Skip to main content

Search

Truth in Lending: 12.2.3.4.3 Does a rescission claim extend the limitations period for underlying disclosure violations?

Section 1635(g) provides: “In any action in which it is determined that a creditor has violated this section, in addition to rescission the court may award relief under section 1640 of this title for violations of this chapter not relating to the right to rescind.” One decision suggests that this provision means that, if a claim for rescission is timely because it was exercised within the three-year period set by section 1635(f), then the consumer can also seek damages for disclosure violations even if they would normally be barred by the one-year statute of limitations.

Truth in Lending: 12.2.3.5 Repeat Transactions and Continuing Violations

Some extensions of credit are set up to create repeat transactions. In payday loans, for example, borrowers often enter into a new agreement or provide a new check to be held with each rollover.111 Each rollover may be a separate failure to disclose, starting a new one-year period for filing suit.112 Auto pawn transactions may be set up in the same way.113

Truth in Lending: 12.2.4.1 Overview

Sometimes, at first glance, the basic rules for calculating a limitations period138 suggest that it may be too late to file a claim. But that should not end the analysis. There are a number of legal concepts or doctrines that can affect when a limitations period begins to run or is tolled. This section discusses the most commonly litigated ones raised in the TILA context: equitable tolling, equitable estoppel, fraudulent concealment, and the discovery rule.

Truth in Lending: 12.2.4.2 The Discovery Rule and Fraudulent Concealment

Chronologically, the first question to ask is when the limitations period starts to run. Generally, a cause of action accrues and the statute of limitations starts to run at the same time—when the plaintiff is injured—even if the plaintiff does not know about the injury.142 But there may be an equitable exception to this principle depending on when the consumer discovered relevant facts and the reason for any delay.

Truth in Lending: 12.2.4.3.2 Due diligence requirement

The plaintiff must exercise due diligence in order for a court to equitably toll the statute of limitation.179 Whether the plaintiff exercised due diligence is a question of fact.180 Many decisions hold that the consumer must exercise diligence to uncover TILA violations181 and must act promptly upon discovering the violations.182 A consumer, however, need not do a full-blown investigation to adequate

Truth in Lending: 12.2.4.4 Equitable Estoppel

Equitable estoppel is another doctrine that gives a plaintiff more time to file a suit. But, in contrast to equitable tolling, it applies when the statute of limitations has expired: It estops, or bars, the defendant from asserting the expired limitations period as a defense.197

Truth in Lending: 12.2.4.7 Selected Scenarios Where Courts Address Tolling TILA’s Limitations Periods

While it is not difficult to categorize the legal doctrines that excuse the late filing of a complaint, it is impossible to provide a comprehensive or definitive list of facts that trigger those doctrines. This subsection provides a sample of scenarios where courts have addressed a late TILA claim and provided a clear statement of the grounds for granting or denying a request for tolling. Many other decisions are not amenable to this type of list because they provide multiple grounds for a decision or are too general.

Truth in Lending: 4.1.1 The Scope of This Chapter and Sources of Law

For transactions within the scope of the Truth in Lending Act,1 information must be conveyed to the consumer in the form of written disclosures. Different types of transactions carry distinct disclosure requirements, which can be found in different parts of the statute and regulations, as well as in different chapters of this treatise.

Truth in Lending: 4.1.2 What Is Closed-End Credit?

Closed-end credit is defined by Regulation Z as “consumer credit other than ‘open-end credit.’”10 The statute does not use the term “closed end” but refers to a consumer credit transaction “other than under an open end credit plan.”11

Truth in Lending: 4.1.3.1 Multiple Creditors

For covered transactions in which there is a single creditor, that creditor must make the disclosures.16 In the rare instance in which there are multiple creditors, only one set of disclosures must be given.17 The creditors must agree among themselves as to which creditor must give the disclosures.

Truth in Lending: 4.1.4 Who Must Receive Disclosures

Disclosures must be made to the consumer who is obligated in the transaction.32 If more than one consumer is involved, disclosures may be given to any one consumer who has primary liability on the obligation.33 That consumer must be a principal debtor and not a surety or guarantor.34 When credit is extended to a covered trust, the disclosures may be given to the trustee on behalf of the trust.35 However, in r

Truth in Lending: 4.2.1 General

TILA dictates not only what information must be disclosed but how and when it should be disclosed. These requirements go to the heart of TILA: unless the disclosures are comprehensible and delivered to the consumer prior to entering into the transaction, the disclosures will be of little use to the consumer in making a rational economic decision as to whether to enter into a consumer credit transaction.

Truth in Lending: 4.2.2.1 Listing of Model Forms

The Act requires the Federal Reserve Board (and subsequently the Consumer Financial Protection Bureau) to publish model disclosure forms and clauses upon which creditors may rely.57 In compliance with that mandate the FRB promulgated the following Closed-End Models in Appendix H of Regulation Z:

H-1 Credit Sale Model Form (§ 1026.18)

H-2 Loan Model Form (§ 1026.18)

H-3 Amount Financed Itemization Model Form (§ 1026.18(c))

H-4(A) Variable Rate Model Clauses (§ 1026.18(f)(1))

Truth in Lending: 4.2.3 Meaningful Disclosures

TILA’s core purpose is to provide “meaningful disclosure of credit terms so that the consumer will be able to compare more readily the various credit terms available to him and avoid the uninformed use of credit.”74

Truth in Lending: 4.2.4.1 The Standard As Enunciated by the FRB and CFPB

The statute and Regulation Z require that disclosures must be made clearly and conspicuously.82 All required disclosures are subject to the clear and conspicuous standard, whether or not the individual disclosure gives rise to special relief, such as rescission.83 The official interpretations amplify this standard by requiring that disclosures be made “in a reasonably understandable form.”84 Legibility, type size and font, and conflicting information may

Truth in Lending: 4.2.4.2 The Standard As Enunciated by the Courts

Courts typically judge whether a disclosure is “clear and conspicuous” using an objective standard, that of the “ordinary” consumer.89 If the ordinary consumer would be confused or misled by the disclosures, they are not clear and conspicuous.90 Several courts hold that whether disclosures meet these standards is a question of law to be decided by a judge.91 Consequently, cases can be won or lost on summary judgment.

Truth in Lending: 4.2.4.4 Clear

If a disclosure is misleading or capable of more than one plausible interpretation, it is not “clear.”106 Provision of blank disclosures or disclosures only partially filled out should also be a violation of the clear and conspicuous standard.107 For example, some courts have held that the misstatement or omission of dates on the notice of right to cancel renders the disclosure unclear.108 Disclosures that are illegible are not clear.