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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: 9.6.13.5.2 Damages roadmap
To calculate an assignee’s maximum liability in HOEPA cases and to apply the constraints of section 1641(d), the following road map should be helpful:
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: Editor’s Note
12 C.F.R. pt. 1026, amended through 86 Fed. Reg. 72,820 (Dec. 23, 2021).
Truth in Lending: Editor’s Note
12 C.F.R. pt. 1026, amended through 86 Fed. Reg. 72,820 (Dec. 23, 2021).
Truth in Lending: Editor’s Note
12 C.F.R. pt. 1026, amended through 86 Fed. Reg. 72,820 (Dec. 23, 2021).
Truth in Lending: 12.2.5.1 State Court Action May Toll the Limitation Period in Federal Court
Commencing a TILA action or raising a TILA counterclaim in state court before the end of the running of the statute of limitations may toll the statute of limitations in federal court.247 The pendency of a prior federal suit that is dismissed under Federal Rule of Civil Procedure 41 generally does not toll the statute of limitations, however.248
Truth in Lending: 12.2.5.2 Limitation Period for Individual Claim Is Tolled During Pendency of Class Action
The general rule in federal courts is that the statute of limitations for an individual suit is tolled during the pendency of a class action.252 If certification of the class is denied for reasons unrelated to the merits of the claim, individuals may file suit within what was left of the original limitations period at the time the class action was filed.253
Truth in Lending: 12.2.5.3 Mental Impairment
The majority of circuits have tolled statutes for mental incompetence or impairment.263 And the U.S.
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: 12.2.5.5 Effect of Bankruptcy
The Bankruptcy Code272 tolls statutes of limitations and other deadlines for varying periods when either the consumer or the creditor files bankruptcy. These tolling rules are discussed at § 10.3.3.6, supra.
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: 12.2.6.1 TILA Explicitly Allows Recoupment for Damage Claims
The statutory one-year limitation period, 15 U.S.C.
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: 12.2.6.4 Recoupment Where Creditor Initiates Nonjudicial Foreclosure
Consumers may wish to assert TILA claims by way of recoupment where the creditor exercises some nonjudicial method, such as nonjudicial foreclosure, to collect the debt.
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: 12.2.6.5.2.3 Filing a proof of claim for a creditor
It will generally be to the debtor’s advantage to have the creditor file the claim first.
Truth in Lending: 12.2.6.5.3 Treatment of bifurcated secured and unsecured claims
Another issue arises when a secured creditor’s claim has, pursuant to various bankruptcy provisions,337 been bifurcated into a secured and an unsecured portion. The question is whether the recoupment amount may be allocated fully to the secured portion.
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.