Statute of Limitations Under TILA

Often the greatest hurdle in seeking relief under the Truth in Lending Act (TILA) is ensuring that the case is filed within the applicable statute of limitations. A statute of limitations limits the time an individual has to file an action after they have been wronged.

When a violation of TILA occurs, the one year limitations period applicable to actions for statutory and actual damages begins to run. However, when the consumer has an extended right to rescind, or pursue other statutory remedies because of the violation, the statute of limitations for the damages sought by the consumer extends to three years from the date the violation occurs. TILA violations can occur when a lender fails to provide the necessary disclosures at closing or the disclosures are deficient.

A creditor may also violate TILA by engaging in fraudulent, misleading, and deceptive practices that conceal a TILA violation which took place at the time of closing. Often consumers do not discover any violation until after they have paid excessive charges imposed by their creditors.

Consumers who later learn of the creditor’s TILA violations can seek equitable relief from the strict statute of limitations through a legal theory known as “equitable tolling” of the statute of limitations. This is also known as the “discovery doctrine”, wherein a limitations period does not begin to run until after the wrong is discovered. The exact status of the discovery doctrine in Michigan has been called into question by a recent case which will be discussed more fully in a later post.

The TILA statute of limitations protects creditors from claims brought by consumers more than a year (or three) after the transaction occurs. This limitation in turn reinforces the importance of consumers obtaining independent legal advice before, at, and after closing on residential transactions. Wilson Law Group stands ready to answer questions regarding your current foreclosure, possible TILA violations in your own mortgage documents, or any other legal issue you may have.

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