15 U.S.C. § 1640 — Civil liability
submitted 58 years ago by Pub. L. 90-321 to r/title-15-COMMERCE-AND-TRADE · 2,599 words · no verdicts yet
A creditor that violates the listed consumer-credit disclosure rules generally owes the affected person actual damages and specified additional amounts. The section also sets rules for errors, defenses, lawsuits, class actions, assignments, and certain mortgage violations.
(a) Individual or class action for damages; amount of award; factors determining amount of award. Unless this section says otherwise, a creditor* that fails to meet a requirement of this part is liable to the affected person* for: (1) the person’s actual loss caused by the failure; (2)(A) in an individual case, (i) twice the finance charge, (ii) for a consumer lease, 25% of all monthly payments, but at least $200 and at most $2,000, (iii) for an unsecured open-end consumer credit* plan, twice the finance charge, with a $500 minimum and $5,000 maximum, or a higher amount for an established pattern of failures, or (iv) for a closed-end credit transaction secured by real property or a dwelling, at least $400 and at most $4,000; or (B) in a class action, an amount the court allows, with no minimum recovery for each class member and a total recovery for the same failure by the same creditor capped at the lesser of $1,000,000 or 1% of the creditor’s net worth; (3) in a successful action enforcing this liability, or an action establishing a right to rescind under section 1635 or 1638(e)(7), court costs and a reasonable attorney fee; and (4) for a violation of section 1639, section 1639b(c)(1) or (2), or section 1639c(a), all finance charges and fees paid by the consumer, unless the creditor proves the violation was not material. For a class award, the court must consider actual damages, how often and how persistently the creditor failed to comply, the creditor’s resources, the number of people harmed, and whether the failure was intentional. For disclosures under section 1637(a) and (b), paragraph (2) liability applies only to failures involving section 1635, section 1637(a), paragraphs (4) through (13) of section 1637(b), or a State disclosure requirement that the Bureau* has found substantially equivalent. For section 1637(c) or (d) disclosures, a card issuer* is liable only to a cardholder* who pays the specified fee or uses the card. For section 1638 disclosures, paragraph (2) liability applies only to failures involving section 1635; section 1638(a)(2), as far as it requires the amount financed, and paragraphs (3), (4), (5), (6), and (9); section 1638(b)(2)(C)(ii); section 1638(e)(2)(A), (B), (D), (F), or (J) for purposes of section 1638(e)(2) or (4); section 1638(e)(4)(C), (6), (7), or (8); or a substantially equivalent State disclosure requirement. Liability for a required disclosure rests only on the creditor required to make it, except as section 1641 provides.
(b) Correction of errors. A creditor or assignee is not liable under this section, section 1607, or section 1611 for a failure under this part or part E if, within 60 days after discovering the error and before a lawsuit or written notice from the obligor, it tells the affected person about the error and adjusts the account so the person will not pay more than the disclosed charge or the dollar equivalent of the disclosed annual percentage rate, whichever is lower.
(c) Unintentional violations; bona fide errors. A creditor or assignee is not liable for a violation if it proves that the violation was unintentional, resulted from a genuine error, and occurred despite reasonable procedures designed to prevent it. Examples include clerical, calculation, computer, programming, and printing errors. A mistake about what the law requires is not a genuine error.
(d) Multiple obligors. If a consumer transaction or lease has more than one obligor, there may be only one recovery under subsection (a)(2) for the violation.
(e) Court jurisdiction; deadlines; State enforcement. A lawsuit may be filed in a United States district court or another court with jurisdiction within one year after the violation, or for a private education loan, within one year after the first regular principal payment is due. A lawsuit for a violation of section 1639, 1639b, or 1639c may be filed within three years after the violation. These limits do not prevent a person from raising the violation as a defense by recoupment or set-off in a debt-collection action filed later, unless State law says otherwise. The proper State attorney general may sue for a violation of sections 1639, 1639b, 1639c, 1639d, 1639e, 1639f, 1639g, or 1639h within three years. The attorney general must give the responsible Federal agency written notice and a copy of the complaint before suing, or immediately after filing if advance notice is not feasible. The Federal agency may intervene, remove the case to the proper district court, be heard on all issues, and appeal.
(f) Good-faith compliance. The liability provisions in this section, sections 1607(b), 1607(c), 1607(e), and 1611 do not apply to an act or omission done in good faith in line with a Bureau rule, regulation, or interpretation, or an authorized Federal Reserve official’s interpretation or approval, even if that rule, interpretation, or approval is later changed, withdrawn, or held invalid.
(g) Repeated failures to disclose. Multiple failures to disclose required information for one account or one credit transaction give the person one recovery. Continued failures after a recovery allow additional recoveries. This does not eliminate a remedy under section 1635.
(h) Offset. A person may not offset a possible liability under subsection (a)(2) against money the person owes the creditor or assignee unless a court with jurisdiction has determined the liability in a case to which the person was a party. A consumer in default may still bring an original action or raise the violation as a defense or counterclaim in a collection action.
(i) Class-action moratorium. From May 18, 1995, through October 1, 1995, a court could not certify a class in an action about a first-lien, real-property or dwelling-secured refinancing or consolidation if the claim alleged that a creditor failed to include a charge in the section 1638 finance charge, failed to make another section 1638 disclosure because of that omission, or gave an improper rescission notice because it chose the wrong Bureau model form. The prohibition did not apply if the resulting annual percentage rate exceeded the tolerance in section 1606(c), if no rescission notice was provided in any form, or if the notice was improper for another reason.
(j) Private educational lender. A private educational lender has no liability under this section for failing to comply with section 1638(e)(3).
(k) Defense to foreclosure. (1) During a judicial or nonjudicial foreclosure or other debt-collection action involving a residential mortgage loan, a consumer may assert a creditor’s violation of section 1639b(c)(1) or (2), or section 1639c(a), by recoupment or set-off without regard to subsection (e)’s deadline. (2)(A) The amount equals the damages available under subsection (a) for an original valid claim plus the consumer’s action costs, including a reasonable attorney fee. (B) If judgment comes after the subsection (e) deadline, damages under subsection (a)(4) are limited to the amount computed through the day before that deadline.
(l) Borrower fraud. In addition to any other legal or contractual remedy, a creditor or assignee is not liable if the obligor or a co-obligor was convicted of obtaining the residential mortgage loan through actual fraud.
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, subsection (f) or (g) of section 1641 of this title, or part D or E of this subchapter with respect to any person* is liable to such person in an amount equal to the sum of—
any actual damage sustained by such person as a result of the failure;
in the case of an individual action twice the amount of any finance charge in connection with the transaction, (ii) in the case of an individual action relating to a consumer lease under part E of this subchapter, 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 $200 nor greater than $2,000, (iii) in the case of an individual action relating to an open end consumer credit plan* that is not secured by real property or a dwelling, twice the amount of any finance charge in connection with the transaction, with a minimum of $500 and a maximum of $5,000, or such higher amount as may be appropriate in the case of an established pattern or practice of such failures; 1 or (iv) 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 $400 or greater than $4,000; or
in the case of a class action, such amount as the court may allow, except that as to each member of the class no minimum recovery shall be applicable, and the total recovery under this subparagraph in any class action or series of class actions arising out of the same failure to comply by the same creditor shall not be more than the lesser of $1,000,000 or 1 per centum of the net worth of the creditor;
in the case of any successful action to enforce the foregoing liability or in any action in which a person is determined to have a right of rescission under section 1635 or 1638(e)(7) of this title, the costs of the action, together with a reasonable attorney’s fee as determined by the court; and
in the case of a failure to comply with any requirement under section 1639 of this title, paragraph (1) or (2) of section 1639b(c) of this title, or section 1639c(a) of this title, an amount equal to the sum of all finance charges and fees paid by the consumer, unless the creditor demonstrates that the failure to comply is not material.
In determining the amount of award in any class action, the court shall consider, among other relevant factors, the amount of any actual damages awarded, the frequency and persistence of failures of compliance by the creditor, the resources of the creditor, the number of persons adversely affected, and the extent to which the creditor’s failure of compliance was intentional. In connection with the disclosures referred to in subsections (a) and (b) of section 1637 of this title, a creditor shall have a liability determined under paragraph (2) only for failing to comply with the requirements of section 1635 of this title, 1637(a) 2 of this title, or any of paragraphs (4) through (13) of section 1637(b) of this title, or for failing to comply with disclosure requirements under State law for any term or item that the Bureau* has determined to be substantially the same in meaning under section 1610(a)(2) of this title as any of the terms or items referred to in section 1637(a) of this title, or any of paragraphs (4) through (13) of section 1637(b) of this title. In connection with the disclosures referred to in subsection (c) or (d) of section 1637 of this title, a card issuer* shall have a liability under this section only to a cardholder* who pays a fee described in section 1637(c)(1)(A)(ii)(I) or section 1637(c)(4)(A)(i) of this title or who uses the credit card* or charge card. In connection with the disclosures referred to in section 1638 of this title, a creditor shall have a liability determined under paragraph (2) only for failing to comply with the requirements of section 1635 of this title, of paragraph (2) (insofar as it requires a disclosure of the “amount financed”), (3), (4), (5), (6), or (9) of section 1638(a) of this title, or section 1638(b)(2)(C)(ii) of this title, of subparagraphs (A), (B), (D), (F), or (J) of section 1638(e)(2) of this title (for purposes of paragraph (2) or (4) of section 1638(e) of this title), or paragraph (4)(C), (6), (7), or (8) of section 1638(e) of this title, or for failing to comply with disclosure requirements under State law for any term which the Bureau has determined to be substantially the same in meaning under section 1610(a)(2) of this title as any of the terms referred to in any of those paragraphs of section 1638(a) of this title or section 1638(b)(2)(C)(ii) of this title. With respect to any failure to make disclosures required under this part or part D or E of this subchapter, liability shall be imposed only upon the creditor required to make disclosure, except as provided in section 1641 of this title.
A creditor or assignee has no liability under this section or section 1607 of this title or section 1611 of this title for any failure to comply with any requirement imposed under this part or part E, if within sixty days after discovering an error, whether pursuant to a final written examination report or notice issued under section 1607(e)(1) of this title or through the creditor’s or assignee’s own procedures, and prior to the institution of an action under this section or the receipt of written notice of the error from the obligor, the creditor or assignee notifies the person concerned of the error and makes whatever adjustments in the appropriate account are necessary to assure that the person will not be required to pay an amount in excess of the charge actually disclosed, or the dollar equivalent of the annual percentage rate actually disclosed, whichever is lower.
A creditor or assignee may not be held liable in any action brought under this section or section 1635 of this title for a violation of this subchapter if the creditor or assignee shows by a preponderance of evidence that the violation was not intentional and resulted from a bona fide error notwithstanding the maintenance of procedures reasonably adapted to avoid any such error. Examples of a bona fide error include, but are not limited to, clerical, calculation, computer malfunction and programing, and printing errors, except that an error of legal judgment with respect to a person’s obligations under this subchapter is not a bona fide error.
When there are multiple obligors in a consumer credit transaction or consumer lease, there shall be no more than one recovery of damages under subsection (a)(2) for a violation of this subchapter.
Except as provided in the subsequent sentence, any action under this section may be brought in any United States district court, or in any other court of competent jurisdiction, within one year from the date of the occurrence of the violation or, in the case of a violation involving a private education loan (as that term is defined in section 1650(a) of this title), 1 year from the date on which the first regular payment of principal is due under the loan. Any action under this section with respect to any violation of section 1639, 1639b, or 1639c of this title may be brought in any United States district court, or in any other court of competent jurisdiction, before the end of the 3-year period beginning on the date of the occurrence of the violation. This subsection 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. An action to enforce a violation of section 1639, 1639b, 1639c, 1639d, 1639e, 1639f, 1639g, or 1639h of this title may also be brought by the appropriate State attorney general in any appropriate United States district court, or any other court of competent jurisdiction, not later than 3 years after the date on which the violation occurs. The State attorney general shall provide prior written notice of any such civil action to the Federal agency responsible for enforcement under section 1607 of this title and shall provide the agency with a copy of the complaint. If prior notice is not feasible, the State attorney general shall provide notice to such agency immediately upon instituting the action. The Federal agency may—
intervene in the action;
upon intervening—
remove the action to the appropriate United States district court, if it was not originally brought there; and
be heard on all matters arising in the action; and
file a petition for appeal.
No provision of this section, section 1607(b) of this title, section 1607(c) of this title, section 1607(e) of this title, or section 1611 of this title imposing any liability shall apply to any act done or omitted in good faith in conformity with any rule, regulation, or interpretation thereof by the Bureau or in conformity with any interpretation or approval by an official or employee of the Federal Reserve System duly authorized by the Bureau to issue such interpretations or approvals under such procedures as the Bureau may prescribe therefor, notwithstanding that after such act or omission has occurred, such rule, regulation, interpretation, or approval is amended, rescinded, or determined by judicial or other authority to be invalid for any reason.
The multiple failure to disclose to any person any information required under this part or part D or E of this subchapter to be disclosed in connection with a single account under an open end consumer credit plan, other single consumer credit sale, consumer loan, consumer lease, or other extension of consumer credit, shall entitle the person to a single recovery under this section but continued failure to disclose after a recovery has been granted shall give rise to rights to additional recoveries. This subsection does not bar any remedy permitted by section 1635 of this title.
A person may not take any action to offset any amount for which a creditor or assignee is potentially liable to such person under subsection (a)(2) against any amount owed by such person, unless the amount of the creditor’s or assignee’s liability under this subchapter has been determined by judgment of a court of competent jurisdiction in an action of which such person was a party. This subsection does not bar a consumer then in default on the obligation from asserting a violation of this subchapter as an original action, or as a defense or counterclaim to an action to collect amounts owed by the consumer brought by a person liable under this subchapter.
During the period beginning on May 18, 1995, and ending on October 1, 1995, no court may enter any order certifying any class in any action under this subchapter—
which is brought in connection with any credit transaction not under an open end credit plan which is secured by a first lien on real property or a dwelling and constitutes a refinancing or consolidation of an existing extension of credit; and
which is based on the alleged failure of a creditor—
to include a charge actually incurred (in connection with the transaction) in the finance charge disclosed pursuant to section 1638 of this title;
to properly make any other disclosure required under section 1638 of this title as a result of the failure described in clause (i); or
to provide proper notice of rescission rights under section 1635(a) of this title due to the selection by the creditor of the incorrect form from among the model forms prescribed by the Bureau or from among forms based on such model forms.
Paragraph (1) shall not apply with respect to any action—
described in clause (i) or (ii) of paragraph (1)(B), if the amount disclosed as the finance charge results in an annual percentage rate that exceeds the tolerance provided in section 1606(c) of this title; or
described in paragraph (1)(B)(iii), if—
no notice relating to rescission rights under section 1635(a) of this title was provided in any form; or
proper notice was not provided for any reason other than the reason described in such paragraph.
A private educational lender (as that term is defined in section 1650(a) of this title) has no liability under this section for failure to comply with section 1638(e)(3) of this title).3
Notwithstanding any other provision of law, when a creditor, assignee, or other holder of a residential mortgage loan or anyone acting on behalf of such creditor, assignee, or holder, initiates a judicial or nonjudicial foreclosure of the residential mortgage loan, or any other action to collect the debt in connection with such loan, a consumer may assert a violation by a creditor of paragraph (1) or (2) of section 1639b(c) of this title, or of section 1639c(a) of this title, as a matter of defense by recoupment or set off without regard for the time limit on a private action for damages under subsection (e).
The amount of recoupment or set-off under paragraph (1) shall equal the amount to which the consumer would be entitled under subsection (a) for damages for a valid claim brought in an original action against the creditor, plus the costs to the consumer of the action, including a reasonable attorney’s fee.
Where such judgment is rendered after the expiration of the applicable time limit on a private action for damages under subsection (e), the amount of recoupment or set-off under paragraph (1) derived from damages under subsection (a)(4) shall not exceed the amount to which the consumer would have been entitled under subsection (a)(4) for damages computed up to the day preceding the expiration of the applicable time limit.
In addition to any other remedy available by law or contract, no creditor or assignee shall be liable to an obligor under this section, if such obligor, or co-obligor has been convicted of obtaining by actual fraud such residential mortgage loan.
Source credit: (Pub. L. 90–321, title I, § 130, May 29, 1968, 82 Stat. 157; Pub. L. 93–495, title IV, §§ 406, 407, 408(a)–(d), Oct. 28, 1974, 88 Stat. 1518; Pub. L. 94–222, § 3(b), Feb. 27, 1976, 90 Stat. 197; Pub. L. 94–240, § 4, Mar. 23, 1976, 90 Stat. 260; Pub. L. 96–221, title VI, § 615, Mar. 31, 1980, 94 Stat. 180; Pub. L. 100–583, § 3, Nov. 3, 1988, 102 Stat. 2966; Pub. L. 103–325, title I, § 153(a), (b), Sept. 23, 1994, 108 Stat. 2195; Pub. L. 104–12, § 2, May 18, 1995, 109 Stat. 161; Pub. L. 104–29, § 6, Sept. 30, 1995, 109 Stat. 274; Pub. L. 110–289, div. B, title V, § 2502(b), July 30, 2008, 122 Stat. 2857; Pub. L. 110–315, title X, § 1012(a), Aug. 14, 2008, 122 Stat. 3482; Pub. L. 111–22, div. A, title IV, § 404(b), May 20, 2009, 123 Stat. 1658; Pub. L. 111–24, title I, § 107, title II, § 201(b), May 22, 2009, 123 Stat. 1743, 1745; Pub. L. 111–203, title X, § 1100A(2), title XIV, §§ 1413, 1416, 1417, 1422, July 21, 2010, 124 Stat. 2107, 2148, 2153, 2157.)
- 1968Enacted · Pub. L. 90-321 · 82 Stat. 157
- 1974Amended · Pub. L. 93-495 · 88 Stat. 1518
- 1976Amended · Pub. L. 94-222 · 90 Stat. 197
- 1976Amended · Pub. L. 94-240 · 90 Stat. 260
- 1980Amended · Pub. L. 96-221 · 94 Stat. 180
- 1988Amended · Pub. L. 100-583 · 102 Stat. 2966
- 1994Amended · Pub. L. 103-325 · 108 Stat. 2195
- 1995Amended · Pub. L. 104-12 · 109 Stat. 161
- 1995Amended · Pub. L. 104-29 · 109 Stat. 274
- 2008Amended · Pub. L. 110-289 · 122 Stat. 2857
- 2008Amended · Pub. L. 110-315 · 122 Stat. 3482
- 2009Amended · Pub. L. 111-22 · 123 Stat. 1658
- 2009Amended · Pub. L. 111-24 · 123 Stat. 1743, 1745
- 2010Amended · Pub. L. 111-203 · 124 Stat. 2107, 2148, 2153, 2157
A history note hasn’t been published yet. The record shows enactment by Pub. L. 90-321 on 1968-05-29.
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