Defendants contend that even if Brown is entitled to rescind the loan, she should be
barred from seeking statutory damages for the alleged underlying violations of TILA and
HOEPA. They assert that Brown’s damages claims cannot ride piggyback on her rescission
claim to obtain the benefit of the three-year statute of limitations that applies to the rescission
claims. Instead they argue that her TILA damage claims are governed by § 1640(e), which
provides that “[aJny action under this section may be brought . . . within one year from the date
of the occurrence of the violation.” 15 U.S.C. § 1640(e). Because a TILA credit transaction is
consummated when the plaintiff becomes contractually obligated on a credit transaction, 12
CER. § 226.2(a)(13), defendants claim that Brown had only one year from the date of her Joan
closing to bring her claims for damages, which she did not do.

TILA § 1635 addresses a borrower’s right of rescission. Under this provision, a debtor
who secures a loan on primary residential property has “the right to rescind the transaction until
midnight of the third business day following the consummation of the transaction or the delivery
of the information and rescission forms . . . whichever is later.” 15 U.S.C. § 1635(a). If the
lender neglects to make a material disclosure as defined in the implementing regulations, the
borrower’s right to rescind may be extended for up to three years. 15 U.S.C. § 1635(f); 12
CER. § 226.23(a)(3). The required material disclosures include the annual percentage rate, the
finance charge, the amount financed, the total payments, the payment schedule, and the
disclosures referred to in § 226.32(c) and (d). Jd. at n.48. Similarly, HOEPA provides that
violations of its special protection provisions entitle consumers to the remedies provided under §
1635. 15 U.S.C. § 1639(j) (“Any mortgage that contains a provision prohibited by this section

shall be deemed a failure to deliver the material disclosures required under this subchapter, for


Conclusion
For the reasons stated above, the Court grants defendants’ motion for partial summary

judgment [docket no. 52]. The case is set for a status hearing on January 5, 2005 at 9:30 a.m.

JV MUG

MATTHEW F. KENNELLY/
United States District Judge

Date: January 4, 2005



that defendants understated the finance charge on her TILA disclosure statement by an amount in
excess of TILA’s applicable tolerance of .5% of the loan principal. Next, Brown charges that
although the points and fees under the Joan actually came to 11.84%, well above the 8% HOEPA
trigger, defendants failed to provide the necessary advanced HOEPA warning disclosure
concerning the high cost of the loan. 15 U.S.C. § 1602(aa). Brown also claims that she is
entitled to enhanced damages in an amount equal to the sum of all finance charges and fees paid,
as provided by HOEPA. 15 U.S.C. § 1640(a)(4). Finally, she contends that she is entitled to
statutory damages for defendants’ failure to honor her timely exercise of her right to rescind.

In their motion for partial summary judgment, defendants assert that Brown’s damage
claims for the underlying violations of TILA and HOEPA are barred by TILA’s one-year statute
of limitations for damage claims pursuant to 15 U.S.C. § 1640. Brown maintains that if the
Court finds she is entitled to an extended, three-year right to rescind the loan because of
violations under 15 U.S.C. § 1635, she would also be allowed, in seeking rescission, to preserve
her claims for damages even though they would be time-barred if they stood alone.

Discussion

Summary judgment is appropriate where “the pleadings, depositions, answers to
interrogatories, and admissions on file, together with the affidavits, if any, show that there is no
genuine issue as to any material fact and that the moving party is entitled to judgment as a matter
of law.” Fed. R. Civ. P. 56(c); Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986). In
determining whether a genuine issue of material fact exists, the Court must construe all facts and
draw all reasonable and justifiable inferences in favor of Brown, the non-moving party on this

motion. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255 (1986).


the purpose of section 1635 of this title.”); see also Newton v. United Companies Fin. Corp., 24
F. Supp. 2d 444 (B.D. Pa. 1998). Thus, Brown would be entitled to rescind her loan for up to
three years from the date of consummation of the transaction if Equicredit failed to make the
required disclosures as she alleges.

The central dispute in this case concerns the interpretation of § 1635(g), titled “Additional
relief,” which provides that “[i]Jn any action in which it is determined that a creditor has violated
this section, in addition to rescission the court may award relief under section 1640 of this title
for violations of this subchapter not relating to the right to rescind.” 15 U.S.C. § 1635(g).

Brown contends that this provision extends the longer three-year statute of limitations to damage
claims when the right to rescind is lengthened under § 1635(f). The Court does not believe that
in adopting § 1635(g), Congress intended to alter the one-year statute of limitations applicable to
damage claims.

Notably, § 1635(g) contains no language to suggest that Congress intended to override the
statute of limitations set out in § 1640(e). The more appropriate reading, consistent with its
language, is that Congress was simply clarifying that a plaintiff bringing a claim for rescission
could also sue for statutory damages. The relatively scant legislative history of § 1635(g) is
consistent with this reading. In discussing its 1980 amendments to TILA, which included the
addition of § 1635(g), the Senate report on the proposed legislation stated that, “the bill explicitly
provides that a consumer who exercises his right to rescind may also bring suit under the Act for
other violations not relating to rescission. The Act is currently ambiguous on this issue, and this
section codifies the majority position of the courts.” S. REP. NO. 96-368, at 29 (1979), reprinted

in 1980 U.S.C.C.A.N. 236, 265. Prior to the amendment, some courts did not allow plaintiffs to



Minute Order Form (06/97)

United States District Court, Northern District of Hlinois

Name of Assigned Judge
or Magistrate Judge

Matthew F. Kennelly

Sitting Judge if Other
than Assigned Judge

CASE NUMBER 02 C 5023 DATE 1/4/2005
CASE Brown vs. Nationscredit Financial Services
TITLE
[In the Following box (a) indicate the party fiting the motion, ¢., plaintiff, defendant, 3rd party plaintiff, and (b) state briefly the nature
MOTION: of the motion being presented. ]

DOCKET ENTRY:

(1) oO Filed motion of [ use listing in “Motion” box above.]

(2) i] Brief in support of motion due

(3) a Answer brief to motion due___. Reply to answer briefdue___.

(4) o Ruling/Hearing on setfor at.

(5) Qo Status hearing{held/continued to] [set for/re-set for]on___—s—ssetfor_ ss at_

(6) G Pretrial conference[held/continued to] [set for/re-set for] on setfor se at__

mM oO Trial[set for/re-set for]on____at

(8) Oo [BenchyJury trial] [Hearing] held/continuedto_ ss at_

(9) Oo This case is dismissed [with/without] prejudice and without costs[by/agreement/pursuant to}

OOFRCP4(m) (Local Rule 41.1 OOFRCP41(a\(1) OFRCP41(a)(2).

qo) =f [Other docket entry] For the reasons set forth on the attached Memorandum Opinion and Order,
the Court grants defendants’ motion for partial summary judgment (52-1). Status hearing set to 1/5/05
at 9:30 a.m.

(il) [For further detail see order attached to the original minute order.]

No notices required, advised in open cout.

No notices required
a number of notices:

Document
Number

Notices mailed by judge's staff.

JAN,O7 2

Notified counsel by telephone. Wate docketed

Y | Docketing to mail notices.

Mail AO 450 form,

Copy to judge/magisirate judge

courtroom
OR deputy's
initials

Date/time received in

sailing deputy initials

central Clerk's Office


concurrently sue for rescission under § 1635 and damages under § 1640, but instead required
borrowers to elect one of the two remedies. See Wachtel v. West, 476 F.2d 1062, 1065 (6th Cir.
1973),

In sum, both the language of § 1635(g) and its legislative history support the notion that
this subsection was not intended to alter the statute of limitations applicable to TILA damage
claims. The majority of courts addressing this issue have reached the same conclusion. Rudisell
v. Fifth Third Bank, 622 F.2d 243 (6th Cir. 1980); Bell v. Ameriquest Mortgage Co., No. 04C
5987, 2004 WL 2973819 (N.D. Ill. Nov. 30, 2004); Pulphus v. Sullivan, No. 02 C 5794, 2003
WL 1964333 (N.D. Ill. Apr. 28, 2003); Jenkins v. Mercantile Mortgage Co., 231 F. Supp. 2d
737, 745 (N.D. Ill. 2002); Dowdy v. First Metro. Mortgage Co., No. 01 C 7211, 2002 WL
745851, at *1-2 (N.D. Ill. 2002); Elliott v. ITT Corp., 764 F. Supp. 102 (N.D. Ill. 1991). But see
Mclntosh v. Irwin Union Bank & Trust Co., 215 F.R.D. 26, 30 (D. Mass. 2003); Reynolds v.
D&N Bank, 792 F. Supp. 1035, 1036-39 (finding, without discussion of the statute of limitations,
that plaintiff is entitled to rescission and statutory damages despite claim being brought fourteen
months after entering the contract).

The Court, therefore, grants defendants’ motion for partial summary judgment. Brown is
barred from bringing damages claims for the violations of TILA and HOEPA that she claims
occurred at the time she obtained the Joan, as she did not bring those claims within the year after
the loan was made. Her damage claim arising from defendants’ failure to honor her notice of
rescission is not time-barred because it was made within one year from the date of that particular

violation.



IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION

COREANER BROWN,
Plaintiff,

vs. Case No. 02 C 5023
NATIONSCREDIT FINANCIAL SERVICES
CORPORATION, doing business as
EQUICREDIT CORPORATION OF
ILLINOIS; EQUICREDIT CORPORATION
OF AMERICA; FAIRBANKS CAPITAL
CORPORATION; and BANK OF NEW
YORK,

wevevuevrvrvuvuevrvevvvw

Defendants.

MEMORANDUM OPINION AND ORDER

MATTHEW F. KENNELLY, District Judge:

Coreaner Brown has sued her mortgage lender, its assignee, and the loan servicer to
rescind her loan and obtain statutory damages for defendants’ alleged violations of the Truth in
Lending Act (“TILA”), 15 U.S.C. § 1601 et seq., as amended by the Home Ownership and
Equity Protection Act of 1994 (“HOEPA”), 15 U.S.C. §§ 1602(aa) & 1639, its implementing
Federal Reserve Board Regulation Z, 12 C.F.R. § 226; and the Illinois Consumer Fraud Act.
Brown contends that she is entitled to statutory damages for defendants’ failure to rescind the
loan and for underlying disclosure violations.

The case is before the Court on defendants’ motion for partial summary judgment.

Defendants argue that Brown’s underlying statutory claims are time-barred by TILA’s one-year



statute of limitations for damage claims set out in § 1640(e). For the reasons stated below, the
Court grants defendants’ motion.
Facts

On November 18, 1999, Brown obtained a $51,000 mortgage loan from Equicredit
Corporation of Illinois (“Equicredit”) that was primarily used for a home repair project.
Defendant Nationscredit Financial Services Corporation is Equicredit’s successor by merger.
Defendant Bank of New York now holds title to Brown’s loan, and defendant Fairbanks Capital
Corporation services the loan.

Brown filed her original complaint on July 16, 2002. She attempted to rescind the loan
on July 9, 2002 by sending a rescission notice to Equicredit. Pl’s 56.1 Stmt., Ex. V. Ina July 25,
2002 letter, Equicredit rejected her request for rescission. Brown seeks a judgment for rescission
of the loan and statutory damages for defendants’ alleged violations of TILA, as amended by
HOEPA, and for defendants’ failure to honor her timely notice of rescission. Brown brings
similar claims under the Illinois Consumer Fraud Act.

Brown contends that she is entitled to rescind the loan pursuant to TILA § 1635 based on
defendants’ failure to provide clear and conspicuous disclosure of her three-day right to rescind,
or alternatively, because defendants failed to provide the requisite advance disclosures required
under HOEPA. In addition to rescission, Brown argues she is entitled to statutory damages for
five separate violations of TILA and HOEPA. First, she alleges that at her loan closing,
Equicredit’s agent required her to sign a form “confirming” that she was not rescinding the
transaction, which Brown contends violated TILA’s requirement of clear and conspicuous

disclosure with respect to her rescission rights. 12 CER. § 226.23(a)(3). Second, she claims