Monday, September 13, 2010

FYI: Fed Dist Cts Divided on Deadline to Rescind After Notice Under TILA

As the attached two recent federal district court opinions illustrate, the courts are divided on the issue of when a borrower must file a court claim for TILA rescission, after the borrower already demanded rescission within 3 years following the date of closing. 

 

In Briosos v. Wells Fargo Bank, No. C 10-02834 (N.D. Cal. Aug. 25, 2010), the U.S. District Court for the Northern District of California held among other things that the borrower timely exercised his right to rescission within the 3-year period for doing so, and that his lawsuit to enforce his TILA rescission demand filed some 9 months later after the 3-year period had expired was still timely. 

 

However, agreeing with a growing majority of federal courts, especially those having situs in California, the court in Briosos also held that the borrower failed to sufficiently allege facts supporting his ability to tender the non-rescindable balance due as part of the rescission process, with leave to amend and replead on this issue.

 

On the other hand, in Rosenfield v. HSBC Bank, USA, No. 10-cv-58 (D. Colo. Aug. 31, 2010), the borrower demanded rescission of a November 2006 mortgage loan in 2008.  However, the borrower did not file to enforce the demand for rescission until December of 2009.  The U.S. District Court for the District of Colorado held that TILA provides an absolute 3-year limit on both the right to rescind and the ability to file suit, and therefore that the TILA rescission allegations were time-barred.

 

In addition, the Rosenfield court also held that a judicial proceeding filed under Colorado law in connection with non-judicial foreclosures in that state was not an "action to collect the debt," and therefore that the borrower's attempt to assert a TILA claim for damages more than 1 year after the closing was also time-barred.

 

 

Let me know if you have any questions.  Thanks.
 

 

Ralph T. Wutscher

Kahrl Wutscher LLP

The Loop Center Building

105 W. Madison Street, Suite 2100
Chicago, Illinois  60602
Direct:  (312) 551-9320 

Fax:  (866) 581-9302
Mobile:  (312) 493-0874

RWutscher@kw-llp.com

http://www.kw-llp.com

 

NOTICE:  We do not send unsolicited emails.  If you received this email in error, or if you wish to be removed from our update distribution list, please simply reply to this email and state your intention.  Thank you.

 

Our updates are available on the internet, in searchable format, at: http://updates.kw-llp.com

 

 

 

FYI: 1st Cir Holds FCRA 1681s-2(b)(1) Requires Notice of Dispute from CRA

The U.S. Court of Appeals for the First Circuit recently held affirmed a district court's order granting summary judgment in favor of a credit card lender on a consumer's claims that the company failed to investigate a disputed credit card charge, in supposed violation of section 1681s-2(b)(1) of the Fair Credit Reporting Act ("FCRA").

A copy of the opinion is available at:

http://www.ca1.uscourts.gov/cgi-bin/getopn.pl?OPINION=09-2323P.01A

Plaintiff brought this lawsuit against a credit card company after the company made allegedly incorrect reports of delinquent payments that were disputed by plaintiff.  Plaintiff claimed that the credit card lender violated section 1681s-2(b)(1) of the FCRA by failing to investigate the dispute.  The district court granted summary judgment of the credit card lender and this appeal followed. 

As you may recall, section 1681s-2 of the Fair Credit Reporting Act ("FCRA") imposes certain obligations on entities that furnish credit information to consumer credit reporting agencies ("CRAs").  Among other things, these duties include investigating disputes over the completeness or accuracy of the information furnished and then notifying the CRA of any corrections. 

 

However, a furnisher's investigation and notification duties under § 1681s-2(b) are triggered if the CRA notifies the furnisher of a consumer's dispute, but, on the other hand, "[a] notice of disputed information provided directly by the consumer to a furnisher does not trigger a furnisher's duties under § 1681s-2(b)."  In affirming the district court's decision, the First Circuit's opinion centered on this distinction, and the plaintiff did not raise a claim under section 312 of FACTA

 

Ultimately, the Court based its decision on the fact that there was no evidence that a CRA, rather than just plaintiff himself, had ever contacted the credit card company concerning plaintiff's objections, noting that this is "exactly the same fatal hole in [plaintiff's] case as the district court found."  In so doing, the Court rejected plaintiff's attempts to discredit the testimony of all three major CRAs and his attempts to introduce letters which he claimed supported his conclusion that a CRA had contacted the credit card company.  Rather, the Court held that, based on the evidence, "the only reasonable inference is that no notice was ever sent" by a CRA and that the letters introduced by plaintiff "actually cut against the proposition that [plaintiff] believes them to support."
 
Let me know if you have any questions.  Thanks.
 

 

Ralph T. Wutscher

Kahrl Wutscher LLP

The Loop Center Building

105 W. Madison Street, Suite 2100
Chicago, Illinois  60602
Direct:  (312) 551-9320 

Fax:  (866) 581-9302
Mobile:  (312) 493-0874

RWutscher@kw-llp.com

http://www.kw-llp.com

 

NOTICE:  We do not send unsolicited emails.  If you received this email in error, or if you wish to be removed from our update distribution list, please simply reply to this email and state your intention.  Thank you.

 

Our updates are available on the internet, in searchable format, at: http://updates.kw-llp.com