1972, September, Pg. 27. Private Remedies Under Truth-in-Lending and UCCC.

• Author: by L. Richard Freese

1 Colo.Law. 27

Colorado Lawyer

1972.

1972, September, Pg. 27.

Private Remedies Under Truth-in-Lending and UCCC

27Vol. 1, No. 11, Pg. 27

Private Remedies Under Truth-in-Lending and UCCCby L. Richard Freese and Marshall A. SniderL. Richard Freese, Jr., Denver, is a partner in the firm of Davis, Graham & Stubbs and an instructor in consumer law at the Denver University School of Law. Marshall A. Snider, Denver, is director of the Consumer Division, Legal Aid Society of Metropolitan Denver. Both Mr. Freese and Mr. Snider have been frequent lecturers on the UCCC and consumer credit legislation.The Federal Truth-in-Lending Act, a part of the Federal Consumer Credit Protection Act, became effective on July 1, 1969. The Truth-in-Lending Act (15 U.S.C. § 1601 et seq.) provides for uniform disclosure of the terms and conditions of consumer credit transactions, and also provides for a right of rescission in certain consumer real estate transactions. The Act provides for public enforcement of its substantive provisions through several federal agencies and also, in section 130, provides for enforcement through private actions brought by debtors to whom the required disclosures have not been given. Considerable controversy has been generated as to the propriety and effectiveness of the private enforcement scheme set forth in section 130, particularly as that enforcement has been pursued in asserted class actions. In summary fashion, this article will examine the provisions of section 130 and the case authorities interpreting it.

The article will also examine the comparable private enforcement provisions of sections 73-5-202 and 73-5-203 of the Colorado Uniform Consumer Credit Code (C.R.S. 1963, § 73-1-101 et seq.). That Code, effective on October 1, 1971, not only covers in substantially identical provisions the disclosure scheme provided in the Federal Truth-in-Lending Act, but goes well beyond that Act to provide regulation of the types and levels of finance charges and other charges and to provide comprehensive restrictions and remedies in the extension of consumer credit. Although the Code was enacted in Utah and Oklahoma in 1969 and in Indiana, Idaho, Wyoming, and Colorado in 1971, sections 5-202 and 5-203 have not been discussed in reported cases. Nevertheless their similarities to section 130 of the Federal Truth-in-Lending Act, as well as their differences, make their examination a logical complement to a discussion of section 130.

Private Enforcement under Federal Truth-in-LendingWe will focus on subsections (a), (b) and (c) of section 130 of the Federal

28Truth-in-Lending Act. Subsection (a) establishes the basis for private enforcement and subsections (b) and (c) provide two affirmative defenses to (a).The reported cases relating to section 130 have been brought in the federal courts. Although an individual's recovery under section 130(a) would normally be less than $10,000, the jurisdiction of the federal courts over those claims is permitted by subsection (e) of section 130, regardless of the amount in controversy requirement of 28 U.S.C. 1331. Section 130(e) also renders moot the prohibition against aggregation of claims, as established in Snyder v. Harris, 394 U.S. 332 (1969), to reach that $10,000 jurisdictional amount in controversy.

Section 130(a) provides:(a) Except as otherwise provided in this section, any creditor who fails in connection with any consumer credit transaction to disclose to any person any information required under this chapter to be disclosed to that person is liable to that person in an amount equal to the sum of

(1) twice the amount of the finance charge in connection with the transaction, except that the liability under this paragraph shall not be less than $100 nor greater than $1,000; and

(2) in the case of any successful action to enforce the foregoing liability, the costs of the action together with a reasonable attorney's fee as determined by the court. (Emphasis supplied.)

Several questions have been raised with respect to some of the operative words in section 130(a).

First, does "any consumer credit transaction" refer to an individual debtor or a class of debtors where the disclosure error is the same? Is there a separate "transaction" for each incorrect monthly statement, although an identical error, or is there only one "transaction" in such instance? The case authorities suggest the first alternative to each question. See, e.g., Ratner v. Chemical Bank, 329 F. Supp. 270 (S.D.N.Y. 1971), and 4 CCH Consumer Credit Guide ¶ 99238 (S.D.N.Y. Feb. 14, 1972).

Second, does the $100 minimum penalty apply (1) to each error in a disclosure form, or (2) to the entire form, regardless of the number of errors in that form, or (3) to one form, regardless of how many individuals received that improper form? Although it is believed that the second of these three alternatives is most probably what the legislature intended, the issue is open. An argument in favor of (1) could be derived from an expansive meaning of "any information," whereas (2) could be derived from the word "transaction." In late April 1972, the United States Senate passed S. 652, entitled the "Fair Credit Billing Act," which contains in its section 207 a recommendation by the Federal Reserve Board to codify that second alternative.

Third, in Ratner v. Chemical Bank, 329 F. Supp. 270 (S.D.N.Y. 1971)...