URGENT NOTICE: The Carlson Law Firm is currently investigating a Truth in Lending Act violation on behalf of American Express credit card holders. The Annual Percentage Rate information disclosed in billing statements was incomplete, in violation of the Truth in Lending Act. The statutory award on individual claims for violations ranges from $500 to $5,000, plus attorneys’ fees.
Were you an AMEX cardholder in May, June and/or July 2016? You may be eligible for compensation. Please contact our law firm ASAP.
What is the Truth in Lending Act (TILA)?
When you place your trust in a financial institution, you assume that they will ensure your rights are protected and adhered to. Unfortunately, that isn’t always the case. That’s when the Truth in Lending Act steps in.
The Truth in Lending Act, or TILA as it is more commonly know, protects borrowers by requiring banks and other institutions to make appropriate disclosures before lending funds. TILA is intended to protect against unfair lending practices. TILA covers most consumer credit loans, including mortgages, credit cards, and home equity loans.
Overall, TILA is the body of federal law intended to ensure meaningful disclosure of credit terms to consumers and borrowers, including credit card users. This law helps the consumer will be able to compare the various credit terms available and avoid the uninformed use of credit while establishing a fair and competitive financial marketplace. TILA’s origins date back to 1968 when the law was enacted by Congress and implemented by the U.S. Federal Reserve Board.
Under TILA, creditors are protected against the following practices:
- Failure to disclose
- High-pressure sales
- Unfair credit card practices
- Unfair credit billing
Under TILA, borrowers are protected by the following practices:
- Requiring full disclosure of loan costs and terms
- Creating the right of rescission (allowing creditors to back out from loans in a limited time)
- Providing channels for alternative dispute resolution
- Directing borrowers to put creditors on notice when their mortgage is reassigned
- Placing caps on high cost mortgages and some types of home equity lines of credit
- Providing better protections for borrowers’ primary residences secured by loans
Truth in Lending Act Subparts
The Truth in Lending Act is divided into several subparts:
Subpart A – contains the information needed to understand the rest of the Act, such as rules of construct, and definitions.
Subpart B – is concerned with open-end credit lines, such as credit cards and home equity loans.
Subpart C – deals with closed-end credit, such as loans to purchase cars or houses, which come with fixed loan terms, meaning they end on a certain date. Certain aspects of the loan process covered under this subpart include rules pertaining to disclosure, annual percentage rate calculations, and right of rescission.
Subpart D – narrows down the more specific issues, such as the rules pertaining to oral disclosure, exemptions by state, and rate limitations.
Subpart E – consists of special rules that apply to mortgage transactions, such as the practices relating to “high-cost” or “higher-priced” mortgages, and the requirements for home equity plans and reverse mortgages.
Know Your Rights Under the Truth in Lending Act
As an economy that relies heavily on credit card usage, the standardized disclosures and billing rules that credit card companies must adhere to are an integral part of TILA. TILA requires lenders to disclose information in a standardized way to prevent consumers from unknowingly signing bad deals, as well as protects them from unfair billing practices by requiring disclosure rules.
U.S. lending laws give credit card issuers a lot of freedom to set terms, but in exchange, they are subject to stiff penalties when they don’t disclose their terms properly.
A few examples of disclosures that card issuers must provide include:
- A standardized set of conditions under which finance charges are imposed, as well as information about grace periods
- The methods issuers use to determine finance charges as well as other assessments such as late fees, annual fees and over-the-limit fees
- The annual percentage rate on the account
What Is Regulation Z?
Regulation Z is a Federal Reserve Board rule that requires lenders to give you the true cost of credit in writing before you borrow. That includes spelling out the amount of money loaned, the interest rate, APR, finance charges, fees and length of loan terms.
In short, Regulation Z is another name for the Truth in Lending Act. The two are used interchangeably.
The TILA and Regulation Z have undergone amendments in the past, most notably the CARD Act in 2009. Before the act, card issuers could change interest rates arbitrarily and with little notice. At its most basic level, the law seeks to make rates and fees on credit cards more transparent so consumers can see what they’re getting and make smarter financial decisions.
Some of the changes the CARD Act brought to TILA include:
- Credit card companies can not increase interest rates or make significant changes to the fee structure without giving cardholders 45 days’ notice.
- Cardholders are given the right to opt out of significant changes to the account’s terms and pay off balances under the original terms.
- Credit card issuers are ordered to provide statements for credit accounts at least 21 days before payments were due.
- Monthly card statements have to disclose how long it would take consumers to pay off their balance if only minimum payments were made, and how much consumers would have to pay in order to pay the balance off in three years.
A 2015 study by the CFPB found that the CARD Act helped reduce over-the-limit fees by $9 billion and late fees by $7 billion — a total of $16 billion saved by consumers.
Fair Credit Billing Act
The Fair Credit Billing Act is a federal law which was enacted in 1974 as an amendment to Regulation Z of the Truth in Lending Act (TILA). The law was designed to protect consumers from unfair billing practices.
Common billing errors that are denoted under the Fair Credit Billing Act include:
- Charges made in the wrong amount
- Charges that appear on the bill, but were not actually processed by the consumer. Also referred to as unauthorized charges (Federal laws limit the consumer’s responsibility for unauthorized charges to $50).
- Charges for goods that were not delivered as specified at the time of purchase
- Charges for goods that are not received by the consumer
- Calculation errors
- Credit Card or charge card statements mailed to the incorrect address (creditor must receive the consumer’s change of address, in formal writing, at least 20 days prior to the end of the billing period.)
- Charges that the consumer wishes to clarify or requests proof for
- Failure to properly reflect charges or payments to credit or charge accounts
TILA: A No-Fault Law
TILA is a strict liability law. This means that it is either violated or it is not. You, as the borrower, do not have to prove intent on the part of the lender, or personal harm, to exercise your right of rescission. Only the fact of the violation is relevant.
Do I Have A TILA Claim?
It’s in the interest of every American to make sure that our lending institutions are following the law in all their dealings.
Triggering the Truth in Lending Act can happen in many ways. Here are examples of when you may have a TILA claim:
- A lender changed the terms of your home equity line of credit without your knowledge and consent.
- A lender did not provide you with an accurate and truthful rate calculation
- You receive charges for hidden or other inappropriate fees that your lender failed to disclose.
If there is a TILA claim, you may have several legal options available.
When to Seek Legal Advice
If you have been a victim of unfair lending practices or high-pressure sales tactics, you may need advice from an experienced consumer protection attorney. An attorney can help you fully understand your rights under the Truth in Lending Act.
As a credit consumer, you are eligible to claim “statutory damages” from your issuer when it breaks the law in that way.
Statutory damages are something like a fine the bank must pay for not meeting its responsibilities, but instead of a government authority collecting, it’s you, the consumer, that gets to collect.
If you feel that you have been the victim of an act that violated your consumer rights, a consumer protection lawyer can help.
FAQs – Frequently Asked Questions
Aside from collecting money, why should I care about these violations?
It’s in the interest of every American to make sure that our lending institutions are following the law in all their dealings. It was a breakdown in the oversight of our lending industry that helped bring about the financial crisis of 2007-08. And it was largely consumers who bore the consequences of that breakdown and failure. Bringing these claims sends a strong, positive message to the banks that we consumers are watching them carefully and that we will hold them accountable. An additional benefit is that watchful consumers discourage bad actors and keep the competition in the industry honest and fair, which is good for consumers and business.
I have the credit card but I haven’t suffered any money damages, so how is it that I could be eligible to make a sizable claim?
You are eligible to claim sizable damages when lenders violate their obligations to properly inform consumers about their credit accounts. U.S. lending laws give credit card issuers a lot of freedom to set terms, but in exchange, they are subject to stiff penalties when they don’t disclose their terms properly. When a credit card issuer provides you a document that has incorrect key information or is missing key information, it has broken the law. As a credit consumer, you are eligible to claim “statutory damages” from your issuer when it breaks the law in that way. Statutory damages are something like a fine the bank must pay for not meeting its responsibilities, but instead of a government authority collecting, it’s you, the consumer, that gets to collect.
Why does all this money go to me and not the government?
Congress decided that the best system of getting lenders to follow the law was to give consumers the right to file a claim for their lenders’ violation of the law. For this system to work, Congress also determined that it needed to be financially well worthwhile for consumers and attorneys to enforce the law and bring a case. (A primarily private-enforcement solution is probably one that most people would agree is more cost-effective than hiring a federal watchdog bureaucracy.)
Why haven’t I heard about consumers bringing and winning these kinds of private cases before?
Over the first few decades the law was in effect, violations were typically addressed by consumers bringing class actions against credit card issuers. These were very effective in obtaining large recoveries for consumers when their lenders violated the law and were publicly embarrassing to some banks.
In response, many banks worked to insulate themselves from this exposure by putting new clauses into card agreements. They inserted class action bans and mandatory individual arbitration clauses in their card agreements to keep cases out of court and make it difficult for a consumer to economically bring a case. This was effective for these banks for a while, but after the financial meltdown, some changes in the law, as well as emerging technology, made it easier and worthwhile for individuals and their attorneys to bring individual claims. Because these banks require cases to be brought in private arbitration rather than the court, and because banks will only settle them with a non-disclosure agreement, the public never gets to hear about consumer successes.
How The Carlson Law Firm Can Help
Our team of attorneys is currently investigating a potential Truth in Lending Act violation on behalf of American Express credit card holders. The Annual Percentage Rate information disclosed in billing statements was incomplete, in violation of the Truth in Lending Act. Were you an AMEX cardholder in May, June and/or July 2016? You may be eligible for compensation.
The Carlson Law Firm has extensive knowledge of the consumer protection laws that are in place to guard against unfair practices. We take the time to understand your needs as well as to examine all of the details surrounding your case to help craft effective solutions.