Question:

What are the consequences if a lender hasn’t provided a Truth in Lending Disclosure Statement and has committed a violation of Truth in Lending Act?

Answer:

Truth in Lending Disclosure Statement includes some important costs and terms of the loan, such as the total of all payments, the annual percentage rate, etc. Lenders are required to provide it and if they don't, they are in violation of the federal Truth in Lending Act and may be held liable.

What does that mean for the homeowner and the lender?

It doesn't matter whether the borrower has been harmed by the nondisclosure or not. If the creditor is in violation of the disclosure requirements, there are two options:

  • The error should be corrected within 60 days of discovery (but before the borrower sends a written notice).
  • The creditor should prove that the error is a result of bona fide error.

If none of the above is done a lawsuit may be brought in court. In case the consumer prevails, he/she may be awarder actual damages, court expenses and attorney's fees.

Additionally, in individual lawsuits the consumer may be awarded twice the correctly calculated finance charge. However this amount should not exceed $1,000 and should be more than $100.

In criminal cases the fines may be even bigger. If the creditor has committed a willful and knowing violation of the Truth in Lending Act the fines may reach $5,000.

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