.5(a)(2)-2.

1)                  Violate for printing the terms “finance charge” and annual percentage rate” in the same typeface as other material terms. Brown v. Payday Check Advance, Inc., 202 F.3d 987, 990 (7th Cir. Ill. 2000). See also, Herrera v. First Northern Sav. & Loan Asso’n, 805 F.2d 896, 898 (NM 1986) (TILA violated when the term “annual percentage rate” appeared on the disclosure statement in identical size, style, and boldness with over 30 other terms and phrases).

2)                  No violation where the term “annual percentage rate” appears in a bolded box and is highlighted by all capital and bolded letter.” Robinson v. First Franklin Financial Corp., 2006 WL 2540777 (E.D. Pa.).

  1. c. TILA disclosures must be grouped together and segregated from all unrelated information. U.S.C. § 1632(a). Disclosures must be organized in the contrast so that each section of the disclosure statement is complete without any extra information that confuses the consumers. Reg. Z. § 226.5(b)(1).

1)                  A paragraph at the bottom of the contract referring to the “property described above” is ambiguous and does not comply with the requirement that disclosures be grouped together. Leathers v. Toyota-Volvo, 824 F. Supp. 155 (C.D. Ill. 1993). See also, In re Cook, 76 B.R. 661, 663 (C.D. Ill. 1987) (information in the disclosure statement referred back and forth violates TILA, because the required disclosures must be simplified and grouped in a single location and segregated from everything else).

2)                  Failure to disclose time of payment in the disclosure statement violates TILA because “the timing of payments […] must be grouped with the other required disclosure” such as number of payments and amount of payments. Jones v. Ameriquest Mort. Co., 2006 WL 273545 (N.D. Ill.). See Andrews v. Chevy Chase Bank, 240 F.R.D at 617 (the creditor listed the period of payments in a different place than the number and amount of payments violate TILA requires to group related information together).

  1. d. Additional information. Lenders can include additional information on the disclosure statement so long as the additional information relates to the required disclosures. U.S.C. § 1632(b).

1)                  Disclosure of an additional interest rate of 1.950 percent, which only applied to the first monthly payment, in the disclosure statement is violation, because it causes the loan to “appear more attractive than it actually was and serve no useful purpose.” Andrews v. Chevy Chase Bank, 240 F.R.D at 620.

2)                  Additional information setting out the Note Rate disclosed on the Disclosure Statement found “helpful and important to consumers.” Smith v. Anderson, 801 F.2d 661, 663 (Ct. App. Va. 1986).

  1. e. The home equity brochure published by the Board or a suitable substitute shall be provided. U.S.C. § 1637A(e). Creditors are required to provide the consumer with a brochure prepared by the FRB describing the home equity plans. If a creditor provides a substitute brochure, the brochure must be comparable to the Board’s brochure in substance and comprehensiveness. Reg. Z. § 226.5b(e)-1. When a third party has provided the consumer with a brochure, the creditor does not have to give the consumer a second copy of the brochure. Reg. Z. § 226.5b(e)-2.
  2. 2. Time of Disclosures: “The disclosures and brochure required … shall be provided at the time an application is provided to the consumer.”
    1. a. Creditor failed to provide the consumer disclosure statement at the consummation of the credit transaction violates TILA. Family Fed. Sav. & Loan v. Davis, 172 B.R. 437 (D.C. 1994); In re Schweizer, 354 B.R. 272, 281 (Id. 2006).
    2. b. No Violation where the creditor presents to the consumer, prior to the consummation of the credit transaction, a contract with multiple copies and allows the consumer to keep one of the copies before signing the contract. Queen v. Lynch Jewelers, LLC, 55 P.3d 914, 916 (Kan. App. 2002).
  3. 3. Required Disclosures for Open-End Credit Plan

TILA requires the following information to be disclosed, to the extent applicable. U.S.C. § 1637(a).

  1. a. Disclosure of the Finance Charge Accrual Date: The conditions under which a finance charge may be imposed together with either the time period, if any in which the customer may pay without incurring additional finance charges or there is no free ride period. Reg. Z. § 226.6(a)(1).
  2. b. Disclosure of the Periodic Rate, Range of Balances, and APR: For each period, a creditor must disclose the periodic rate that will be used to compute the finance charge; the balances to which the rate is applied; the corresponding nominal annual percentage rate; if deferent rates apply to different types of transactions, they must be disclosed; and penalty rate and possible conditions that trigger the penalty rate. Reg. Z. § 226.6(a)(2).
  3. c. Disclosure of the Periodic Rate, Range of Balances, and APR: The method used to determine the balance on which the finance charged is imposed, and a complex method calls for a more detailed explanation. Reg. Z. § 226.6(a)(3).
  4. d. Disclosure of the Finance Charge Amount: The method used to determine the amount of finance charge, including any minimum or fixed amount. Reg. Z. § 226.6(a)(4).
  5. e. Disclosure of Charges Other than Finance Charge: Identification of other charges which may be imposed and their method of computation in accordance with the FRB regulations. Significant charges such as membership fees, late charges, default charges, charges for exceeding the credit limit of an account, fee for providing copies of documents, taxes imposed on the credit transaction, real estate charges, and other charges must be disclosed. Reg. Z. §§ 226.6(b), 226.4.
  6. f. Disclosure of Security Interest: If a security interest will be secured in connection with the transaction, the collateral must be identified, even if the property is not owed by the consumer. Reg. Z. § 26.2(a)(25).
  7. g. Disclosure of Billing Error Right: A statement as to billing error rights and the right to assert claims and defenses in a form prescribed by the FRB must be provided to the consumer at the consummation of a transaction. Reg. Z. § 226.2(a)(d).
  8. 4. Required Disclosures of Residential Mortgage Transactions

Most home mortgages are subject to the disclosure requirements of TILA. U.S.C. § 1638. The required disclosures must be provided to the homeowner prior to the consummation of a credit transaction. Homeowners have the right to rescind most credit transactions, including home equity loans and home improvement loans, in which the home is taken as collateral.

  1. a. Disclosure of the Creditor: The name of the creditor must be provided and the address and/or telephone number are not required but may be included. U.S.C. § 1602(f); Reg. Z. § 226.2(a)(17).

Failure to disclose of the creditor’s identity properly entitles the consumer only actual damages, if any.

  1. b. Amount Financed: This term must be used in disclosure statement, and a brief description of the amount financed must be provided. U.S.C. § 1638(a)(2)(A).

Failures to properly disclose the amount financed gives rise to statutory damages, attorney’s fees, and any actual damages. Reg. Z. § 1640(a)(3). Its violation may also extend the consumer’s right to rescind. U.S.C. § 1602(u); Reg. Z. § 226.23 n. 48.

  1. c. Finance Charge: The term “finance charge” must be used and A brief description must be provided. U.S.C. § 1638(a)(3); Reg. Z. § 226.18(d). It can be disclosed only as a total amount, and there is no requirement to itemize finance charge, and overstating finance charge does not violate TILA. Vandenbroeck v. Commonpoint Mortg. Co., 22 F.Supp. 2d 677 (W.D. Mich. 1998).

In real estate closing charges, fees may be excluded from the finance charge are real property and title-related fees; document fees; closing agent, attorney fees; and notary, appraisal, and credit report fees. U.S.C. § 1605(e); Reg. Z. § 226.4(c)(7).

  1. d. APR: The term must be used and disclosure must be accurate. U.S.C. §1638(a)(4); Reg. Z. §§ 226.18(e). The APR is accurately disclosed when it is not more than 1/8 of 1 percentage point (.125%) above or below the actual APR. In variable-rate transactions, the description must inform the consumer that the interest rate is subject to change. A historical example illustrating the effects of interest rate changes implemented according to the loan program may be provided to the borrowers. U.S.C. § 1638(a)(14); Reg. Z. § 226.18(f).

Improper disclosure of the APR is a material violation of TILA that extends the consumer’s right to rescind. U.S.C. § 1602(u); Reg. Z. § 226.23 n 48. Statutory damage, attorney’s fee, and actual damage are also available. U.S.C. § 1640(a)(3).

  1. e. Payment Schedule: Payment schedule includes the number of payments, the amount of each payment, and the timing of payments scheduled to repay the obligation. U.S.C. § 1638(5)-(6); Reg. Z. § 226.18(g). Failure to disclose that payments were due monthly violates TILA. Andrews v. Chevy Chase Bank, 240 F.R.D. at 617.

Violation of these requirements entitles the consumer statutory damages, attorney’s fees, and actual damages. U.S.C. § 1640(a)(3) Improper disclosure is also a material violation for purposes of rescission. U.S.C. § 1602(u); U.S.C. § 1602(u); Reg. Z. § 226.23 n 48.

  1. f. Total Sale Price in a Sale of Property: The total of the cash price of the property or services, additional charges, and the finance charge must be disclosed. U.S.C. § 1638(a)(7). Reg. Z. § 226.18(j). Actual damages may be available for violation to disclose this factor. U.S.C. § 1640(a).
  2. g. A statement regarding the taking of the security interest in the property: The creditor must disclose whether it acquires a security interest in the property being purchased, or in other property, as part of the transaction.

Violate this requirement will give rise to statutory damages, attorney’s fees, and actual damages. U.S.C. § 1640(a)(3).

  1. h. Late charges: The dollar amount or the percentage charge may be imposed for late charge. U.S.C. § 1638(a)(10); Reg. Z. § 226.18(l). Actual damages may be available for failure to state the late charges. U.S.C. § 1640(a).
  2. i. Any Rebate Available: Any funds given to the consumer must be disclose whether it is in the form of cash, check, deposit in a savings or checking account. Reg. Z. § 226.18(r). Actual damages may be available for this violation. U.S.C. § 1640(a).
  3. j. Disclosure of Reference to Additional Documents: Information regarding nonpayment, default, and the right to accelerate the maturity of the debt. Prepayment rebates and penalties are not required to be disclosed to simplify the closing process. Instead, the creditor can provide appropriate documents that consumer could refer to. Reg. Z. § 226.17(a)(4). Actual damages may be available for failure to disclose this requirement. U.S.C. § 1640(a).
  4. 5. Required Disclosures for Adjustable Rate Mortgages

Adjustable rate mortgages (ARMs), which secured by the borrower’s principal dwelling with a maturity longer than one year, are required to be disclosed with additional information. To simplify disclosure requirements for variable rate loans, creditors may disclose any variable rate transaction applying the ARMs disclosure rule. However, the reverse is not allowed. Reg. Z. § 226.18(f); 52 Fed. Reg. 48665 (Dec. 24, 1987).

Failure to disclose properly and accurately the requirements of variable rate loans entitles the consumer statutory and actual damages and also rescission right. In re Fidler, 210 B.R. 411 (D. Mass. 1997).

  1. a. Rate Cap Disclosure: The maximum interest rate that may be imposed during the term of the obligation must be disclosed to the borrower. Reg. Z. § 226.30(a); Fed. Reg. 45611 (Dec. 1, 1987).
  2. b. ARM brochure: The Consumer Handbook on Adjustable Rate Mortgages, published by the Board and the Federal Home Loan Bank Board, may be provided to the consumer to fulfill this requirement. Creditors can also provide a suitable consumer handbook that is comparable to the Board’s Consumer Handbook in substance and comprehensiveness. Reg. Z. § 226.19(b)(1).
  3. c. Timing of Disclosures: The required disclosures and the Consumer Handbook must be provided to the borrower when an application form is furnished or before the payment of a non-refundable fee is made, whichever earlier. Reg. Z. § 226.19(b). Where the borrower receives the application by mail or a third party agent, the required information must be placed in the mail or delivered within three business days. Reg. Z. § 226.19 (b), n. 45b.
  4. d. Specific Disclosures Required for Variable Rate Loan: Major aspects of the variable rate loan program, which the consumer is considering, must be specifically disclosed.

1)                  The Index: Identification of the index will be used to calculate the interest rate and a brief description of the method used in calculating the interest rate are required by the Regulation. § 226.19(b)(2)(ii).

2)                  Current Margin Value and Interest Rate: A statement must be provided to the consumer suggesting the consumer ask for the current margin and interest rate. Reg. Z. § 226.19(b)(2)(iv).

3)                  Frequency of rate change and payment adjustment must be disclosed. Reg. Z. § 226.19(b)(2)(vi).

4)                  Negative Amortization: A statement to inform the consumer the consequences of negative amortization. A creditor must disclose the rules relating to the option, including the effects of exercising the option such as the increase of interest rate will occur and the payment amount will increase. Reg. Z. § 226.19(b)(2)(vii); commentary § 226.19(2). Andrews v. Chevy Chase Bank, 240 F.R.D at 620 (no violation found where the creditor informs the borrowers what will occur when the interest rate increases).

5)                  Conversion Feature: If the loan has a conversion feature, the amount of fees will be charge and the method of the fixed rate interest to be determined must be disclosed. Reg. Z. § 226.19(b)(2)(vii)-3.

  1. e. Historical Example Disclosure: Creditors have the option to disclose the maximum interest rate and payment amount for a $10,000 loan amount or the historical example of changes in the index being used. U.S.C. § 1638; Reg. Z. 226.9(b)(2)(viii). If the former method is used, a statement that the periodic payment may increase or decrease substantially. Reg. Z. § 226.19(b)(2)(viii)(B).
  2. f. Subsequent Disclosures: Disclosures concerning rate adjustments are required for all variable rate loans. Reg. Z. § 226.19(b). Notice of the adjusted payment amount, interest rate, index rate, and loan balance is required to disclose to the borrower in a timely manner. Reg. Z. § 226.20(c)(1)-(4).

If payment adjustment may accompany interest rate adjustment, creditors are required to send borrowers notice at least 25, but not more than 120, days prior to the due date of a payment at the new interest rate. Notice is required to be sent to borrowers whenever there is an adjustment in interest rate. Reg. Z. § 226.20(c).

If interest rate adjustments are made without a corresponding payment adjustment, the notice can be sent to the borrower once a year. Id.

Incorrect adjustment or used of index value or incorrect disclosing the new payment amount that does not comport with the contract terms violate TILA requirements, giving rise to statutory and actual damages. U.S.C. § 1640(a).

Statue of limitations for an affirmative violation is “one year from the date of the occurrence of the violation” that starts running when the erroneous notice is sent. U.S.C. § 1604(e).

  1. 6. Required Disclosure of Rescission Rights: Rescission rights arise when the transaction is a consumer credit transaction, in which a non-purchase lien or security interest is placed on the consumer’s principal dwelling unit. TILA rescission remedies reflect Congress’ intent to keep homeowners from placing their homes in jeopardy without a reasonably clear understanding of the financial risks and benefits of the transaction.
    1. a. Rescission right is vested in the owner of the property that is the subject of the security interest. Reg. Z. §§ 226.15(a)(1)(i), 226.15(b), 226.23(a)(1).
    2. b. The security interest must be the principal residence of the owner of the interest. Reg. Z. § 226.2(a)(11).
    3. c. Time of Delivery: The rescission notice may be given after consummation, though the rescission period does not begin to run until it is effectively delivered. Official Staff Commentary § 226.23(b)-4. It is not effectively delivered until it is given in a form the consumer can keep. Reg. Z. § 226.15(b). A written acknowledgement of receipt of rescission notice creates a rebuttable presumption of delivery. Cole v. Lovett, 672 F. Supp. 947 (S.D. Miss. 1987).
    4. d. Providing Rescission Notice: Each person who has the right to rescind a credit transaction must be provided two copies of rescission notice and the required disclosures in a credit transaction. U.S.C. § 1635(a); Reg. Z. §§ 226.5(b), 226.15(b). Notice of the right to rescind is also required for non-purchase money mortgages. U.S.C. § 1635(a). Giving the TILA notice and another notice of rescission at the same time, which have different rescission dates, confuses an ordinary consumer, violating the “clear and conspicuous” disclosure requirement. Jones v. Ameriquest.
    5. e. Time to Exercise Rescission Right: The consumers have until midnight of the third business day following the delivery of the rescission notice, the transaction, or the receiving of the Truth-In-Lending statement, whichever occurs last. See, Jones v. Ameriquest. Right to rescind can be exercised prior to the consummation of the loan. Community Mutual Sav. Bank v. Gillen, 655 N.Y.S.2d 271 (City Ct. 1997) (the consumer properly rescinds her loan at closing recovering fees paid to the creditor).

If the creditor fails to deliver the required notice of material disclosures, the consumer’s right to rescind is automatically extended from three business days to three years. Reg. Z. § 226.23(a)(3).

  1. f. Assignee’s Liability: An assignee is liable for statutory damages for violations by failure to disclosure TILA requirements by its predecessors and its own violation if it fails to respond properly to a rescission notice. Palmer v. Champion Mortg., 465 F.3d 24, 27 (1st Cir. 2006) (“if a creditor does not respond to a rescission request within twenty days, the debtor may file suit in federal court to enforce the rescission right). See also U.S.C. § 1635(b).
  2. g. Rescission Process: The consumer must send a written notice to the creditor to trigger the rescission process. When the notice of rescission has been mailed, the notice is considered given. Reg. Z. §§ 226.15(a)(2), 226.23(a)(2).

When the consumer rescinds, the security interest automatically becomes void. The consumer is relieved of any obligation to pay any finance charge or any other charge. U.S.C. § 1635(b); Reg. Z. §§ 226.15(d)(1), 226.23(d)(1). Rescission voids the mortgage and is a complete defense to foreclosure. Yslas v. K.K. Guenther Builders, Inc., 342 So.2d 859 (Fla.2d D.C.A. 1977). See Beach v. Great Western Bank, 670 So.2d 986 (Fla. 4th  D.C.A. 1996).

The creditor has twenty days from receipt of the consumer’s rescission notice to return any money or property given to anyone and to take appropriate and necessary action to reflect the termination of the security interest. U.S.C. § 1635(b); Reg. Z. §§ 226.15(d)(2), 226.23(d)(2).

After the creditor has complied with the preceding mandate, the consumer tenders back to the creditor any money or property received. U.S.C. § 1635(b); Reg. Z. §§ 226.15(d)(3), 226.23(d)(3).


Only creditors are subject to the civil penalties of TILA. U.S.C. § 1640(a). Civil damages are appropriate when disclosure requirements have been violated, and liability is imposed despite the creditor’s alleged good faith and reasonableness. Ratner v. Chemical Bank N.Y. Trust Co., 329 F. Supp. 270 (S.D.N.Y. 1971).

  1. 1. Statutory Damages

Violations of the general requirements and rescission requirements give rise to statutory damage claims. U.S.C. § 1640(a). For open-end credit transactions, statutory damages are awarded in the amount twice of the amount of finance charge. If the action arises out of a credit transaction secured by a dwelling, the consumer is entitled to a minimum award of $200 but not more than $2,000. U.S.C. § 1640(a)(2)(A)(i-iii). Only one statutory recovery is allowed even there are multiple disclosure violations in a transaction. U.S.C. § 1640(g).

  1. 2. Attorney’s Fees

Consumers are awarded attorney’s fees in a successful action or when they are “determined to have a right of rescission under section 1635,” even if the consumer is not obligated to pay his or her attorney. U.S.C. § 1640(3); Andrews v. Chevy Chase Bank, 240 F.R.D. at 621 (“because […] plaintiffs have a right of rescission, they are entitled to attorneys’ fees”); Kessler v. Associates Financial Servs. Co. of HI, Inc., 639 F.2d 498, 499 (C.A. Hi. 1981) (attorney’s fees are awarded even the plaintiffs are represented without charge by legal services attorneys). Attorney’s fees include the cost of the action and “a reasonable attorney’s fee as determined by the court.” U.S.C. § 1640(3).

  1. 3. Actual Damages

A consumer is entitled for actual damages when a creditor fails to comply with the requirements imposed by TILA, in the amount equal to the sum of any actual damage sustained by the consumer as a result of the creditor’s violation. U.S.C. § 1640(a)(1). Courts may require the consumer to show actual reliance upon the accuracy of the disclosures in order to claim actual damages. Perrone v. General Motors Acceptance Corp., 232 F.3d 433, 435-439 (5th Cir. 2000); Peters v. Jim Lupient Oldsmobile Co., 220 F.3d 915, 917 (8th Cir. 2000) (detrimental reliance is established when the plaintiff shows that she read and understood the disclosures and that if the disclosures have been accurate, she would have sought and obtained a lower loan).

[1] Material terms are annual percentage rate, finance charge, method of determining the finance charge and the balance, amount financed, total of payments, the number and amount of payments, due dates or periods of payments scheduled to repay the indebtedness. U.S.C. § 1602(u); Reg. Z. § 226.23 n. 48.

SB 94 and its interferance with the practice

5 Sep

CA SB 94 on Lawyers & Loan Modifications Passes Assembly… 62-10

The California Assembly has passed Senate Bill 94, a bill that seeks to protect homeowners from loan modification scammers, but could end up having the unintended consequence of eliminating a homeowner’s ability to retain an attorney to help them save their home from foreclosure.

The bill, which has an “urgency clause” attached to it, now must pass the State Senate, and if passed, could be signed by the Governor on October 11th, and go into effect immediately thereafter.

SB 94’s author is California State Senator Ron Calderon, the Chair of the Senate Banking Committee, which shouldn’t come as much of a surprise to anyone familiar with the bigger picture. Sen. Calderon, while acknowledging that fee-for-service providers can provide valuable services to homeowners at risk of foreclosure, authored SB 94 to ensure that providers of these services are not compensated until the contracted services have been performed.

SB 94 prevents companies, individuals… and even attorneys… from receiving fees or any other form of compensation until after the contracted services have been rendered. The bill will now go to the Democratic controlled Senate where it is expected to pass.

Supporters of the bill say that the state is literally teeming with con artists who take advantage of homeowners desperate to save their homes from foreclosure by charging hefty fees up front and then failing to deliver anything of value in return. They say that by making it illegal to charge up front fees, they will be protecting consumers from being scammed.

While there’s no question that there have been some unscrupulous people that have taken advantage of homeowners in distress, the number of these scammers is unclear. Now that we’ve learned that lenders and servicers have only modified an average of 9% of qualified mortgages under the Obama plan, it’s hard to tell which companies were scamming and which were made to look like scams by the servicers and lenders who failed to live up to their agreement with the federal government.

In fact, ever since it’s come to light that mortgage servicers have been sued hundreds of times, that they continue to violate the HAMP provisions, that they foreclose when they’re not supposed to, charge up front fees for modifications, require homeowners to sign waivers, and so much more, who can be sure who the scammers really are. Bank of America, for example, got the worst grade of any bank on the President’s report card listing, modifying only 4% of the eligible mortgages since the plan began. We’ve given B of A something like $200 billion and they still claim that they’re having a hard time answering the phones over there, so who’s scamming who?

To make matters worse, and in the spirit of Y2K, the media has fanned the flames of irrationality with stories of people losing their homes as a result of someone failing to get their loan modified. The stories go something like this:

We gave them 1,000. They told us to stop making our mortgage payment. They promised us a principal reduction. We didn’t hear from them for months. And then we lost our house.

I am so sure. Can that even happen? I own a house or two. Walk me through how that happened again, because I absolutely guarantee you… no way could those things happen to me and I end up losing my house over it. Not a chance in the world. I’m not saying I couldn’t lose a house, but it sure as heck would take a damn sight more than that to make it happen.

Depending on how you read the language in the bill, it may prevent licensed California attorneys from requiring a retainer in advance of services being rendered, and this could essentially eliminate a homeowner’s ability to hire a lawyer to help save their home.

Supporters, on the other hand, respond that homeowners will still be able to hire attorneys, but that the attorneys will now have to wait until after services have been rendered before being paid for their services. They say that attorneys, just like real estate agents and mortgage brokers, will now only be able to receive compensation after services have been rendered.

But, assuming they’re talking about at the end of the transaction, there are key differences. Real estate agents and mortgage brokers are paid OUT OF ESCROW at the end of a transaction. They don’t send clients a bill for their services after the property is sold.

Homeowners at risk of foreclosure are having trouble paying their bills and for the most part, their credit ratings have suffered as a result. If an attorney were to represent a homeowner seeking a loan modification, and then bill for his or her services after the loan was modified, the attorney would be nothing more than an unsecured creditor of a homeowner who’s only marginally credit worthy at best. If the homeowner didn’t pay the bill, the attorney would have no recourse other than to sue the homeowner in Small Claims Court where they would likely receive small payments over time if lucky.

Extending unsecured credit to homeowners that are already struggling to pay their bills, and then having to sue them in order to collect simply isn’t a business model that attorneys, or anyone else for that matter, are likely to embrace. In fact, the more than 50 California attorneys involved in loan modifications that I contacted to ask about this issue all confirmed that they would not represent homeowners on that basis.

One attorney, who asked not to be identified, said: “Getting a lender or servicer to agree to a loan modification takes months, sometimes six or nine months. If I worked on behalf of homeowners for six or nine months and then didn’t get paid by a number of them, it wouldn’t be very long before I’d have to close my doors. No lawyer is going to do that kind of work without any security and anyone who thinks they will, simply isn’t familiar with what’s involved.”

“I don’t think there’s any question that SB 94 will make it almost impossible for a homeowner to obtain legal representation related to loan modifications,” explained another attorney who also asked not to be identified. ”The banks have fought lawyers helping clients through the loan modification process every step of the way, so I’m not surprised they’ve pushed for this legislation to pass.”

Proponents of the legislation recite the all too familiar mantra about there being so many scammers out there that the state has no choice but to move to shut down any one offering to help homeowners secure loan modifications that charges a fee for the services. They point out that consumers can just call their banks directly, or that there are nonprofit organizations throughout the state that can help homeowners with loan modifications.

While the latter is certainly true, it’s only further evidence that there exists a group of people in positions of influence that are unfamiliar , or at the very least not adequately familiar with obtaining a loan modification through a nonprofit organization, and they’ve certainly never tried calling a bank directly.

The fact that there are nonprofit housing counselors available, and the degree to which they may or may not be able to assist a given homeowner, is irrelevant. Homeowners are well aware of the nonprofit options available. They are also aware that they can call their banks directly. From the President of the United States and and U.S. Attorney General to the community newspapers found in every small town in America, homeowners have heard the fairy tales about about these options, and they’ve tried them… over and over again, often times for many months. When they didn’t get the desired results, they hired a firm to help them.

Yet, even the State Bar of California is supporting SB 94, and even AB 764, a California Assembly variation on the theme, and one even more draconian because of its requirement that attorneys only be allowed to bill a client after a successful loan modification has been obtained. That means that an attorney would have to guarantee a homeowner that he or she would obtain a modification agreement from a lender or servicer or not get paid for trying. Absurd on so many levels. Frankly, if AB 764 passes, would the last one out of California please turn off the lights and bring the flag.

As of late July, the California State Bar said it was investigating 391 complaints against 141 attorneys, as opposed to nine investigations related to loan modifications in 2008. The Bar hasn’t read anywhere all of the complaints its received, but you don’t have to be a statistician to figure out that there’s more to the complaints that meets the eye. So far the State Bar has taken action against three attorneys and the Attorney General another four… so, let’s see… carry the 3… that’s 7 lawyers. Two or three more and they could have a softball team.

At the federal level they’re still reporting the same numbers they were last spring. Closed 11… sent 71 letters… blah, blah, blah… we’ve got a country of 300 million and at least 5 million are in trouble on their mortgage. The simple fact is, they’re going to have to come up with some serious numbers before I’m going to be scared of bumping into a scammer on every corner.

Looking Ahead…

California’s ALT-A and Option ARM mortgages are just beginning to re-set, causing payments to rise, and with almost half of the mortgages in California already underwater, these homeowners will be unable to refinance and foreclosures will increase as a result. Prime jumbo foreclosure rates are already up a mind blowing 634% as compared with January 2008 levels, according to LPS Applied Analytics.

Clearly, if SB 94 ends up reducing the number of legitimate firms available for homeowners to turn to, everyone involved in its passage is going to be retiring. While many sub-prime borrowers have suffered silently through this horror show of a housing crisis, the ALT-A and Option ARM borrowers are highly unlikely to slip quietly into the night.

There are a couple of things about the latest version of SB 94 that I found interesting:

1. It says that a lawyer can’t collect a fee or any other compensation before serivces have been delivered, but it doesn’t make clear whether attorneys can ask the client to deposit funds in the law firm’s trust account and then bill against thsoe funds as amounts are earned. Funds deposited in a law firm trust account remain the client’s funds, so they’re not a lawyer’s “fees or other compensation”. Those funds are there so that when the fees have been earned, the lawyer doesn’t have to hope his or her bill gets paid. Of course, it also says that an attorney can’t hold any security interest, but money in a trust account a client’s money, the attorney has no lien against it. All of this is a matter of interpretation, of course, so who knows.

2. While there used to be language in both the real estate and lawyer sections that prohibited breaking up services related to a loan modification, in the latest version all of the language related to breaking up services as applied to attorneys has been eliminated. It still applies to real estate licensed firms, but not to attorneys. This may be a good thing, as at least a lawyer could complete sections of the work involved as opposed to having to wait until the very end, which the way the banks have been handling things, could be nine months away.

3. The bill says nothing about the amounts that may be charged for services in connection with a loan modification. So, in the case of an attorney, that would seem to mean that… well, you can put one, two and three together from there.

4. Lawyers are not included in definition of foreclosure consultant. And there is a requirement that new language be inserted in contracts, along the lines of “You don’t have to pay anyone to get a loan modification… blah, blah, blah.” Like that will be news to any homeowner in America. I’ve spoken with hundreds and never ran across one who didn’t try it themselves before calling a lawyer. I realize the Attorney General doesn’t seem to know that, but look… he’s been busy.


Will SB 94 actually stop con artists from taking advantage of homeowners in distress? Or will it end up only stopping reputable lawyers from helping homeowners, while foreclosures increase and our economy continues its deflationary free fall? Will the California State Bar ever finishing reading the complaints being received, and if they ever do, will they understand what they’ve read. Or is our destiny that the masses won’t understand what’s happening around them until it sucks them under as well.

I surely hope not. But for now, I’m just hoping people can still a hire an attorney next week to help save their homes, because if they can’t… the Bar is going to get a lot more letters from unhappy homeowners.

Borrowers’ Defenses to Forclosure

19 Apr

A great source of information you can use, and since the Guy is in Washington I can give him all the credit

United First Class Action

9 Mar

On Saturday March 7,2009 a meeting was held for 200 plus victims of the United First equity save your house scam. At that meeting it was determined that a class action should be filed to recover the funds lost by the victims of the unconscionable contract.

As a first step an involuntary Bankruptcy is being filed today March 9, 2009. To be considered as a creditor of said Bankruptcy please Fax the Joint Venture agreement and retainer agreement to 909-494-4214.
Additionally it is this attorneys opinion that said Bankruptcy will act as a “stay” for all averse actions being taken by lenders as against said victims. This opinion is based upon the fact that United First maintained an interest in the real property as a joint venture to 80% of the properties value(no matter how unconscionable this may be) this is an interest that can be protected by the Bankruptcy Stay 11 USC 362.

My plan for Loan Modifications i.e. Attorney loan mod

25 Jan

Recent Loan Modification studies have shown that a large percentage of traditional loan modifications put the borrowers more upside down than when they started.
Unfortunately many loan mods are leaving people with higher monthly payments. In many loan modifcation the money you did not pay gets tacked on to the back of the loan… Increasing your loan balance and making you more upside down. This is why over 50% of all loan mods are in default. They are not fixing the problem they are just postponing it.

Before you go into default on your loans at the advice of some former subprime loan seller, make sure you understand that absent finding some legal leverage over the lender you have a good chance of seeing your payments going up.

Our Loan Modification program includes

1. Upside Down Analysis

2. Qualified Written Request and offer of Loan Modification

3. Letter informing lender of clients election to pursue remedies carved out by recent California Law under 2923.6 and or Federal Programs under the Truth in lending Act and the Fair Debt collection practices Act.

4. Letter Disputing debt (if advisable)

5. Cease and Desist letters (if advisable)

6. Follow up, contact with negotiator, and negotiation by an attorney when needed.
By now many of you have read about all the Federal Governments Loan Modification Programs. Others have been cold called by a former loan brokers offering to help you with your Loan Modification. Its odd that many of the brokers who put people into these miserable loans are now charging people up front to get out of the them.

Before you spend thousands of dollars with someone, do an investigation:

1. Is the person licensed by the California Department of Real Estate? Or, the California State Bar?

2. Are your potential representatives aware that have to be licensed according to the DRE?

3. Are they asking you for money up front? They are violating the California Foreclosure Consultant act if they are neither CA attorneys nor perhaps Real Estate brokers in possesion of a no opinion letter from the California Department of Real Estate? Note… if a Notice of Default has been filed against your residence only attorneys acting as your attorney can take up front fees. Don’t fall for “attorney backed” baloney. Are you retaining the services of the attorney or not? Did you sign a retainer agreement ?

4. If your potential representative is not an attorney make sure he or she is a Real Estate Broker capable of proving their upfront retainer agreement has been given a no opinon letter by the DRE. (As of November 2008 – only 14 non attorney entites have been “approved by the DRE.)

5. If somone says they are attorney backed – ask to speak with the attorney. What does attorney backed mean? From what we have seen it is usually a junk marketing business being run by someone who can not get a proper license to do loan modifications.

6. Find out how your loan modification people intend to gain leverage over the lender.

7. If you are offered a loan audit or a Qualfied Written Request under RESPA letter – will an attorney be doing the negotiating against the lender? Will you have to hire the attorney after you pay for your loan audit? Doesn’t that put cart before the horse?

8. Will it do you any good to have a loan audit done if you later have to go out and retain an attorney. You want to retain their services of an attorney before you pay for the audit. The loan audit is the profit center; negotiation takes time.
9. What kind of results should you expect?

10. Who will be doing your negotiating?

11. Will the Loan Modification request go out on Legal Letterhead?

12. How much will you have to pay? Are you looking for a typical loan mod result or are you looking to leverage the law in the hopes of getting a better than average loan mod result.

13. What if your are not satisfied with the loan modification offered by the lender?

14. Should you go into default on both loans prior to requesting a loan modification? Why? What happens if the loan mod does not work out to your satisfaction? (very important question.)

15. Will an attorney review the terms of your loan modification with you? Will you have to waive your anti-deficiency protections if you sign your loan modification paperwork? Will an attorney help you leverage recent changes in California law in an attempt to get a substantial reduction in the principle?

HOEPA audit checklist

18 Jan


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