Truth in Lending: 10.9.3.1 General Availability of Statutory and Actual Damages
The potential for damages against a noncompliant creditor in a rescission case is greater than in a nonrescission TILA case.
The potential for damages against a noncompliant creditor in a rescission case is greater than in a nonrescission TILA case.
Practitioners should be sure to evaluate the case carefully to assure that all damages to which the consumer might be entitled are properly calculated. This is especially important if the consumers anticipate financial difficulty in making tender, as damage awards may offset much of the tender amount. Statutory damages are “capable of mathematical calculation,” but the plaintiff should be entitled to a hearing on actual damages.1458
A few courts have held that an assignee who rejects or ignores the consumer’s rescission is not liable for statutory damages unless the disclosure violations on which the rescission is based are apparent on the face of the documents.1467 These courts reason that section 1640(a) only imposes statutory damages liability on “any creditor,” which is defined by section 1602(g) as the entity to which the obligation was originally payable.
Attorney fees are available in rescission cases.1476 A few courts have held, however, that attorney fees are available against an assignee in a rescission case only if the underlying violation was apparent on the face of the contract.1477 These courts reason that, while rescission is always available against an assignee by virtue of section 1635(c), the right to attorney fees arises under section 1640(a), which makes them available against a “creditor” who fails to comply with TILA.
Once a consumer tenders return of the money or property delivered by the creditor, the creditor has twenty days to take possession of it. If the creditor does not take possession within twenty days, the statute and Regulation Z are both explicit that ownership of the money or property vests in the consumer without any further obligation to pay for it.1487
A second scenario in which the consumer may claim the right to keep the property or proceeds may arise more frequently, at least in the extended rescission context.
Since negating the consumer’s tender obligation because of the creditor’s noncompliance is inherent in Steps Two and Three in the rescission process, it is clear that courts have the equitable authority to modify it.1504 While the better rule is that the tender obligation should be negated unless the creditor shows some special equities in its favor,1505 courts typically make this remedy an exception rather than the rule, and confine it to cases involving deception, cheating, or overreac
Perhaps the most important aspect of TILA’s extended rescission right for consumers is its value as a defense to foreclosure.
Fair Debt Collection is available in both a print and digital version. Print revisions are released every few years and the digital version is updated more frequently, with all changes integrated into the text. The digital version also contains additional pleadings, practice tools, and primary source material, described at § 1.1.1.3, infra.
This treatise is designed to help lawyers and paralegals representing consumers who are victims of abusive debt collection practices. It may also be useful to debt collection professionals as a part of their legal compliance efforts.
The chapters of the treatise are divided as follows:
The digital version of this treatise contains thousands of additional documents: Pleadings and Discovery, Practice Tools, and Primary Sources. These materials are listed at the bottom of the digital version’s table of contents, available at www.nclc.org/library. (The table of contents is found on the digital version’s left pane.)
This treatise covers laws applicable to all types of debt collectors—creditors, first-party debt collectors, third-party debt collectors, debt buyers, collection attorneys, and the employees of each that make the phone calls asking for money. Unless the context indicates otherwise, the term “debt collector” or “collector” may be used in this treatise to mean any person collecting a debt.
This treatise comprehensively covers affirmative litigation against abusive debt collectors, but it cannot cover all areas of consumer law. Other relevant manuals published by NCLC include:
National Consumer Law Center staff participates in a variety of in-person training events on fair debt collection laws. NCLC organizes the annual Consumer Rights Litigation Conference for consumer advocates. This conference generally provides sessions on fair debt collection issues. NCLC and the National Association of Consumer Advocates have sponsored a two-day training on fair debt collection issues annually since 2004.
NCLC maintains a Debt Collection website. This website includes links to model statutes, policy analysis, testimony, webinars, and consumer resources.
NCLC also hosts a variety of listservs, including Debt Collection Policy and Fight Debt Scams. Information about subscribing to NCLC listservs is available online. The descriptions of each listserv contain information about who is eligible to join.
In the seventeenth and eighteenth centuries, one of the factors that propelled emigration from England to the American colonies was the harsh enforcement of early English bankruptcy laws.4 Fear of debtors’ prison—where debtors were kept without bedding, blankets, coal, or access to medical care until their debts could be paid5—drove “shiploads” of Englishmen to relocate to the colonies.6 At the time, English bankruptcy laws gave the right of action to the cred
Debt collection is a leading topic of consumer complaints to the Consumer Financial Protection Bureau73 through its Consumer Complaint Database.74 The most common types of debt collection complaints in 2021 were complaints about: attempts to collect debt not owed (56%), written notification about debt
Indebtedness is associated with poor mental health.92 This relationship remains significant even after controlling for socioeconomic status and other factors.93 Several studies have shown that debt is a risk factor for depression,94 anxiety,95 substance abuse,96 and mental disorders.97 The psychological burdens of carr
Low- and moderate-income consumers are disproportionately impacted by debt collection activity.
Racial and ethnic disparities exist with respect to who is in debt. As discussed below, these disparities exist at various stages in the lifecycle of a debt. Wealth and asset gaps might explain at least some of the observed disparities in debt collection.117
Among families headed by older Americans, the percentage who are in debt has increased in recent years.148 Data from the Board of Governors of the Federal Reserve System showed that more than half of families with a reference person age seventy-five or older were in debt in 2019, compared to less than a quarter of similar families in 1989.149 Indebtedness of households with individuals age 65–74 has also increased.150
In 2021, the Military Family Lifestyle Survey found that 51% of active-duty family respondents with credit cards carried a balance from month to month, with 16% reporting credit card balances of more than $20,000.171 Consumer debt can negatively impact the careers of military personnel and some debt collectors attempt to use this to leverage payments from servicemembers.172 The Consumer Financial Protection Bureau has highlighted a variety of abusive debt collect
In 2020, more than 25 million individuals, 8.2% of the U.S.
The “Find an Attorney” feature on the National Association of Consumer Advocates’ website206 lists hundreds of lawyers with “debt collection” as one of their practice areas. The “debt collection” practice area includes both attorneys who specialize in defending consumers who have been sued in a collection action and those who sue debt collectors for violations of the Fair Debt Collection Practices Act and other state and federal consumer protection statutes.
Original creditors are entities that provide extensions of credit such as banks, credit unions, student loan lenders, auto lenders, and payday lenders. Additionally, some original creditors provide goods or services on credit, such as utility companies, medical providers, and cell phone companies.
Original creditors frequently employ people in-house to collect on their delinquent accounts. In a survey of credit card issuers conducted by the CFPB, all respondents conducted at least some collection activity in-house.207