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Truth in Lending: 13.7.1.2.3 Seventh Circuit requires early termination as precondition to challenging reasonableness of charge

The Seventh Circuit finds that it is premature to determine the reasonableness of an early termination formula until the lease is terminated early.583 The CLA requires charges to be reasonable in light of anticipated or actual harm.584 Because it is impossible (according the Seventh Circuit) to tell ahead of an actual early termination whether the charges are unreasonable compared to actual harm, any challenge to the lease provision is premature.

Truth in Lending: 13.7.1.2.4 Other courts require consumer to independently establish injury

Certain courts require consumers to independently establish injury to raise the unreasonableness of an early termination formula.585 But there certainly can be injury before the lessor attempts to enforce the early termination charge,586 and before the consumer is required to pay the charge.587 For example, the consumer should have standing where the consumer would have terminated the lease but for the early termination charge.

Truth in Lending: 13.7.1.3 Advertising Violations

A lessor’s failure to comply with the CLA’s advertising requirements590 triggers a private remedy only where the consumer “suffers actual damage from the violation.”591 But, if a violation results in actual damage, the lessor is liable no matter the nature of the advertising violation—liability attaches for any advertising violation that causes injury to the consumer.

Truth in Lending: 13.7.2.2 Multiple Statutory Damages for Multiple Violations, Lessors or Lessees

The CLA specifies that the consumer is entitled to only one statutory damage award for multiple disclosure violations.613 Multiple statutory damages should be allowed where there are both disclosure and nondisclosure violations, such as unreasonable early termination charges or advertising violations. This is consistent with TILA case law that provides for statutory damages for disclosure violations and separate statutory damages for rescission violations.614

Truth in Lending: 13.7.3.1 General

A CLA action must be brought within one year of lease termination,627 while TILA allows actions only within one year of the violation.628 Lease termination is at scheduled termination if the lease goes to term or on the early termination date if the lease is terminated early.629

Truth in Lending: 13.7.3.2 Recoupment Claims

Despite sloppy legislative drafting, it seems clear that CLA claims may be raised by way of recoupment after the one-year limitation period has expired. The CLA specifies that lessors are liable as provided in 15 U.S.C. § 1640.632 15 U.S.C. § 1640(e) specifies that:

Truth in Lending: 13.7.4 Jurisdiction

CLA violations may be brought in any federal district court without regard to diversity or amount in controversy requirements or in any other court of competent jurisdiction.641 Reference should be made supra to the relevant TILA discussion as to whether lessors can bring state law collection counterclaims to the consumer’s federal court CLA claim, and whether the consumer can add state law claims to a federal court CLA claim.642 Lessors cannot remove to federal court a case where the c

Truth in Lending: 13.7.5.3 Correction Defense

The correction defense provides that a lessor has no liability for a CLA violation if within sixty days of discovering an error, but before the consumer notifies the lessor, the lessor notifies the consumer of the error.652 Courts allow this defense only for clerical or mathematical errors, not for informational errors.653 Informational errors include violations dealing with format, type size, and meaningful sequence.

Truth in Lending: 13.7.5.4 Bona Fide Error Defense

As detailed supra as it relates to TILA,657 a lessor is not liable for a CLA violation if it is shown by a preponderance of evidence that the violation was unintentional and resulted from a bona fide error despite maintenance of procedures reasonably adopted to avoid any such error.658 An error of legal judgment is not a bona fide error; examples of bona fide error include clerical, calculation, computer malfunction, and printing errors.659

Truth in Lending: 13.7.5.5 Good Faith Conformity with Federal Agency Rulings and Official Interpretations

The CLA states that a “lessor who properly uses the material aspects of any model disclosure form…shall be deemed to be in compliance with the disclosure requirements to which the form relates.”665 Lessors also are not liable under the CLA for acts done or omitted in good faith in conformity with Regulation M or its official interpretations,666 even if a federal agency or the courts later change that interpretation.

Truth in Lending: 5.12.1.2 Definitions

In many consumer loans, contractual provisions permit changes to the interest rate after consummation. These loans are commonly known as “variable rate” transactions. Mortgages with variable rate provisions are typically called adjustable-rate mortgages or ARMs.

Variable rate loan notes use some terminology not found in fixed rate loan documents. The following three terms are critical:

Truth in Lending: 12.2.2 Limitations Period for Government Civil Enforcement

TILA clearly identifies the statute of limitations for some government enforcements actions but is silent on others. Under section 1640(e), state attorneys general have three years to enforce sections 1639, 1639b, 1639c, 1639d, 1639e, 1639f, 1639g, and 1639h. But nowhere does the Act explicitly state a limitations period for federal enforcement. As a result, the few courts to directly consider the federal limitations period have reached conflicting results.

Truth in Lending: 11.2.4.1 Overview

Under both Spokeo and Ramirez, a consumer can establish standing by showing that the harm (the downstream consequences) alleged has a close “historical or common-law analogue for their asserted injury.”107 The Court listed a number of recognized tangible and intangible injuries: physical, monetary, and reputational harm; disclosure of private information; and intrusion upon seclusion.108

Truth in Lending: 4.3.1 Overview

Paperless lending is a developing issue in consumer credit. While credit transactions using electronic records and electronic signatures can provide conveniences for borrowers, they also create substantial opportunities for fraud.

Truth in Lending: 4.3.2 Authority of the CFPB to Interpret Electronic Disclosure Standards and Establish Exceptions

Federal agencies have authority to interpret E-Sign, but the interpretation must be consistent with the statute’s rules for electronic disclosures and cannot add requirements.210 Agencies can set requirements for electronic disclosures only if they are substantially equivalent to the requirements for nonelectronic disclosures and do not impose unreasonable costs on acceptance and use of electronic records.211 Agencies also cannot require the application of a specific technology or technical spec