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TOPIC: What if TILA is Violated?
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What if TILA is Violated? 8 Years, 3 Months ago Karma: 0  
What is the penalty for violating TILA? Does the wronged consumer benefit?

Here are some examples of violations of The Truth In Lending Act:

Creditors are liable for violation of the disclosure requirements, regardless of whether the consumer was harmed by the nondisclosure, UNLESS:

The creditor corrects the error within 60 days of discovery and prior to written suit or written notice from the consumer, or

The error is the result of bona fide error. The creditor bears the burden of proving by a preponderance of the evidence that:

The violation was unintentional.
The error occurred notwithstanding compliance with procedures reasonably adapted to avoid such error. (Error of legal judgment with respect to creditor's TILA obligations not a bona fide error.)
Civil remedies for failure to comply with TILA requirements :

Action may be brought in any U.S. district court or in any other competent court within one year from the date on which the violation occurred. This limitation does not apply when TILA violations are asserted as a defense, set-off, or counterclaim, except as otherwise provided by state law.

Private remedies - applicable to violations of provisions regarding credit transactions, credit billing, and consumer leases.

Actual damages in all cases.
Attorneys' fees and court costs for successful enforcement and rescission actions.
Statutory damages.
(1) For individual actions, double the correctly calculated finance charge but not less than $100 or more than $1,000 for individual actions.
For class actions, an amount allowed by the court with no required minimum recovery per class member to a maximum of $500,000 or 1% of the creditor's net worth, whichever is less.
These can be imposed on creditors who fail to comply with specified TILA disclosure requirements, with the right of rescission, with the provisions concerning credit cards, or with the fair credit billing requirements.
Enforcement by administrative agencies.

The enforcement scheme for banks includes the Federal Reserve System, the Federal Deposit Insurance Corporation, and other agencies. The enforcement agency responsible for creditors not subject to the authority of any specific enforcement agency is the Federal Trade Commission. Nine separate agencies currently have enforcement responsibilities.

Enforcement agencies can:

Issue cease and desist orders or hold hearings pursuant to which creditors are required to adjust debtors' accounts to ensure that the debtor is not required to pay a finance charge in excess of the finance charge actually disclosed or the dollar equivalent of the annual percentage rate actually disclosed, whichever is lower.

If the FTC determines in a cease and desist proceeding against a particular individual or firm that a given practice is "unfair or deceptive," it may proceed against any other individual or firm for knowingly engaging in the forbidden practice, even if that entity was not involved in the previous proceeding.

Criminal penalties - Willful and knowing violations of TILA permit imposition of a fine of $5,000, imprisonment for up to one year, or both.

Truth in lending act: 3-day cooling off period

In addition to remedies described above, consumers who enter home equity loans may also have rescission rights . Under TILA, a consumer may rescind a consumer credit transaction involving a non-purchase-money security interest in the consumer's principal dwelling

Within 3 business days if all TILA disclosure requirements met, or

During an extended statutory period for TILA disclosure violations such as:

Failure to give adequate notice of right to rescind,

Failure to give adequate TILA credit term disclosures.

Rescission voids the security interest in the principal dwelling. Consumer must have ownership interest in dwelling that is encumbered by creditor's security interest. Consumer need not be a signatory to the credit agreement. TILA rescission rights do not apply to business credit transactions, even if secured by consumer's principal dwelling.

Scope of truth in lending cooling off period

Right to rescind
Time to Exercise Right to Rescind.
Extended right to rescind.
Waiver of the Right to Rescind.
Delay of Performance.
Rescission Process.
Particular Types of Transactions.
Back 1a. Right to rescind applies whenever there is non- purchase money security interest in consumer's principal residence (i.e., home equity loans/lines of credit/home improvement loans, etc.)

A consumer can have only one principal dwelling at a time (includes mobile homes, trailers, houseboats, if used as principal dwelling).

A vacation or other second home is not a principal dwelling.
A transaction secured by a second home cannot be rescinded, even if the consumer plans to reside there in the future.
Back 2a. Time to Exercise Right to Rescind.

Right to rescind until midnight of third business day following the later of:

Consummation of transaction,

In the case of closed-end credit, when the credit agreement is signed.

a. In the case of open-end credit, the occurrence giving rise to the right to rescind:

Opening the plan,
Each credit extension above previously established credit limit,
Increasing the credit limit,
Adding to an existing account a security interest in the consumer's principal dwelling, and
Increasing the dollar amount of the security interest taken in the dwelling to secure the plan.
b. Delivery of the required rescission right notice, or

c. Delivery of all material disclosures.
Extended right to rescind.

Continuing right to rescind if required disclosures not made or made incorrectly, but

There is statutory cut-off of extended right to rescind at three years after consummation.


Will be cut off earlier by transfer of all consumer's interest in the property (including involuntary transfer such as foreclosure), or sale of the property.
Violations giving rise to an extended three-tear right to rescind.

a. Failure to give proper rescission notice.

Creditors are required to deliver two copies of the right to rescind to each consumer entitled to rescind.

This is tricky language that needs to be read carefully. Call the Law Office of Andrew Farmer at (865) 428-6737 for a free consultation regarding your individual situation. We serve clients in property matters in Blount, Knox, Jefferson, and Sevier counties.
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