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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

Truth in Lending: 11.7.10.5.3 Are creditors liable for the actions of servicers?

The application of principal-agent liability to servicer violations of TILA has been addressed most frequently in the context of section 1641(f)(2), which requires servicers to respond to homeowner inquiries as to the owner or master servicer of the loan.1110 Congress amended section 1640(a) in 2009 to create a private right of action for violations of section 1641(f).1111 Because creditors have no direct responsibilities of their own under section 1641(f), many courts have interpreted t

Truth in Lending: 11.7.10.5.4 Are assignees liable for servicers’ violations?

The same logic that requires creditors to be held liable for servicers’ violations applies with equal force to an assignee’s violations.1115 In an era where the vast majority of loans are sold after origination, and servicing violations of TILA may occur at any point in the loan’s life, assignee liability for servicer violations of TILA is necessary to give full effect to TILA’s provisions.

Truth in Lending: 11.9.1 Background

The Truth in Lending Act explicitly provides for class action relief, comprised of actual damages, statutory damages, and attorney fees.1132 Many Truth in Lending Act violations are unusually well-suited to class action treatment. Violations are often apparent on the face of the written documents and typically are identical for each class member. Proof of reliance, intent, or actual injury is unnecessary in many cases. Statutory damages are available so that individual actual damages need not be proven.

Truth in Lending: 11.9.2.1 General

This subsection concentrates on certifying TILA class actions in federal court. Many states have adopted the federal class action rules of procedure, but attorneys bringing state court TILA class actions in other states will have to follow their own state’s rules instead. This subsection should be read in conjunction with another National Consumer Law Center publication, Consumer Class Actions,1154 which provides additional assistance on class certification issues.

Truth in Lending: 11.10.6 Appeals of Attorney Fee Awards

An attorney fee award alone may be appealed if the TILA action is successful.1567 The right to a statutory attorney fee award is solely that of the client, not of the attorney, although in some circumstances the court may order the fee award paid directly to the attorney.1568 The client may assign the fee award to the attorney,1569 and the attorney may have standing to appeal a fee award decision, particularly where the attorney is a su

Truth in Lending: 11.10.7 Interim Fees

In protracted litigation, creditors may slowly deplete the resources of the consumer’s attorneys by requiring the expenditure of numerous hours that may not be compensated, if at all, until after the termination of the litigation.

Truth in Lending: 11.10.8 Apportionment of Award Among Defendants

Courts may apportion the fee award among several defendants to ensure that a single defendant is not liable for fees greater than those incurred to litigate the case against that defendant.1579 Where a plaintiff does not prevail against all of the defendants, a fee award for work pertaining to all of the defendants is nonetheless appropriate where the factual and legal bases are related.1580 If some but not all the defendants settle, the ultimate fee award entered by the court may be red

Truth in Lending: 11.11.1 Practical Significance

Whether a party to a Truth in Lending action may demand a jury trial as a matter of right is an issue that has been litigated only infrequently,1582 but emerging case law suggests that at least with respect to damages, a jury trial should be available. The paucity of decisions on this question may reflect the fact that TILA complaints historically tend to challenge the adequacy of written disclosures.