Opinion ID: 2581736
Heading Depth: 3
Heading Rank: 1

Heading: The Truth in Lending Act

Text: Initially, and as a general matter, the Kekas assert that the Credit Union violated TILA by (1) failing timely to provide them with notice of their right to cancel and (2) once notice was provided, incorrectly exhibiting (a) the date of expiration of the Kekas' right to cancel and (b) the annual percentage rate. The declared purpose of [TILA] is to assure a meaningful disclosure of credit terms so that the consumer will be able to compare more readily the various credit terms available to him and avoid the uninformed use of credit, and to protect the consumer against inaccurate and unfair credit billing and credit card practices. 15 U.S.C. § 1601(a); see Mourning v. Family Publications Service, Inc., 411 U.S. 356, 363-368, 93 S.Ct. 1652, 1657-1660, 36 L.Ed.2d 318 (1973). Accordingly, [TILA] requires creditors to provide borrowers with clear and accurate disclosures of terms dealing with things like finance charges, annual percentage rates of interest, and the borrower's rights. See §§ 1631, 1632, 1635, 1638. Failure to satisfy [TILA] subjects a lender to criminal penalties for noncompliance, see § 1611, as well as to statutory and actual damages traceable to a lender's failure to make the requisite disclosures, see § 1640. Section 1640(e) provides that an action for such damages may be brought within one year after a violation of [TILA], but that a borrower may assert the right to damages as a matter of defense by recoupment or set-off in a collection action brought by the lender even after the one year is up. Going beyond these rights to damages, [TILA] also authorizes a borrower whose loan is secured with his principal dwelling, and who has been denied the requisite disclosures, to rescind the loan transaction entirely until midnight of the third business day following the consummation of the transaction or the delivery of the information and rescission forms required under this section together with a statement containing the material disclosures required under this subchapter, whichever is later. § 1635(a).... [TILA] provides, however, that the borrower's right of rescission shall expire three years after the date of consummation of the transaction or upon the sale of the property, whichever occurs first, even if the required disclosures have never been made. § 1635(f). [TILA] gives a borrower no express permission to assert the right of rescission as an affirmative defense after the expiration of the 3-year period. Beach v. Ocwen Federal Bank, 523 U.S. 410, 412-13, 118 S.Ct. 1408, 140 L.Ed.2d 566 (1998) (footnote omitted). Accordingly, in Beach, the United States Supreme Court held that TILA permits no federal right to rescind, defensively or otherwise, after the 3 year period of § 1635(f) has run. Id. at 419. The Beach Court explained as follows: It is useful to look ahead to [15 U.S.C.] § 1640 with its provisions for recovery of damages. Subsection (e) reads that the 1-year limit on actions for damages does not bar a person from asserting a violation of this subchapter in an action to collect the debt which was brought more than one year from the date of the occurrence of the violation as a matter of defense by recoupment or set-off in such action, except as otherwise provided by State law. 15 U.S.C. § 1640(e). Thus the effect of the 1-year limitation provision on damages actions is expressly deflected from recoupment claims. The quite different treatment of rescission stands in stark contrast to this, however, there being no provision for rescission as a defense that would mitigate the uncompromising provision of § 1635(f) that the borrower's right shall expire with the running of the time. Id. at 418-19, 118 S.Ct. 1408. The holding in Beach is dispositive of the Kekas' contention that TILA accorded them the right to rescind their loan transaction. Their right to rescission expired, at the latest, three years after they entered into the transaction, i.e., on June 7, 1997, and their attempt to assert that right as a defense in the Credit Union's action to foreclose on the mortgage on their residence was as ineffective as their original attempt to rescind the transaction by sending the cancellation notice to the Credit Union on August 17, 1998. [7] However, Beach makes clear that the Kekas were entitled to assert their recoupment claim based upon the Credit Union's alleged violation of TILA. As we have noted, the Kekas allege that they did not timely receive notice of their right to cancel and other disclosure statements from the Credit Union, as required by TILA. A lender's failure to provide these documents in the prescribed manner constitutes a violation of TILA. 15 U.S.C. § 1638(b); Bartholomew v. Northampton Nat'l Bank of Easton, Easton, PA., 584 F.2d 1288, 1296 (3 Cir.1978) (TILA requires that creditors make full disclosure prior to the extension of credit). As attachments to Paranial's affidavit, the Credit Union produced true copies of the TILA disclosures, which the Kekas admit that they signed on June 7, 1994. The Kekas counter in their affidavits and declaration, however, that they did not receive copies of the documents at the time. TILA provides that written acknowledgment of receipt of any disclosures required under this subchapter by a person to whom information, forms, and a statement is required to be given pursuant to this section does no more than create a rebuttable presumption of delivery thereof. 15 U.S.C. § 1635(c). The case law of other jurisdictions is well settled that a debtor's affidavit averring non-delivery is sufficient to create a genuine issue of material fact as to whether the statutory presumption had been rebutted, thereby precluding summary judgment with respect to a claim based upon a debtor's assertion of non-delivery. Stone v. Mehlberg, 728 F.Supp. 1341, 1353-54 (W.D. Mich.1989 & Supp. Opinion 1990); Powers v. Sims & Levin Realtors, 396 F.Supp. 12, 22-23 (E.D.Va.1975) (congressional policy, as expressed by 15 U.S.C. § 1635(c), precludes granting a creditor summary judgment on the basis of a receipt acknowledgment alone where the [debtors] deny by affidavit that they received the disclosures required by [TILA]); Cintron v. Bankers Trust Co., 682 So.2d 616, 616-17 (Fla.Dist.Ct.App.1996); Award Lumber & Constr. Co., Inc. v. Humphries, 110 Ill. App.3d 119, 65 Ill.Dec. 676, 441 N.E.2d 1190, 1191-92 (1982) (discussing relevant case law and concluding that, while an affidavit of non-delivery from defendant in this case would have sufficed to create a material issue of fact, the mere allegation thereof ... is insufficient to rebut the presumption raised by the signed acknowledgment of receipt). We therefore hold that the Kekas' affidavits and declaration raised a genuine issue of material fact as to whether the Credit Union timely provided the Kekas with the disclosures required by TILA. Having done so, we must, on that basis alone, vacate the circuit court's summary judgment in favor of the Credit Union with respect to Count Four of the Kekas' counterclaim for damages allegedly resulting from the foregoing violation of TILA. The Kekas further urge that the documents proffered by the Credit Union as the statutorily required disclosures did not comply with the standards prescribed by TILA, inasmuch as the date of expiration of the Kekas' right to cancel the transaction, which the Credit Union stated as June 13, 1994, and the annual percentage rate of interest, stated as 8.9994%, were incorrect. Federal law generally requires strict compliance with the technical requirements of TILA. See, e.g., Jackson v. Grant, 890 F.2d 118, 120 (9th Cir.1989) (incorrect expiration date that was prior to actual consummation of loan); Semar v. Platte Valley Fed. Sav. & Loan Ass'n., 791 F.2d 699, 704 (9th Cir.1986) (expiration date omitted); Riopta v. Amresco Residential Mortgage Corp., 101 F.Supp.2d 1326 (D.Haw.1999) (improperly dated notice of right to cancellation). Federal courts have held that [t]he legal inquiry about the quality of disclosure is not directed at whether the credit consumer was actually confused or misled.... The court must engage only in an objective inquiry into the violation of specific provisions of TILA requirements. Jenkins v. Landmark Mortgage Corp. of Virginia, 696 F.Supp. 1089, 1095 (W.D.Va.1988) (citing Powers, 542 F.2d at 1219). Nevertheless, it has been acknowledged that [s]trict compliance does not necessarily mean punctilious compliance if, with minor deviations from the language of [TILA], there is still a substantial, clear disclosure of the fact or information demanded by the applicable statute or regulation. Smith v. Chapman, 614 F.2d 968, 972 (5th Cir.1980). Thus, in ruling that a particular manner of disclosure violated TILA, the courts have invariably discussed why the disclosure was confusing, misleading, or otherwise potentially detrimental to the borrower. See, e.g., Jenkins, supra . In the cases involving noncompliance with the requirement that the date of expiration of the right of recission be disclosed, lenders have either failed to disclose the expiration date altogether or stated a rescission period shorter than three days, counter to the basic rationale for a rescission, [ i.e., ] `to give the debtor an opportunity to reflect in the quiet of his home' without undue pressure. Jenkins, 696 F.Supp. at 1095 n. 4 (quoting Rudisell v. Fifth Third Bank, 622 F.2d 243, 249 n. 9 (6th Cir.1980), and Curry v. Fidelity Consumer Discount Co., 656 F.Supp. 1129, 1131 (E.D.Pa.1987)). When a lender allows a borrower to cancel the loan transaction during a period greater than the three days prescribed by TILA, no such prejudice to the borrower results. The Credit Union's notice to the Kekas of their right to cancel informed that, [i]f you cancel by mail or by telegram, you must send the notice no later than midnight of June 13, 1994 (or midnight of the third business day following the latest of the three events listed above), ( i.e., (1) the date of transaction, which is June 7, 1994 ; or (2) the date you received your [TILA] disclosures; or (3) the date you received this notice of your right to cancel). (Emphasis added.) Inasmuch as June 7, 1994 was a Tuesday, the third business day thereafter was Friday, June 10, 1994. The Kekas insist that the Credit Union was required to state June 10, 1994, rather than June 13, 1994, in the disclosure. [8] 12 C.F.R. §§ 226.1 through 226.29, known as Regulation Z, which implements TILA's detailed disclosure requirements, provides in relevant part that [t]he consumer may exercise the right to rescind until midnight of the third business day following consummation, delivery of the notice required by paragraph (b) of this section, or delivery of all material disclosures, whichever occurs last. 12 C.F.R. § 226.23(a). In 12 C.F.R. § 226.23(b), the regulation provides that [t]he notice [of right to rescind] shall be on a separate document that identifies the transaction and shall clearly and conspicuously disclose ... (v)[t]he date the rescission period expires. Thus, although the regulation entitles the consumer to rescind until midnight of the third business day following consummation, it merely directs the creditor clearly and conspicuously to disclose the date the rescission period expires. Inasmuch as a disclosure that recites a date later than the third business day following the date of the transaction as being the date the rescission period expires does not prejudice the consumer's statutory right of rescission, but actually benefits the consumer by extending the rescission period, we hold that such a disclosure materially complies with 12 C.F.R. § 226.23(b)(v). [9] Accordingly, we reject the Kekas' argument that the Credit Union's notice of right to cancel violated TILA on the grounds of nondisclosure of the expiration of the rescission period. [10]