How Does the Truth In Lending Act Protect Consumers ?
The Truth in Lending Act is a remedial statute designed to aid and protect consumers. Section 1601 of the Act clearly sets forth its purpose:
The Congress finds that economic stabilization would be enhanced and the competition among the various financial institutions and other firms engaged in the extension of consumer credit would be strengthened by the informed use of credit. the informed use of credit results from an awareness of the cost thereof by consumers. It is the purpose of this sub-chapter 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(a).
The goal of the Act is 'primarily to aid the unsophisticated consumer so that he . . . is not easily misled as to the total cost of financing.' Shepeard v. Quality Siding & Window Factory, 730 F. Supp. 1295, 1299 (D. Del. 1990) (quoting Thomka v. A.Z. Chevrolet, Inc., 619 F.2d 246, 248 (3d Cir. 1980).
The "Truth in Lending Regulations, known as Regulation Z, have been promulgated by the Board of Governors of the Federal Reserve System to implement the Truth in Lending Act. 12 C.F.R. 226 et seq. (West 1982)." Chrysler First Fin. Serv. Corp. v. Revells, Del. Super., C.A. No. Civ. A. No. 91 L-06-12, Bifferato, J. 1993 WL 542951 (11/17/93).
The Truth in Lending Act "must be liberally construed in favor of the consumer." Rowland v. Magna Millikin Bank, 812 F. Supp. 875, 878 (C.D. Ill. 1992) (citing Davis v. Werne, 673 F.wd 866, 869 (5th Cir. 1982); Wilmington Trust Co. v. Van Dan, Del. Super., Poppiti, J. 1987 W.L. 28310 (Oct. 19, 1987)."
In upholding this standard, courts have determined that this means that "TILA requirements are enforced by imposing a sort of strict liability in favor of consumers who have secured financing through transactions not in compliance with the terms of the Act.
It is strict liability in the sense that absolute compliance is required and even technical violations will form the basis for liability." Rowland, 812 F. Supp. at 878 (quoting Shepeard, 730 F. Supp. at 1299). In so finding, the Seventh Circuit U.S. Court of Appeals stated:
It is not sufficient to attempt to comply with the spirit of TILA in order to avoid liability. Rather, strict compliance with the required disclosures and terminology is required. Many violations of TILA involve technical violations without egregious conduct of any kind on the part of the creditor. However, Congress did not intend that creditors should escape liability for merely technical violations. Thus, while it may be true, in some sense, as the creditors have argued, that the terminological violations here are inconsequential, the fact remains that they are violations. Any misgivings which creditors may have about the technical nature of the requirements should be addressed to Congress or to the Federal Reserve Board, not to the courts.
Brown v. Marquette Sav. & Loan Ass'n., 686 F.2d 608, 613 (7th Cir. 1982); Chivers v. Johnson, 22 F. Supp. 832 (N.D. Ill. 1998). "Once the court finds a violation, no matter how technical, it has no discretion with respect to liability." Smith v. Fidelity Consumer Discount Co., 898 F.2d 896, 898 (3d Cir. 1989) (quoting Grant v. Imperial Motors, 539 F.2d 506, 510 (5th Cir. 1976). Delaware courts have also adopted this strict standard.
Fifteen U.S.C. 1640(a) provides, inter alia, that any creditor who fails to comply with Part B of the Act is liable for actual damages and double the amount of the finance charge in the transaction. Fifteen U.S.C. 1640(a) provides as follows:
(a) Individual or class action for damages; amount of award; factors determining amount of award . . .Except as otherwise provided in this section, any creditor who fails to comply with any requirement imposed under this part, including any requirement under section 1635 of this title, or part D or E of this sub-chapter with respect to any person is liable to such person in any amount equal to the sum of --
(1) any actual damage sustained by such person as a result of the failure;
(2)(A)(i) in the case of an individual action twice the amount of any finance charge in connection with the transaction, (ii) in the case of any individual action relating to a consumer lease under part E of this sub-chapter, 25 per centum of the total amount of monthly payments under the lease, except that the liability under this subparagraph shall not be less than $ 100 nor greater than $ 1,000, or (iii) in the case of an individual action relating to a credit transaction not under an open end credit plan that is secured by real property or a dwelling, not less than $ 200 or greater than $ 2,000;
Six Del. C. 2732 provides as follows:
In a contract for the sale . . . of merchandise to a consumer, a person engages in a deceptive practice when he knowingly or recklessly:
(1) Distorts or obscures the terms, conditions or meaning of the contract or creates a likelihood of confusion or misunderstanding by the use of unintelligible words, phrases or sentences; or
(2) Omits information required by law to be disclosed in contracts with a consumer.