What If Car Loan Lenders Violate Truth In Lending

January 27, 2012

What if a car loan lender violates the truth in lending act (TILA)? Consequences are and should be swift. The truth in lending act is a federal law, passed in 1968, that requires lenders to make a borrower aware of how much a loan will cost. Before the federal law, lenders could advertise a loan at 6% interest, however, included in the loan papers was difficult legal jargon for borrowers to understand. Lenders could add charges for various things and the charges had the potential to even double the initial interest rate. Today, federal law requires that borrowers are provided with all the information about the loan and written in terminology that is understandable. The following charges must be determined before a borrower agrees to the contract: finance charges, annual percentage rate, and late payment penalties. Again, lenders are liable if the federal law is broken.

Lenders can make honest mistakes

A lender will not be held accountable for truth in lending violations if the lender corrects the mistake within sixty days of the discovery, unless the borrower has already filed a lawsuit. If the error was completely unintentional, the lender might not be held responsible. However, the lenders, not the consumers, bear the weight of proving beyond a doubt that the violation was, in fact, unintentional. The lender would also have to prove that the mistake was made in spite of compliance with procedures that would usually avoid such an error. Mistakes such as computer error, clerical error, miscalculations, and printing errors could be considered a bonafide mistake.

What if your TILA rights are violated?

If you feel that your TILA rights were violated in anyway, you as a consumer should enforce the lender to follow these consumer rights in state or federal court. As a borrower, you may file a civil lawsuit as an individual if the lender has violated the act. You may also consider counter-suing if you are sued for past debt and you feel that your TILA rights were violated. If you decide to pursue a suit as an individual, you may be entitled to actual damage and lawyer fees, an amount equal to twice the finance charge, and/or 25% of total monthly payments under a leased vehicle (not less than $100 or greater than $1000). A person has one year from the date of the violation to pursue an individual suit.

Some people may decide to pursue a class action lawsuit, which the borrower is entitled. There is no minimum recovery for each member in a class-action lawsuit. The total recovery of the class cannot exceed more than $500,000 or 1% of the net worth of the lender. As with individual suits, attorneys fees and court costs could be paid by the lender if the borrower is successful in a suit. Attorney generals may also sue to enforce TILA requirements. Again, a person has one year from the date of the violation to pursue a class-action lawsuit.

Truth in lending protects consumers from untruthful loans. A violation should be reported to uphold the integrity in lenders. TILA was designed to protect borrowers, so borrowers should pursue unlawful loans.

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