Attorney Fee Recovery and the Federal Consumer Credit Transaction Laws

The federal consumer credit protection code, at 15 U.S.C. 1640(a)(3), provides for attorney fees as part of the recoverable amount for any violation of Parts B, D, or E of Subsection I of the code. (These code sections are parts of what is referred to as the Truth in Lending Act.) Part B deals with disclosures in consumer credit transactions and runs from 1631 to 1651. Part D deals with credit billing and runs from 1666 to 1666j. Part E deals with Consumer Leases and runs from 1677 to 1677f.

Although granting attorney fee to a prevailing plaintiff is mandatory, the court has discretion as to the amount of fees awarded. That said, courts have acknowledged that the purpose for awarding attorney fees is to make the plaintiff whole and encourage private enforcement actions. Attorney fees are quantified based on a reasonable hourly rate and a reasonable number of hours for work necessary to plaintiff’s representation. Plaintiff’s actual obligation to pay the fee is not a factor. Since a Plaintiff might be found to have prevailed on its action even where a cases settles, defendants should make sure settlements specifically address the attorney fee issue.

Things that can put a business at risk under the above laws (and this is a very abbreviated list) include:

(1) Failing to adhere to the ways in which certain kinds of disclosures need to be labeled and formatted (15 U.S.C 1632).

(2) Failing to properly disclose the consumer’s right to rescind a consumer credit transaction within three days of its formation (15 U.S.C. 1635).

(3) Violating the disclosure requirements associated with an open ended consumer credit plan (including with respect to solicitations, opening accounts, renewing accounts, changing terms/rates, and furnishing statements, (15 U.S.C. 1637), with additional rules if the plan is secured by the consumer’s principal dwelling (15 U.S.C. 1637(a)).

(4) Violating the disclosure requirements associated with a non-open ended consumer credit transaction (15 U.S.C. 1638), with other specific disclosure requirements for certain mortgages (15 U.S.C. 1639).

(5) Violating the disclosure requirements associated with reverse mortgages (15 U.S.C. 1648).

(6) Violating the rules governing the handling of alleged billing errors. (15 U.S.C. 1066).

(7) Violating the rules governing the return of credit balances (15 U.S.C. 1066(d)).

(8) Violating the prohibition against credit card tie in services (15 U.S.C. 1666(g)).

(9) Violating the prohibition against offsets to pay credit card debt (15 U.S.C. 1666(h)).

(10) Failing to adhere to rules governing rate increases and amortization for credit card accounts (15 U.S.C. 1666(i)).

(11) Violating the rules governing disclosures in a consumer lease (15 U.S.C. 1667(a)).

(12) Violating the rules governing consumer liability at the termination of a lease (15 U.S.C. 1667(b)).

(13) Violating the rules governing disclosures in advertisements for consumer leases (15 U.S.C. 1677(c)).

Violations of the consumer credit protection code carry statutory penalties in addition to actual damages. Such penalties, including liability for the plaintiff’s attorney fees, can be triggered by unintentional violations even where the plaintiff has not incurred any actual damage. Moreover, violations may be the product of faulty procedures applied systematically across many transactions, making great fodder for class actions—especially if the class does not have to dilute their recovery to pay attorney fees.

The information contained in this blog is not legal advice and should not be relied on as such. For legal advice or for answers to specific questions, please contact the blog's author.