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ILLINOIS COURT ALLOWS TILA RESCISSION FOR TECHNICAL VIOLATION

The U.S. District Court for the Northern District of Illinois granted partial summary judgment for a mortgage borrower on her claims for rescission and statutory damages under the federal Truth in Lending Act (“TILA”) in Jones v. Ameriquest Mortgage Co., No. 05-CV-0432 (N.D. Ill. Jan. 31, 2006). The borrower alleged that (i) her TILA disclosures failed to fully disclose her repayment schedule and (ii) a form explaining a one-week cancellation period violated the TILA requirement to clearly and conspicuously disclose the right to cancel a transaction within three business days.

In regard to the first claim, the plaintiff’s payment schedule specified the number of payments, the amounts of the payments and the exact dates of the first and last payments, but did not disclose the due dates for the other payments or indicate the period, interval or frequency of payments. Judge Coar held that this incomplete payment schedule, which would have been complete had it included the word “monthly,” violated the TILA. This violation did not result in liability because the statute of limitations already had expired before the complaint was filed. However, the incomplete disclosure statement extended the plaintiff’s rescission period from three days to three years. The plaintiff sent a notice of intent to rescind her loan within the three-year period and the defendants failed to rescind the loan. Thus, Judge Coar granted summary judgment and awarded the plaintiff statutory damages for the defendants’ failure to honor her notice of rescission.

In regard to the second claim, Judge Coar held that a reasonable fact finder could conclude that the form providing a longer period of cancellation than required by federal law detracts from the clarity and conspicuousness of the required TILA rescission form. Thus, genuine issues of material facts precluded summary judgment for either party.

Judge Coar expressly disagreed with an earlier opinion of the same court in which a different judge granted summary judgment for the defendants on the same issues. See Hamm v. Ameriquest Mortgage Co., No. 05 C 227 (N.D. Ill. Sept. 27, 2005).

Judy Scheiderer