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Truth in Lending: 13.7.1.2.3 Seventh Circuit requires early termination as precondition to challenging reasonableness of charge

The Seventh Circuit finds that it is premature to determine the reasonableness of an early termination formula until the lease is terminated early.583 The CLA requires charges to be reasonable in light of anticipated or actual harm.584 Because it is impossible (according the Seventh Circuit) to tell ahead of an actual early termination whether the charges are unreasonable compared to actual harm, any challenge to the lease provision is premature.

Truth in Lending: 13.7.1.2.4 Other courts require consumer to independently establish injury

Certain courts require consumers to independently establish injury to raise the unreasonableness of an early termination formula.585 But there certainly can be injury before the lessor attempts to enforce the early termination charge,586 and before the consumer is required to pay the charge.587 For example, the consumer should have standing where the consumer would have terminated the lease but for the early termination charge.

Truth in Lending: 13.7.1.3 Advertising Violations

A lessor’s failure to comply with the CLA’s advertising requirements590 triggers a private remedy only where the consumer “suffers actual damage from the violation.”591 But, if a violation results in actual damage, the lessor is liable no matter the nature of the advertising violation—liability attaches for any advertising violation that causes injury to the consumer.

Truth in Lending: 13.7.2.2 Multiple Statutory Damages for Multiple Violations, Lessors or Lessees

The CLA specifies that the consumer is entitled to only one statutory damage award for multiple disclosure violations.613 Multiple statutory damages should be allowed where there are both disclosure and nondisclosure violations, such as unreasonable early termination charges or advertising violations. This is consistent with TILA case law that provides for statutory damages for disclosure violations and separate statutory damages for rescission violations.614

Truth in Lending: 13.7.3.1 General

A CLA action must be brought within one year of lease termination,627 while TILA allows actions only within one year of the violation.628 Lease termination is at scheduled termination if the lease goes to term or on the early termination date if the lease is terminated early.629

Truth in Lending: 13.7.3.2 Recoupment Claims

Despite sloppy legislative drafting, it seems clear that CLA claims may be raised by way of recoupment after the one-year limitation period has expired. The CLA specifies that lessors are liable as provided in 15 U.S.C. § 1640.632 15 U.S.C. § 1640(e) specifies that:

Truth in Lending: 13.7.4 Jurisdiction

CLA violations may be brought in any federal district court without regard to diversity or amount in controversy requirements or in any other court of competent jurisdiction.641 Reference should be made supra to the relevant TILA discussion as to whether lessors can bring state law collection counterclaims to the consumer’s federal court CLA claim, and whether the consumer can add state law claims to a federal court CLA claim.642 Lessors cannot remove to federal court a case where the c

Truth in Lending: 13.7.5.3 Correction Defense

The correction defense provides that a lessor has no liability for a CLA violation if within sixty days of discovering an error, but before the consumer notifies the lessor, the lessor notifies the consumer of the error.652 Courts allow this defense only for clerical or mathematical errors, not for informational errors.653 Informational errors include violations dealing with format, type size, and meaningful sequence.

Truth in Lending: 13.7.5.4 Bona Fide Error Defense

As detailed supra as it relates to TILA,657 a lessor is not liable for a CLA violation if it is shown by a preponderance of evidence that the violation was unintentional and resulted from a bona fide error despite maintenance of procedures reasonably adopted to avoid any such error.658 An error of legal judgment is not a bona fide error; examples of bona fide error include clerical, calculation, computer malfunction, and printing errors.659

Truth in Lending: 13.7.5.5 Good Faith Conformity with Federal Agency Rulings and Official Interpretations

The CLA states that a “lessor who properly uses the material aspects of any model disclosure form…shall be deemed to be in compliance with the disclosure requirements to which the form relates.”665 Lessors also are not liable under the CLA for acts done or omitted in good faith in conformity with Regulation M or its official interpretations,666 even if a federal agency or the courts later change that interpretation.

Collection Actions: 9.2.2.1 Generally

In order for an entity collecting medical debt to be covered by the FDCPA, it must be a “debt collector” as defined by statute.104 The FDCPA applies to third-party collection agencies and collection lawyers, but usually not to creditors.

Collection Actions: 9.2.2.2 Coverage of Debt Collectors Acting As Billing Service Providers

Debt collectors sometimes provide services to hospitals in addition to collection activities, such as providing admission and registration support, collecting financial information from patients to support a Medicaid or charity care application, providing customer support on billing questions, and conducting follow up with insurance companies.111 Debt collectors may refer to these activities as “early-out” services or collections.

Collection Actions: 9.2.2.3 Coverage of Providers’ In-House Collection Entities

While hospitals and doctors are generally “creditors” not subject to the FDCPA,126 this is not always the case for in-house or affiliated collection entities. In Orenbuch v. North Shore Health Systems,127 a group of hospitals formed Regional Claims Recovery Service (RCRS)—a debt collection agency that was an unincorporated subdivision of a corporation that provided the hospitals’ administrative support. RCRS had its own employees and computer system at a separate location.

Collection Actions: 9.2.3 Limited CFPB Supervision over Medical Debt Collectors

One significant difference between medical debt and other consumer debt is that collectors who exclusively or predominately collect medical debt are not likely to be supervised by the Consumer Financial Protection Bureau (CFPB). The CFPB has supervisory and enforcement authority over “larger participants” in a market for consumer financial products and services,134 including as any debt collector with receipts over $10 million.135

Collection Actions: 9.3.1.1 Generally

The enactment of the Patient Protection and Affordable Care Act of 2010 (the Affordable Care Act or ACA)178 brought significant changes to the health care and health insurance landscape in the United States. The ACA contains numerous reforms to employer-sponsored health insurance and other private insurance as well as Medicare and Medicaid insurance.179

Among the many ACA provisions are:

Collection Actions: 9.3.1.2 Coverage of ACA Medical Debt Provisions

The ACA’s medical debt provisions apply only to nonprofit hospitals and government hospitals if the government hospitals are recognized under 26 U.S.C. § 501(c)(3).204 The ACA medical debt provisions do not impose requirements on for-profit hospitals, ambulance services, or health care providers not employed by a nonprofit hospital.