Unveiling the Truth in Lending Act: The Impact of TILA’s One-Year Statute of Limitations on Consumers”

The Truth in Lending Act (TILA) is a federal law enacted in 1968 and designed to protect consumers in credit transactions. But how?

The TILA generally offers protection against predatory credit card offers and home loans.

More specifically, it forbids lenders from being deceptive about the terms of mortgages, credit card agreements, auto loans, home equity loans and some other types of agreements. Generally, TILA requires creditors to disclose certain information — things like APR (Annual Percentage Rate), the term of the loan, total cost to the borrower — in a clear and noticeable way.

However, there's a critical aspect of TILA every borrower should be aware of and that is the statute of limitations, which is the time period within which an individual must take legal action if they believe the lender has violated the Act.

The One-Year Statute of Limitations: A Challenge for Consumers

Consumers typically have one year from the occurrence of the violation to file a lawsuit for damages. This one-year statute of limitations can pose a significant challenge for consumers.

In fact, it's not uncommon for borrowers to be unaware that, under federal law, they are entitled to certain disclosures in consumer credit transactions, often discovering the lender's misconduct long after the one-year window has closed.

Furthermore, the consumer is unlikely to be able to determine whether disclosures actually given are legally sufficient to satisfy the strict requirements of Regulation Z,  promulgated under the Act. As a consequence, a TILA violation frequently remains undiscovered until the consumer hires an attorney.

Realistically, this means that many violations will not be discovered until the creditor commences legal action to collect the debt and, as a result, oftentimes the TILA violation doesn't come to an attorney's attention until after the statute has run.

This short time frame, therefore, can be a substantial barrier to seeking relief but there might be some exceptions to overcome the statute of limitations.

Exceptions and Extensions

There are certain exceptions to this one-year limitation rule. For instance, in cases where a creditor fails to make required disclosures, borrowers are allowed three years from the loan's consummation date to rescind certain loans. This extension provides a longer time frame for consumers to identify and act upon potential violations.

Furthermore, the doctrine of equitable tolling may "suspend the limitations period" under certain circumstances. Equitable tolling applies when a plaintiff has exercised due diligence, but the defendant's bad faith, false assurances, or deception has interfered with the plaintiff's ability to discover the violation within the statutory period.

CONCLUSIONS

For consumers, navigating TILA claims can be complex. These exceptions highlight the importance of understanding the nuances of TILA and seeking legal advice to effectively apply its provisions to the matter at issue.

The one-year statute of limitations under TILA is a double-edged sword. While it aims to protect creditors from outdated claims, it also places a burden on the consumers the Act was intended to protect in the first place.

If you are a consumer in West Virginia, Ohio and Pennsylvania and need legal assistance to seek relief under TILA, send us an email to johnson.legal.services@gmail.com or book your free consultation here!