Court: Court of Appeals for the Seventh Circuit; February 1, 2000; Federal Appellate Court
Related cases address damages under the Truth in Lending Act (TILA). Three district judges determined that the plaintiffs' asserted violations do not warrant statutory damages under 15 U.S.C. 1640(a)(2) due to the plaintiffs' failure to allege actual injury, leading to case dismissal. The cases stem from payday loans, which involve short-term, high-interest credit transactions requiring postdated checks.
Two cases challenge the lenders' use of the term "total payment," asserting it should be "total of payments" as mandated by 15 U.S.C. 1638(a)(5), or omitted entirely when only one payment is due. The district judges rejected this claim, noting that the Federal Reserve allows lenders to omit the "total of payments" disclosure in one-payment scenarios. However, while "total payment" may be used, disclosures must be conspicuously segregated per 15 U.S.C. 1638(b)(1).
The lenders violated this segregation rule by including "total payment" in the mandatory disclosure section. Additional violations were identified, including improper itemization and inadequate descriptions of "finance charge" and "annual percentage rate." One plaintiff’s form was particularly deficient because it did not differentiate these terms from others as required by 15 U.S.C. 1632(a).
Remedies for these violations include compensatory damages for any actual injury as stipulated in 15 U.S.C. 1640(a)(1).
Plaintiffs are not claiming actual injury but seek only statutory damages under 15 U.S.C. § 1640(a)(2). The statute imposes liability on creditors for failing to comply with various requirements, including those under sections 1635, 1637, and 1638. Specifically, creditors face liability for any actual damages suffered, and for individual actions, they may owe twice the finance charge or between $200 and $2,000 for credit transactions secured by real property. In class actions, the total recovery is limited to the lesser of $500,000 or 1% of the creditor's net worth. Statutory damages apply to violations of 19 specified sections, with exceptions related to disclosures under sections 1637 and 1638. Section 1637 pertains to open-end consumer credit, while 1638 covers all other consumer loans, including payday loans. The obligation for clear disclosures as mandated in section 1632(a) is linked to the requirements of section 1638. Statutory damages are thus available for failures to comply with specific disclosure requirements under sections 1635 and 1638, particularly concerning the "amount financed" and other enumerated disclosures.
The italicized term in the text is decisive against the plaintiffs as it restricts statutory damages to a specific list of violations. The failure to highlight 'finance charge' and 'annual percentage rate' contravenes section 1632(a); the lack of descriptive explanations breaches section 1638(a)(8); and the inclusion of extraneous information in the federal box violates section 1638(b)(1). None of these violations qualifies for statutory damages. Plaintiffs argue that compliance with the Truth in Lending Act (TILA) requires adherence to all provisions of TILA and Regulation Z, claiming that despite lenders providing accurate finance charges and annual percentage rates, they failed to comply with other requirements, thus invalidating their disclosures. Plaintiffs assert that violations of sections 1632(a), 1638(a)(8), or 1638(b)(1) also breach sections 1638(a)(3) and (a)(4), which are eligible for statutory damages. However, this interpretation contradicts the purpose of section 1640(a), which was amended in 1980 to limit damages for minor formal errors. The plaintiffs' argument suggests a universal inclusion of violations for statutory damages, which would conflict with Congress's intent to exclude specific sections from eligibility, thus misinterpreting the law. Although the plaintiffs cite earlier cases awarding statutory damages for violations of section 1632(a), these decisions predate the 1980 amendments and their applicability is questionable under the revised statute. The omission of section 1632(a) from the list of eligible violations means that no statutory damages can be awarded for its breaches.
In Herrera v. First Northern Savings Loan Ass’n, 805 F.2d 896 (10th Cir. 1986), the Tenth Circuit addressed the implications of the 1980 amendments to the Truth in Lending Act (TILA) but did not analyze the effect of 15 U.S.C. § 1640(a). The defendant invoked 15 U.S.C. § 1640(c), which eliminates liability for damages if a violation is unintentional and results from a bona fide error, provided that reasonable procedures were in place to prevent such errors. The court noted that it did not take a stance on § 1640(a) and referenced precedents including Pennhurst State School Hospital v. Halderman and United States v. L.A. Tucker Truck Lines, Inc. The court concluded that its interpretation of § 1640(a) limits statutory damages to only those violations explicitly listed in that section, rejecting the plaintiffs’ argument that errors in disclosure could be treated as non-disclosure of key statutory terms. The court affirmed the lower court's decision.
