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Truth in Lending: 11.6.3 Legislative History

Prior to 1974, actual damages were not included in the civil liability provisions of the Truth in Lending Act.621 The only explicit private remedy was statutory damages of twice the finance charge, not to exceed $100 minimum or $1,000 maximum, plus costs and attorney fees. This provision applied to both individual and class actions.

Truth in Lending: 11.6.4.3.2 Elements may depend on the damages sought

Detrimental reliance is a causation standard; the question is what harm was caused by the consumer’s reliance on the false disclosures?687 The damages sought should influence the proof of detrimental reliance required. Requiring proof that the consumer passed up better credit makes sense only if the consumer is seeking as damages some differential between the actual terms of credit and the terms of credit he or she passed by.

Truth in Lending: 11.6.4.3.3 Proving detrimental reliance if availability of other credit is an element

Given TILA’s remedial purpose, if the availability of better credit is an element of the detrimental reliance standard, a consumer should only have to establish that better financial arrangements were available on the market. Some courts have permitted such proof, accepting generalized proof of what terms are available in the market, coupled with statistical evidence as to consumer behavior.693 This standard, suggested by Burrell v.

Truth in Lending: 11.6.4.3.4 Benefit of the bargain damages

Detrimental reliance has been imported into TILA law from common law fraud. If one accepts that courts should borrow common law fraud standards—a questionable proposition since TILA should be interpreted liberally—courts should use the actual standard used in fraud cases, not a heightened standard. Common-law fraud has two standard measures for damages: out-of-pocket losses and benefit of the bargain. Benefit of the bargain is the more widely adopted measure of damages.698

Truth in Lending: 11.6.4.2 Why the Detrimental Reliance Standard Is Wrong

Even though a number of courts have adopted the detrimental reliance standard for TILA actual damages,651 there are strong arguments in favor of other, less rigid standards. Fundamentally, TILA is a remedial statute that must be liberally construed to effectuate its purposes.652 Importing a fraud reliance standard is at odds with TILA’s mandate of liberal construction in favor of the borrower.

Truth in Lending: 11.7.2 General: Availability, Purpose, and Character

For certain TILA violations, statutory damages are available in addition to actual damages, costs, and attorney fees.797 For most TILA provisions allowing for statutory damages, those damages are twice the finance charge (the enhanced statutory damages available for certain violations are an exception798).

Truth in Lending: 11.7.3.1 The Statutory Minimum and Capped Amounts

With the exception of enhanced statutory damages for violations related to HOEPA loans and certain restrictions that were added by the Dodd-Frank Act,817 TILA statutory damages are twice the finance charge, but with minimum and maximum amounts specified, depending on the type of credit.

Truth in Lending: 11.7.3.2 Retroactive Effect of Increase in Minimum and Capped Amounts

Do the increases in the minimum statutory damage award and the caps on these awards apply to cases that arose prior to the increase? The leading case is Landgraf v. USI Film Products,825 in which the U.S. Supreme Court addressed the retroactivity of the addition of compensatory damages and punitive damages to a civil rights statute that had formerly provided only a back-pay remedy.

Truth in Lending: 11.7.3.3 Interpreting Ambiguous Statutory Language Regarding the Cap

Consumers have argued that the statute’s language indicates that the cap does not apply to certain types of credit, and creditors have argued that the court has discretion to award an amount less than the cap for closed-end credit secured by real property, even when twice the finance charge exceeds the cap. These arguments were largely resolved by the 2004 Supreme Court case Koons Buick Pontiac GMC, Inc. v. Nigh.836

Truth in Lending: 11.7.4.1 Multiple Statutory Damages for One Transaction

When there are multiple obligors in a consumer credit transaction, there can be only one recovery of statutory damages.865 In other words, if statutory damages are $2,000, and a husband and wife are both obligated on the loan, the total amount that the obligors will receive is $2,000, not $4,000. Of course, in computing actual damages, the injury to both spouses should be considered.

Truth in Lending: 11.7.4.2 Multiple Statutory Damages for Multiple Transactions

The TILA limitation as to multiple statutory damages applies only “in connection with a single account” or “other single credit sale, consumer loan . . . or other extension of consumer credit.”874 Thus, multiple statutory damages can be awarded if a creditor and consumer enter into multiple credit transactions and there are violations in more than one of those transactions, even if these violations are all disclosure violations.

Truth in Lending: 11.7.5.1 Overview

The availability of statutory damages is set forth in the last paragraph of 15 U.S.C. § 1640. That paragraph specifically includes some provisions, specifically excludes others, and is silent as to some others, creating ambiguity. Nor does the statute squarely address the scope of liability for violating Regulation Z provisions that have no clear statutory equivalence.

Truth in Lending: 11.7.5.2.1 General

TILA’s civil liability provision, 15 U.S.C. § 1640(a)(2), begins by making statutory damages available for all part B violations, and then provides that, “in connection with” sections 1637 (open-end disclosures) and 1638 (closed-end disclosures), statutory damages only are available for certain enumerated provisions.

Truth in Lending: 11.7.5.2.4 15 U.S.C. § 1635 rescission

Any rescission violations lead to statutory damages. Section 1640(a) explicitly states that statutory damages are available for violations of “any requirement under section 1635.” Rescission also in no way limits statutory damages for violations of other provisions. Section 1635(g) provides that, where the creditor violates the right of rescission, section 1640 relief is available for part B violations other than the rescission violations, in addition to the remedy of rescission.

Truth in Lending: 11.7.6.2.1 Overview

Section 1638(b)(1) prohibits untimely or improperly segregated disclosures. (Timing requirements are also addressed in the remainder of section 1638(b), (c), and (d).) If an inaccurate disclosure (such as the finance charge or APR) leads to statutory damages, it would seem self-evident that statutory damages should be available if the disclosure is not timely made or not properly segregated.