Truth in Lending: 11.7.1 Statutory Damages Issues Examined Elsewhere in This Treatise
| Topic | Where Addressed |
|---|---|
| In class actions | § 11.9.3, infra |
| For Consumer Leasing Act vi |
| Topic | Where Addressed |
|---|---|
| In class actions | § 11.9.3, infra |
| For Consumer Leasing Act vi |
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).
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.
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.
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
Calculating statutory damages begins with doubling the finance charge.
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.
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.
Nothing in TILA forecloses a consumer from recovering statutory damages under both TILA and state law for similar violations. The issue is usually a state law question.
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.
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.
A listing of the part B provisions and the availability of statutory damages follows. Provisions added by the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act, are indicated with an asterisk. The effective date of the Dodd-Frank Act provisions is discussed at § 1.3, supra.
Section 1632 provides for the form of the disclosures, including, most importantly, that the mandated disclosures be “clear and conspicuous.” Since this is a free standing provision in part B, not in either of the carve-out sections 1637 or 1638, statutory damages should be available.
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.
All part D violations are subject to statutory damages. These include:
The last paragraph of 15 U.S.C. § 1640(a) lists certain provisions of section1638(a) as leading to statutory damages. Statutory damages are not available for section 1638(a) violations that are not among the listed provisions.913 The availability of statutory damages for section 1638 violations other than section 1638(a) is discussed at § 11.7.6.2, infra.
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.
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.
Section 1632(b) states that any creditor may supply information in addition to the required disclosures, “except as provided by section 1638(b)(1).”945 Section 1638(b)(1) requires that most closed-end disclosures be “conspicuously segregated” from all other information, including the itemization of the amount financed.946
Where statutory damages are not available for a section 1638 violation, a state disclosure statute may provide such a remedy for the same violation. A few states have adopted their own disclosure laws that offer statutory damages for a broader array of violations.
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.
As a general rule, Regulation Z violations give rise to liability to the same extent as do violations of the Act.
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.
The 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act creates certain requirements for loan originators, distinct from creditors.1017 Originators are specifically liable for those violations in section 1639b, a change from the usual rule that originators are not liable for TILA violations.1018