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Truth in Lending: 11.6.5.1 Correction of Error As a Standard for Actual Damages

Even though Congress did not define “actual damages” at the time it added the phrase to the Act in 1974, one might assume, in the absence of any indication otherwise, that Congress intended to permit consumers to recover actual damages in the amount defined in preexisting 15 U.S.C. § 1640(b) for uncorrected errors.

Truth in Lending: 11.6.5.5 Reliance upon Fair Dealing by Creditor

Even if the consumer is required to prove reliance, it may be sufficient to show that they relied upon fair dealing by the creditor, rather than upon the particular disclosure. Courts have articulated this rule in consumer protection cases and securities law cases.

In State ex rel. Webster v. Areaco Inv. Co.,756 the court construed Missouri’s Unfair and Deceptive Acts and Practices (UDAP) statute to require only a showing of reliance upon the seller’s duty of fair dealing:

Truth in Lending: 11.6.7.2 Prejudgment Interest

Prejudgment interest on a consumer’s actual damages may be available. The general rule is that prejudgment interest is not allowed where the judgment is in the nature of a penalty, but is allowed for actual damages. While denying prejudgment interest on statutory damages, the Court of Appeals for the Seventh Circuit suggested that interest on actual TILA damages might be appropriate.788 A court granting prejudgment interest has some flexibility in determining the rate of interest.789

Truth in Lending: 11.6.7.3 Multiple Actual Damage Awards

In contrast to the statutory provision (and interpretive case law) limiting damage awards to one recovery of statutory damages,790 actual damages arising from a single transaction may be awarded to more than one person. The single recovery rule stated in 15 U.S.C. § 1640(d) refers to damages under (a)(2)—statutory damages. There is no such rule for actual damages authorized under (a)(1), so the creditor remains liable to “any person” who sustains actual damages.791

Truth in Lending: 11.6.7.4 Relation Between Usurious Interest and Actual Damages

Unlike state usury laws, TILA does not restrict the amount of interest that a creditor may charge. Its disclosure provisions only require that the credit terms—whatever they are—be accurately disclosed in uniform format. Nonetheless, interest that is considered excess under a state usury statute may often be a component of the consumer’s actual damages, because the TILA violations may have served the function of concealing the usurious interest.

Truth in Lending: 11.6.3 Legislative History

Prior to 1974, actual damages were not included in the civil liability provisions of the Truth in Lending Act.621 The only explicit private remedy was statutory damages of twice the finance charge, not to exceed $100 minimum or $1,000 maximum, plus costs and attorney fees. This provision applied to both individual and class actions.

Truth in Lending: 11.6.4.3.2 Elements may depend on the damages sought

Detrimental reliance is a causation standard; the question is what harm was caused by the consumer’s reliance on the false disclosures?687 The damages sought should influence the proof of detrimental reliance required. Requiring proof that the consumer passed up better credit makes sense only if the consumer is seeking as damages some differential between the actual terms of credit and the terms of credit he or she passed by.

Truth in Lending: 11.6.4.3.3 Proving detrimental reliance if availability of other credit is an element

Given TILA’s remedial purpose, if the availability of better credit is an element of the detrimental reliance standard, a consumer should only have to establish that better financial arrangements were available on the market. Some courts have permitted such proof, accepting generalized proof of what terms are available in the market, coupled with statistical evidence as to consumer behavior.693 This standard, suggested by Burrell v.

Truth in Lending: 11.6.4.3.4 Benefit of the bargain damages

Detrimental reliance has been imported into TILA law from common law fraud. If one accepts that courts should borrow common law fraud standards—a questionable proposition since TILA should be interpreted liberally—courts should use the actual standard used in fraud cases, not a heightened standard. Common-law fraud has two standard measures for damages: out-of-pocket losses and benefit of the bargain. Benefit of the bargain is the more widely adopted measure of damages.698

Truth in Lending: 11.6.4.2 Why the Detrimental Reliance Standard Is Wrong

Even though a number of courts have adopted the detrimental reliance standard for TILA actual damages,651 there are strong arguments in favor of other, less rigid standards. Fundamentally, TILA is a remedial statute that must be liberally construed to effectuate its purposes.652 Importing a fraud reliance standard is at odds with TILA’s mandate of liberal construction in favor of the borrower.

Truth in Lending: 11.7.2 General: Availability, Purpose, and Character

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).

Truth in Lending: 11.7.3.1 The Statutory Minimum and Capped Amounts

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.

Truth in Lending: 11.7.3.2 Retroactive Effect of Increase in Minimum and Capped Amounts

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.