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Truth in Lending: 5.13.2.2 Maximum Interest Rate

CEBA does not set the maximum interest rate; determination of the maximum rate is within the creditor’s discretion (although the upper limit should be any applicable state or federal usury caps).1274 However, as a result of the Act, creditors must specify in their ARMs a maximum interest rate that can be imposed.

Truth in Lending: 9.6.13.1 Overview

The ability of assignees under the Uniform Commercial Code to take even fraudulently originated mortgages free from the borrowers’ claims and defenses991 has facilitated predatory lending. Since many mortgage originators are insolvent or disappear at the first hint of litigation, homeowners may be left paying a fraudulent mortgage without recourse.

Truth in Lending: F.3 Sample First Request for Production of Documents

This request is based on discovery materials prepared by consumer law practitioners in three different cases.31 It is intended to be adaptable for both loans and credit sales.

IN THE UNITED STATES DISTRICT COURT FOR THE _______________ DISTRICT OF _______________

Plaintiff

v.

Defendant

INSTRUCTIONS

Truth in Lending: 9.6.2.4.4 Open-end credit before January 10, 2014

For transactions with applications received prior to January 10, 2014,671 open-end credit is excluded from HOEPA.672 This exemption was troubling because of the incentives it created. Some creditors sought to evade the high-rate home equity loan protections discussed in this chapter by structuring abusive loans as open-end credit.

Truth in Lending: 12.2.5.4 Servicemembers Civil Relief Act

The federal Servicemembers Civil Relief Act (formerly the Soldiers’ and Sailors’ Civil Relief Act) tolls the statute of limitations while a member of the military is on active duty.268 The period of active duty is not included in computing the statute of limitations.269 This rule applies whether a suit is brought by or against the service member.270

Truth in Lending: 12.2.5.6 Continuing Wrongs

Two more equitable doctrines can extend the limitations period for misconduct that is ongoing or repeating, rather than having an identifiable end date: the continuing violation doctrine and the theory of continuous accrual.275 Under the first, the cause of action does not accrue until the misconduct ends. Under the second, the plaintiff can recover for harm that occurs within the limitation period but not for older, related acts of misconduct.276

Truth in Lending: 12.2.6.2 Nature of Recoupment and Related Pleading Requirements

Recoupment is a common law doctrine that permits a defendant to raise claims defensively that arise out of the same transaction.293 When recoupment is allowed, TILA violations occurring more than one year previously may be raised against a creditor’s action to collect on the debt.294 Most courts hold that recoupment is only available as a defense to a creditor’s claim and cannot be asserted as part of an affirmative suit by the consumer.295

Truth in Lending: 12.2.6.3 State Law

Most creditor actions against consumers are filed in state court. The TILA provisions regarding recoupment expressly defer to the states. Thus, state law will decide whether a consumer’s TILA claim may be raised as a recoupment defense.

Truth in Lending: 12.2.6.5.1 Availability of recoupment in bankruptcy after the limitation period has run

Bankruptcy can be an important forum for raising recoupment claims, particularly when state law allows the creditor to collect on the debt outside of a judicial action. For example, where a creditor is seeking to collect through self-help repossession or nonjudicial foreclosure, there is no existing legal proceeding in which the consumer could file a recoupment claim.319 In such cases, this strategic advantage may contribute to making a recommendation in favor of bankruptcy.

Truth in Lending: 12.2.6.5.2.1 Bankruptcy schedules

When recoupment is expected to be raised in bankruptcy, it is a good idea to mark the claim in the schedules as “disputed.” Careful practice may also require listing the availability of a recoupment claim as an asset and exempting it at a nominal valuation if an exemption is available.323 Caution is advised, however, as some courts have viewed the debtor as acting affirmatively rather than defensively and thus denied recoupment where debtors have described the creditor’s claim as disputed.324

Truth in Lending: 12.2.6.5.2.2 Procedural and strategic choices

There are three procedural ways to raise a recoupment claim in bankruptcy: filing an adversary proceeding objecting to a proof of claim, filing a simple objection to a proof of claim, or filing a proof of claim on behalf of the creditor.325 Which one is appropriate depends on whether the creditor has filed a proof of claim and the state of the law in the court in which the bankruptcy case is heard.

Truth in Lending: 12.3.1 Overview

TILA imposes liability for damages upon “any creditor” who violates the Act.342 “Creditor” is defined as the party to whom an obligation is initially payable.343 But it is very common for the original creditor to transfer the obligation to another entity after consummation.344 For example, a consumer who buys a car may sign a retail installment contract at the dealership, with the obligation initially payable at the dealership.