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Truth in Lending: 11.7.6.2.2 Statutory damages for untimely disclosures

The Sixth934 and Ninth Circuits935 have interpreted section 1640(a) as overriding what would seem implicit in the disclosure requirements—that to be made properly, they must be made in time to be effective. As a result, these courts find that statutory damages are not available for violations of TILA’s timing requirement.

Truth in Lending: 11.7.7 Which Open-End Disclosure Violations of 15 U.S.C. §§ 1637–1637a Lead to Statutory Damages: Paragraph-by-Paragraph Survey

Statutory damages are available for almost every violation of 15 U.S.C. § 1637, which governs open-end credit disclosures. This conclusion results from a close reading of the two sentences addressing section 1637 in the hanging (last) paragraph of section 1640(a).957 The first sentence limits statutory damages to certain identified provisions of subsections (a) and (b) of section 1637.

Truth in Lending: 11.7.8.2 Where No Direct Statutory Parallel

Under the broad view described in the preceding section, most Regulation Z requirements should be considered to be adopted under part B, making (actual and) statutory damages available. However, one commentator has argued that statutory damages should be available only for violations of Regulation Z provisions that flow directly from analogous sections of the Act.977 This view still results in statutory damages for most Regulation Z violations.

Truth in Lending: 11.7.10.3.1 TILA’s liability provisions apply to assignees that fail to provide transfer of ownership notices

TILA requires assignees to provide mortgagors with written notice when ownership of the mortgage loan is transferred.1028 The question discussed in this subsection is whether assignees are subject to liability under TILA if they fail to provide this notice. The issue comes up because section 1640(a) imposes liability upon “creditor[s],” and the general definition of “creditor” at section 1602(g) includes only the original creditor.1029

Truth in Lending: 11.7.10.3.2 Liability for violations of section 1641(g) includes actual damages, statutory damages, and attorney fees

Section 1640(a) specifically provides that liability for violations of section 1641(g) is “an amount equal to the sum of” actual damages, statutory damages, and attorney fees. Actual damages may include out-of-pocket expenses and potentially mental anguish.1036 Statutory damages liability in connection with the disclosures required by sections 1637 and 1638 is limited to a closed list of disclosures,1037 but there is no such restriction for violations of section 1641(g).

Truth in Lending: 11.10.3.4 No TILA Attorney Fees for Prevailing Creditors

TILA provides no attorney fees for prevailing creditors, even if the consumer’s action is frivolous or in bad faith.1440 There is no due process or equal protection problem when a federal statute authorizes attorney fees for one party, but not the other.1441 Nonetheless, court rules or state law may provide for creditor attorney fees, usually upon a showing that the consumer’s action was frivolous or in bad faith.1442 Without such showi

Truth in Lending: 11.10.4.2.1 Excessive or duplicative time

The allowable hours are those documented by the attorney that were reasonably expended in reaching a favorable result.1460 Excessive, non-productive, inadequately supported or documented, or duplicative time will not be allowed, just as attorneys in private practice should not bill such time to their clients.1461 On the other hand, time that might otherwise be excessive may be justified as necessary to respond to creditor defenses.1462

Truth in Lending: 11.10.4.2.3 Paralegal and law student time; travel time

Attorney fees should compensate not only for attorney time, but also for that of paralegals and law clerks who work on the case.1478 An attorney’s travel time may be compensable.1479 The key question is whether the custom in the local community is to bill separately for such time, as opposed to absorbing these items in firm overhead and reflecting them in the hourly rate charged.1480 Assuming that it is the custom in the community to bi

Truth in Lending: 11.10.4.3 Establishing the Hourly Rate

Once the number of allowable hours is determined for each attorney and paralegal, an hourly rate must be determined for each practitioner.1483 That hourly rate is based on the prevailing rate in the community for that level of legal skill and experience.1484 The average rate in a community is an insufficient measure of the appropriate hourly rate where the attorney in question is quite experienced.1485 A court should not reduce an hourl

Truth in Lending: 11.10.4.4.1 Upward adjustments

The lodestar figure is presumed reasonable unless one of the parties carries the burden of showing that it should be adjusted up or down.1503 Upward adjustments to the lodestar, while theoretically available, are uncommon.1504 In order to be entitled to an upward adjustment, the applicant must demonstrate that the lodestar calculation does not produce a reasonable fee,1505 and the court must provide fairly detailed justification for the

Truth in Lending: 11.10.4.4.2 Downward adjustments

The Supreme Court’s emphasis in Perdue on the “‘strong presumption’ that the lodestar figure is reasonable,” a presumption that “may be overcome” only in “rare circumstances,” applies with equal force to requests for downward adjustments.1514

Truth in Lending: 11.10.4.5 Costs, Expert Fees, and Other Expenses

In any successful TILA action, the creditor is liable to the consumer for “the costs of the action.”1528 The consumer should be reimbursed for filing fees, transcripts, witness fees and other court and litigation expenses not otherwise claimed as attorney fees.1529 In order to obtain reimbursement for costs, the consumer must take care to justify the expenditure.1530

Truth in Lending: 11.10.5 Fee Applications

The Federal Rules of Civil Procedure require motions for attorney fees and expenses to be filed and served no later than fourteen days after judgment.1541 However, all that is required in this time period is notice to the court and to the opponent that fees will be sought, along with a citation to the statute, rule, or other grounds entitling the movant to a fee award, and a fair estimate of the total fees and expenses claimed.1542 In addition, if the court so orders, the petition must d

Truth in Lending: 11.7.10.4.2 Where servicer is original creditor

If the servicer is the original creditor, there should be no question about the servicer’s liability for violations of its duties.1056 Section 1640(a) provides for liability for “any creditor who fails to comply with any requirement imposed under this part.” Section 1640 resides in part B of TILA, which includes sections 1638a, 1639d(j), 1639f, 1639g, and 1641, the sections of TILA that impose duties on servicers.

Truth in Lending: 11.7.10.4.3 Where the servicer is not the original creditor

Some courts have wrestled with inconsistencies in section 1640(a). Section 1640(a) explicitly imposes liability for violations of section 1641(f), which only applies to servicers. But section 1640(a) only applies liability for part B, D and E violations on creditors, except as otherwise provided in section 1641.

Truth in Lending: 11.7.10.4.4 Other theories of servicer liability

Consumers have successfully argued that the servicer’s failure to respond to a request as to who owns the mortgage loan means that the servicer is estopped from denying that it is the creditor, and thus, can be liable for statutory damages for creditor violations.1074 Consumers have less successfully argued that the servicer, by failing to identify the mortgage holder, is acting on behalf of an undisclosed principal, and thus should be liable under an agency theory.1075

Truth in Lending: 11.7.10.5.2 Agency principles

Agency arises when the servicer agrees to act on behalf of the creditor and submit itself to the control of the creditor.1090 The question of whether a principal-agent relationship exists between any two parties “is a legal conclusion made after an assessment of the facts of the relationship and the application of the law of agency to those facts.”1091 The party asserting an agency relationship bears the burden of proving its existence.1092