Court Opinion

ID: 9459380
Source: CourtListenerOpinion
Date Created: 2023-08-04 21:19:06.151585+00
Date Added: 2024-06-11T17:36:08.276671
License: Public Domain

DON J. YOUNG, District Judge,
(dissenting) .
I respectfully dissent. The statute states:
It is the purpose of this [title] . 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. 15 U.S.C. § 1601.
Congress, to effectuate this end, requires that a creditor make certain disclosures to the consumer. 15 U.S.C. §§ 1632-39. If the disclosures are not made, there are civil sanctions which may be imposed on the creditor, 15 U.S. C. § 1640, but the “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). The statute also gives the consumer the right to rescission, 15 U.S.C. § 1635, as explained in the majority opinion.
The majority holds that the rescission remedy provides sufficient protection for the consumer so that the violation as mentioned in § 1640(e) occurs at the time the parties entered into the agreement and the statute of limitations begins to run at that time. If the statute is to be interpreted as the majority have construed it, its effectiveness is limited. It is not difficult to imagine a situation where a consumer has entered into an agreement with a creditor which requires repayment of a loan over a period of five years or more. The creditor does not make disclosures as required by the Act and the consumer is an uninformed one whom the Act was designed to protect. The terms of the agreement are such that the offensive part of the financing does not evidence itself in the loan repayment schedule until after the first year. Under the majority opinion, the consumer will not be able to sue for damages when he becomes aware of the offensive financing since the statute of limitations has run. The consumer at this point is left with the rescission remedy only. Assuming a successful suit by the consumer, it still provides little deterrent effect for the creditor who chose not to disclose since the parties are merely returned to their original positions. In other words, if no disclosures are made the creditor need only fear that the contract may be rescinded but he need not fear any civil liability.
To protect the creditor from civil liability in these situations is to take much of the effectiveness out of the statute, since a creditor who chose not to make disclosures to an uninformed consumer would only have to delay the operation of an offensive part of the agreement until one year after the parties entered into it.
As a general rule, statutes of limitations in actions for fraud commence to run at the time when the fraud is discovered, not when the fraudulent acts occurred. Basically, the statute involved here is designed to prevent frauds being perpetrated by sophisticated lenders upon uniformed borrowers. It would therefore appear that these general principles should be applied to the limitation period in the statute here involved. If the limitation of the statute is thus construed, the “violation” occurs when the consumer knows or should know of the undisclosed credit terms. This would make the knowledge of the violation a factual matter. For example, in the hypothetical situation posed above, the consumer knew or should have known of the violation the moment the offensive financing arrangement surfaced in the *1067loan repayment schedule. Under my construction of the Act, the consumer then has one year from this point in time to initiate his action. Obviously, the creditor has it within his power to avoid any liability under the statute by making disclosures as required by law prior to entering into the agreement.
I would hold that the one year limitation did not commence to run until the plaintiffs discovered the defendants’ violation of the statute and made the demand for rescission which was refused by the defendants. If, as the majority suggests, there was at that time a requirement to elect between the legal and equitable remedies, the plaintiffs made that election by commencing this action, which was done well within the statutory one year limitation after plaintiffs discovered the violation of their rights under the Act. The judgment of the District Court should be reversed, and the case remanded.