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Truth in Lending: D.1 Sample TILA Rescission Notice

VIA FIRST CLASS MAIL AND CERTIFIED MAIL,

RETURN RECEIPT REQUESTED

No. XXXXXXXXXXXXX

[Date]

Ben Benny

Benny’s Mortgage Company

Suite 130, Monterey Building

102 West Broadway

Tucson, Arizona 85701

RE: Homeowner, Mitchell and Martha

Account No. 00000000000

Transaction between Homeowners and Benny’s Mortgage Company dated November 12, 2014, involving a loan and mortgage secured by residential property at [address]

Dear Mr. Benny:

Truth in Lending: D.2 Sample TILA Rescission Notice in Foreclosure Rescue Scam Case

VIA FIRST CLASS MAIL AND CERTIFIED MAIL,

RETURN RECEIPT REQUESTED

No. XXXXXXXXXXXXX

[Date]

Ben Benny

Benny’s Homesavers, Inc.

123 Scammers Row

Gotcha, US 66666

RE: Smith, John and Mary

Account No. 123456

Transaction between Homeowners and Benny’s Homesavers, Inc. dated November 12, 2014, involving a sale-and-leaseback transaction involving residential property at [address]

Dear Mr. Benny:

Truth in Lending: 11.9.2.2 Numerosity

To certify a class action, the court must find that the class is so numerous that joinder is impractical.1166 TILA class actions are usually based on systematic errors in standard form contracts or company practices that affect hundreds of consumers. Since numerosity is only an issue for classes with substantially fewer than a hundred members (TILA actions have been certified with just thirty-three members),1167 numerosity is rarely an issue in TILA class litigation.

Truth in Lending: 11.9.2.3 Commonality

The court must also find that the case involves questions of law or fact common to the class.1173 Usually, the TILA violation will involve an error in a standard form disclosure common to the whole class, and the commonality requirement is easily met.1174 However, attorneys should be aware of a general trend toward heightening the standard for finding commonality. This is exemplified by Wal-Mart Stores, Inc. v.

Truth in Lending: 11.9.2.4 Typicality

The claims of the class representatives, i.e., the named plaintiff(s), must be typical of the claims of the other class members.1188 The named TILA class representative usually alleges that the creditor used a common practice affecting her and all class members; typicality should present no difficulty in such a case.1189 However, the typicality requirement may not be met if the named plaintiff is subject to unique defenses which threaten to become the focus of the litigation.

Truth in Lending: 11.9.2.5.1 General

The named plaintiffs must fairly and adequately protect the interests of the class they represent.1192 This requirement is met where the class representative has no interests antagonistic to the other class members,1193 has a sufficient interest in the outcome of the litigation,1194 and is represented by a qualified, experienced attorney.1195 Even where there may be a fundamental confl

Truth in Lending: 11.9.2.5.2 Named plaintiff may be in default on credit contract

Creditors may argue that the named plaintiff in a TILA class action is not an adequate representative where that individual has defaulted in the credit transaction and thus may be subject to a counterclaim or might attempt to use the class action device for leverage to alleviate her default status.1198 However, as one TILA commentator, Professor Rohner, has noted, this line of argument is specious: “The fact of default has nothing to do with liability for inadequate disclosures for preconsummation activities.

Truth in Lending: 11.9.2.5.3 Cost of notifying the class

In a class action seeking damages, the class representative must pay the cost of notifying the class members when a class is certified and in the event of a proposed settlement or judgment. This notice explains the existence of the lawsuit and gives class members the ability to opt out.1203 The defendant may try to defeat class certification by arguing that the named plaintiff does not have the financial ability to proceed with the case and therefore is an inadequate class representative.

Truth in Lending: 11.9.2.6 Class Actions for Injunctive or Declaratory Relief

A class action may be certified under Rule 23(b)(2) if it meets the Rule 23(a) requirements of numerosity, commonality, typicality, and adequacy of representation, and in addition, the party opposing the class has acted or refused to act on grounds generally applicable to the class, thereby making appropriate final injunctive or corresponding declaratory relief with respect to the class as a whole.

Truth in Lending: 11.9.2.7.1 Common questions must predominate

If the class action seeks damages, common questions of law or fact must predominate over individual issues.1210 In the typical TILA class action, this requirement is met because the alleged TILA violation is the same for each consumer, making issues of law and fact the same for all class members.1211 If there are special issues that affect some members of the class, they will usually not predominate, or can be resolved by creating subclasses.1212

Truth in Lending: 11.9.2.7.2 Superiority

To be certified under Rule 23(b)(3), a class action must, in addition to meeting the requirements of Rule 23(a), be superior to other available methods for the fair and efficient adjudication of the controversy. The court must consider:

Truth in Lending: 11.9.3.1 General

The relief available in a TILA class action is actual damages1253 plus attorney fees1254 plus statutory damages in “such amount as the court may allow,” but no more than the lesser of $500,000 (increased to $1 million by the Dodd-Frank Act1255) or one percent of the creditor’s net worth.1256 As with an individual action, statutory damages are only available for certain TILA violations,

Truth in Lending: 11.9.3.4 Statutory Damages in a Series of TILA Class Actions

TILA limits the maximum recovery of statutory damages in any class action “or series of class actions arising out of the same failure to comply by the same creditor.”1289 In other words, where a creditor is sued in two different class actions for the same violation, the total recovery of both actions added together is limited to the lesser of $500,000 (increased to $1 million by the Dodd-Frank Act1290) or one percent of the creditor’s net worth.

Truth in Lending: 11.9.3.5 Who Determines the Size of the Award—Court or Jury?

TILA specifies that class action damages shall be in “such amount as the court may allow,”1300 subject to the maximum limit discussed above. This statement indicates that the court, not a jury, makes the award. TILA does not make the same distinction for individual actions. Nevertheless, there may be a constitutional right to a jury trial for statutory damages in the class action context too since these are analogous to punitive damages, which are considered available through actions at law, not equity.

Truth in Lending: 11.10.1.2 Most Federal Court Fee Jurisprudence Is Applicable to TILA

The large body of federal court decisions interpreting the Civil Rights Attorney’s Fees Award Act1309 and other federal statutes providing attorney fees to prevailing plaintiffs establish a common framework of interpretation and application.1310 TILA is no exception.1311 For example, TILA cases adopt the now-dominant lodestar approach to calculating fees even though the lodestar theory was developed in civil rights and antitrust cases.

Truth in Lending: 11.10.2.1 Where the Consumer Successfully Concludes an Action

Consumers are awarded TILA attorney fees in “any successful action.”1316 The award is mandatory; while the court may exercise wide discretion over the size of the award, it has no discretion concerning whether an award may be made1317 except in the most extreme circumstances.1318 The award must be made whether the prevailing consumer is the plaintiff or is raising TILA violations as counterclaims to a collection action.

Truth in Lending: 11.10.2.2 Attorney Fees in Connection with Recoupment Claims

After TILA’s one-year limitations period has expired, consumers can still raise TILA claims by way of recoupment, i.e., as a defense to the creditor’s collection action. The TILA damage recovery can only offset and not exceed the creditor’s recovery.1340 However, most courts rule that a successful recoupment defense is a “successful action” requiring the award of attorney fees, even if the fee award exceeds the creditor’s recovery.1341

Truth in Lending: 11.10.2.3 Attorney Fees for Litigation of the Fee Award

Attorney fees must be awarded for time spent recovering fees through a fee application and related proceedings.1344 This well-established “fees-on-fees” rule is founded on the principle that “it would be inconsistent to dilute a fee award by refusing to compensate attorneys for the time they reasonably spent in establishing their rightful claim to the fee.”1345

Truth in Lending: 11.10.2.4 Attorney Fees for Appeals

Successfully defending or prosecuting a TILA appeal, like all postjudgment tasks, is subject to the same mandatory fee award standards.1349 Even if the consumer loses on appeal, so long as some TILA liability is found and upheld, the consumer is entitled to fees for the appeal.1350 A TILA defendant who takes an appeal does so at the risk of incurring all of the consumer’s attorney fees.1351 However, if a consumer’s appellate victory onl

Truth in Lending: 2.2.3 Closed-End vs. Open-End Credit

There are two basic categories of credit: closed-end and open-end. With closed-end credit, the amount borrowed is determined at the outset, while under open-end credit, borrowers have at least the theoretical possibility of borrowing additional sums under the same credit agreement.